An attractive new 7-Eleven store on the Bowery. Photo: Jimmy on East 12th Street
Not everyone is thanking heaven for 7-Eleven! The website Franchise Wisdom has some harsh reviews from 7-Eleven franchise owners, one even goes so far as to compare the Texas-based junk food chain to the mafia. Ouch! From the website:
“I have been a 7-eleven Franchisee for the past 2 years. This is like a MAFIA operation, please DO NOT fall for them. They mistreat their franchisees on different levels, neither good accounting infrastructure nor maintenance infrastructure. They make various promises as you are signing up for their franchise but the ones who make the promise disappear or make a 360-degree turn on their commitment.
They keep finding ways to charge franchisees for various things with erroneous charges. On their mistaken charges it takes months and years to get your money back, their accounting ways and gross profit sharing is completely controlled by them MAFIA like.”
That sounds enticing! Another:
“To make money I used to work 72 hrs because I had invested so much money. In return I had I had no family life. No Franchisee will tell you this thing ’cause no one want to lose their money from 7Eleven. At the end I sold the business. This depicts most of the 7Eleven owners story. Secondly I had all my money invested but if U got 50-60% loan you have to pay around 30-35K installment/yr so you’re left with nothing.”
The website also features an interview with Dick Newmark, the longest tenured franchise owner of a 7-Eleven.
Over the years, Newmark said, the relationship between franchisees and corporate headquarters has been “up and down.” “We had a very close relationship until Southland’s bankruptcy and then the purchase of the company [by the largest 7-Eleven franchisee, Japanese firm Ito-Yokado in 1991.] The way [the new owners] did business was so much different and the change in the profit structure caused a big rift.”…
…Newmark had a major disagreement over his franchise agreement. In the late ’80s, all of the 7-Eleven franchise agreements were extended to 2000. “After that, we theoretically didn’t have a new contract until 2004,” a contract that Newmark calls “the worst thing that ever happened to the franchisees.” The most onerous aspect of the new contract, in Newmark’s view, was a limit on the number of products not offered on 7-Eleven’s recommended list. Under the new agreement, 85 percent of inventory purchases (at cost) had to come from approved vendors, he explained, or franchisees would forfeit 2 percentage points of the contract’s 50-50 gross profit split, up from a 48-52 percent in older contracts. ”They gave us 50 percent, but they also hit us with a promotional/advertising charge of 1.5 percent of gross profit for high-volume stores to as little as 0.5-percent for a low volume stores,” he said.
When Newmark continued to carry sandwiches from a non-recommended supplier, which had a loyal following among his customers, alongside 7-Eleven’s proprietary sandwiches, Newmark found himself in breach of contract. “I was prepared to fight it,” he said. “My argument was by selling only the proprietary sandwiches, I was not able to maximize my profits. Eventually, I discontinued my other supplier’s line altogether, as 7-Eleven grew the category. But since then, our sandwich business has not done as well.”
Back in New York, there are still no takers for the 7-Eleven being constructed in the East Village at 170 Avenue A. 7-Eleven is reportedly paying $35,000 a month for the late night junk food shack scheduled to open in June. It’s not surprising. Astronomical rent and horror stories like these are franchise poison!
7-Eleven Review [Franchise Wisdom]