Franchising is 7-Eleven’s future
Move to sell N. Texas company stores reflects seriousness of strategy.
7-Eleven Inc. is offering to sell its North Texas stores to franchisees for the first time in the Dallas-based company’s 80-year history.
The decision is part of a strategy for 7-Eleven to be almost exclusively franchise-operated by 2013, said Jeff Schenck, senior vice president of franchise and development.
The world’s largest convenience store chain said Wednesday that it would sell 188 locations – from Dallas and Fort Worth to Austin and Killeen – to franchisees. It will retain ownership of only a few stores for product testing and training.
“We’ve been franchising stores since 1964; this isn’t a new thing for us,” Mr. Schenck said. “Now we’re ready to convert to 100 percent.”
7-Eleven was acquired in 2005 by its largest shareholder, Japan’s Seven & I Holdings Co., the franchiser of all 11,500 7-Eleven stores in Japan.
Although corporate has always owned and operated stores in North and Central Texas, Alon USA Energy Inc. of Dallas has owned the license to operate 7-Eleven stores in West Texas for several years.
Alon, which owns 206 7-Eleven stores, is also expanding the 7-Eleven banner in Texas. On Monday, it said it acquired an Abilene-based chain of 102 stores and will be converting them to 7-Elevens.
Texas and Florida are the last states with a large corporate-owned store base to be offered for franchise. More than 540 stores are available in Florida.
Since 2005, 7-Eleven has been actively offering its stores to individuals under agreements that share a store’s profit rather than a percentage of sales. About 3,650 of 7-Eleven’s 5,600 U.S. stores are now franchised.
It’s also trying to increase the available number by identifying places to build stores, acquiring stores and asking existing convenience store operators to become franchisees, Mr. Schenck said.
Over the last several years, 7-Eleven installed new inventory systems, developed fresh food and beverage programs, established a new franchise agreement and generally built the infrastructure that allows corporate to do what it does best while letting entrepreneurs run their own stores, Mr. Schenck said.
“Franchise stores outperform company stores. It’s the difference between owning your home and renting a house. When an individual has invested in it and is adding sweat equity, he’s also becoming involved in the community.”
It costs an average of $104,000 to $119,000 to get into a store in Texas, depending on its sales history and whether it has gasoline pumps. 7-Eleven and the franchisee split profits about evenly. 7-Eleven provides the land, building, equipment, advertising and other services. The owner-franchisee runs the store and is responsible for ordering inventory, payroll and hiring.
The average store generates more than $1.5 million a year in sales, but profits vary greatly by region, the company said.
Current 7-Eleven managers are the first in line to become franchisees. In the Dallas area, three store managers already have acquired their stores, including Bangladesh native Motiul Bhuiyan, who is now the franchisee of the store at 18101 Coit Road. He’s worked for the company for 16 years, starting on weekends as a college student.
“It’s like a partnership. I think it’s a win-win deal. I don’t have to worry about a building or rent, and they don’t have to worry about operating the store,” Mr. Bhuiyan said.
Franchise operations are growing, according to the International Franchise Association. Nearly 900 concepts began franchising in the U.S. during the last three years, and the U.S. Census said it plans to start counting those businesses as a separate category this year.
PricewaterhouseCoopers estimated that in 2004, the U.S. franchising sector generated more than $1.5 trillion in economic activity and provided 18 million jobs.
By MARIA HALKIAS for The Dallas Morning News
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