7-Eleven: A Way of Life

7-ELEVEN Inc. of Dallas, Texas, operates the 7-ELEVEN convenience -store chain in
twenty-six states, the District of Columbia, and five provinces of Canada. 7-ELEVEN Inc.is
the largest operator and franchiser of convenience stores in the world. There are over 7,200
7-ELEVEN stores in operation throughout the United States, serving over 8 million
customers every day. A typical 7-ELEVEN store carries over 3,000 items, including soft
drinks, groceries, beer, tobacco, magazines, housewares, and health and beauty aids.
Other items, particularly fast foods, are regularly being added to the product offerings.
7 ELEVEN Inc., then known as Southland pioneered the convenience store concept in
1927, when it opened as an ice company that also sold milk, bread, and eggs as a
convenience to its customers. The name "7-ELEVEN" originated in 1946, when the stores
operated between the hours of 7 A M and 11 P M. Today the vast majority of 7-ELEVEN
stores are open twenty-four hours.
There are basically two operational types of 7-ELEVEN stores. The neighborhood type is
operated as tin updated version of the mom-and-pop store. Forty percent of the stores are
operated by franchisees, with the remainder being managed by the corporation. Of the
franchiseed locations, many are owned and operated by couples whose families also work
in the store. The typical 7- ELEVEN store is in a suburban location with easy access.
However, 7-ELEVEN also operates "city stores" in some densely populated urban areas.
The store's competition is broad-based, including last-food restaurants, other convenience
stores, supermarkets, and "g-stores" (gasoline stations with a small convenience store on
the premises).
On the marketing side, the 7-ELEVEN management team works to develop programs to
attract additional customers and bring in existing customers more often. Recently, two
segments of the population were being targeted: older people, who historically have not
been convenience-store customers, and working women.
Franchisees have played a significant role in the success of 7-ELEVEN stores. In fact,
many franchisees have been with the company for more than thirty years. Not only do they
understand the business, but they also do an excellent job of tailoring their stores to the
needs of the neighborhoods they serve. Many of the successful market programs provided
by 7-ELEVEN stores were first introduced by various franchisees and are more an integral
part of the entire 7-ELEVEN system in the United States.
The 7-ELEVEN real estate representatives research and select potential sites based on
population, traffic flow, convenience to homes, and competition. The company buys or
leases a site, builds the unit, and leases to the franchisee. Typically, all equipment in the
store, including heating and air conditioning units, shelving, cash registers, refrigerators,
and vaults, is leased to the franchisee. Once control has been taken, the franchisee is
responsible for maintaining the equipment. The company arranges for the initial inventory,
and the franchisee is responsible thereafter for ordering and stocking merchandise. 7ELEVEN provides lists of recommended merchandise and retail prices, as well as names of
vendors that offer high-quality merchandise at a competitive price; some recommended
vendors may be affiliated with 7-ELEVEN, and some merchandise may be produced by
divisions of the parent company. However, franchisees are free to purchase merchandise
from any vendor and establish their store's retail prices.

Extracted from Judd RJ, Justis RT (2008), Franchising An Entrepreneurs Guide, 4e, Thomson, p.530-532

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Before being accepted by 7-ELEVEN as a franchisee, the applicant is required to complete

the Store Operations Training Program, which includes (1) actual two-week, in-store
experience at a 7-ELEVEN training store in order to learn the basic operations; and (2) a
one-week formal training program at one of the regional training centers. The prospective
franchisee learns a variety of management skills, techniques, and procedures essential to
the successful operation of a 7-ELEVEN store. The cost of the training is included in the
initial franchising fee paid by the applicant. After completion of these two training periods,
the applicant has about one week prior to opening the store. The purpose of this is to allow
the new franchisee time to clear up any personal business, hire staff for the new store, and
prepare for the grand opening. During this time, as well as during the grand opening period,
7-ELEVEN provides support staff to assist and advise the new franchisee.
About 250 to 300 prospective franchisees enter the 7-ELEVEN training cycle each year.
Applicants entering the training programs are evaluated at each stage, from the initial
meeting to the actual changeovers just prior to the grand opening of the store. There is no
single set of criteria used to evaluate a franchise applicant. However, personality traits,
entrepreneurial interests, and financial capacity, as well as the evaluation of the field
representatives, are significant in selection of applicants for entry into the training program.
The training staff also makes recommendations concerning each applicant/trainee. Training
staff can also recommend that trainees be disqualified, a form of quality control so that 7ELEVEN can avoid having poorly prepared and unmotivated franchisees representing the
franchise system.
The new franchisee has 120 days after becoming a franchisee to terminate and not
continue as a franchisee. If the franchisee chooses to leave during this period, the company
will refund the franchising fee, less any training expenses, a practice not common to many
other franchising companies in this field. What this policy does is to allow some breathing
and thinking room for the new franchisee to determine if the arrangement is satisfactory.
Source: http://www.7-eleven.com/franchising/moreabontfranchising.asp

Case Questions
1. Why would 7-ELEVEN want to maintain a policy allowing the franchisee to completely
back out after being selected, trained, and assisted into operation as a full-fledged
franchisee?
2. Do you think the policy of refunding the franchising fee should be more common in
franchising? Why or why not?
3. What costs and benefits accrue to 7-ELEVEN by having such a refund policy?
4. How might this policy affect the selection of representatives and training staffs of 7ELEVEN stores?

Extracted from Judd RJ, Justis RT (2008), Franchising An Entrepreneurs Guide, 4e, Thomson, p.530-532

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