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The 7-11 Franchise Program

Written by: John Power

Article Overview: The 7-11 Franchise Program may not be the best model for new franchise plans.

The 7-11 Franchise Program

The convenience store chain, which had its start in 1927, in the Dallas, Texas area, has been selling franchises longer than most, and perhaps that is part of the reason for their unusual franchise fee system, which is profit-based. According to a recent article in Franchise Times, "The profit-based royalty is rare among franchisors that generally charge sales-based royalties and ad funds."

The article said that 7-Eleven officials were surprised that others do not do something similar, and continued, "7-Eleven operates more of the business than a typical franchisor, because it owns and leases the buildings. However, the payments are generally higher than the 8 to 10 percent of sales most franchisees charge for royalties plus advertising and marketing funds."

"For example, according to the company's most recent FDD, a middle-of-the road store in Central Los Angeles may take in $1.6 million in sales. After paying 7-Eleven to lease the store and buying the inventory, the owner is left with $605,000 in gross profit. Half of that, just more than $302,000, is paid to 7-Eleven as a royalty. If calculated on a sales royalty, that fee would be roughly 18.5 percent. The owner then pays for other expenses, including payroll and bills like telephone and garbage. In the end, that store generates roughly $97,000 in income for the owner. That's roughly 6 percent of the store's sales."

That is indeed a unique structure, which seems weighted to 7-Eleven's benefit. We think it unlikely that you could start a franchise program today with such a plan, as new franchisees normally look at several opportunities before buying, and this will probably seem expensive.

More information can be found at: www.biltmorefranchise.com

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Article Tags: 6 million, benefit, convenience store chain, dallas texas area, franchise fee, franchise program, franchise times, franchisees, franchises, franchisor, franchisors, garbage, gross profit, marketing, nbsp, payroll, recent article, royalties, royalty, s sales



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Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: How to develop sales contacts? - Everyone has the right idea here. Depending on your business, there are different techniques that you could use. For consultants and sales heavy businesses, there are three tactics that I have found especially useful in my business: 1. Attend Networking Events 2. Cold Calling 3. Referral Program 4. Affiliate Program (most successful) The affiliate program was successful for me, as I hooked up with a franchise consultant, and he gave multiple unit businesses that needed my credit card processing services. I highly suggest you hook up with a sales partner, and give him a cut of the monthly revenue.
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.


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