DALLAS -- Nearly a year into its new strategy, 7-Eleven Inc. has franchised more than 100 stores with plans to convert its nearly 5,400 U.S. store inventory to franchisees by 2011.
For a company that previously possessed a nearly 50-50 split, moving away from company-operated store to a mom-and-pop approach (buttressed by corporate's expertise) is without question a bold move. But when looking at the efficiencies and cost savings 7-Eleven expects to net, the move becomes more understandable.
You can sub-optimize with how you support [image-nocss] both models because they're entirely different, Jeff Schenck, senior vice president of 7-Eleven's franchise and store development, told CSP Daily News. The accounting systems are different. In one you are managing health and benefits for a large number of corporate employees and taking additional resources. You're developing training and other programs that may work in a corporate environment but don't work in a franchise environment or vice-versa.
So, he said, you find yourself, in my opinion, with some inefficiencies in terms of how you support your operating model.
[In a special spotlight, the July edition of CSP magazine examines the growing wave of traditional retailers tapping franchisees and dealers to grow their total network, and the risks and benefits this approach offers. Also, look for an exclusive video interview with Tariq Khan, chairman of the National Coalition of Associations of 7-Eleven Franchisees in next week's edition of CSPTV. Visit www.cspnet.com/tv on Monday, July 16 to view it.]
While acknowledging the potential upside of franchising, don't expect Wawa to pursue such a course anytime soon.
We never looked at franchising, said Howard Stoeckel, CEO of Wawa, Pa.-based Wawa Inc., which operates all of its 568 stores.
Our capabilities are buying a site, developing a site, taking it through land approval, he said. There are others whose core capability is franchising. To me, it's a very different business model and it's not one that we'd be good at.
Plus, Stoeckel looks at the landscape and thinks conversions would be tougher than ground-ups. This examination also justifies why Wawa shuns acquisitions.
If you look at our business model, there isn't anyone who we could acquire that could adapt to our big gas, big store, on big site' model, Stoeckel said. All of the businesses that have been acquired aren't modern businesses. They're businesses that have been around for quite some time. We know how we want to come to market and it's very difficultif not impossibleto find a business that would fit our model.
For some, franchising promises greater buying power and a new pool of talent. Take NiceN Easy Grocery Shoppes Inc., the upstate New York outfit, whose portfolio consists of 50 company-run and 35 franchise locations.
Having a franchise operation has allowed us the ability to bring in numerous experts on our staff, said Peter Tamburro, executive vice president, franchise. I have more marketing, accounting and foodservice support than I would have for a 35-store group. So it allows us to run a bigger staff that supports our franchisees and better services our corporate stores.
There are downsides, he acknowledges, especially when considering the extravagant new company-operated sites opened in recent years.
Today, corporate NiceN Easy stores do not look like our franchisees, Tamburro said. Most have followed the program when we redesign, but some need complete overhauls and we struggle to get that done.
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