Sunday, September 30, 2012


7-Eleven Franchise Complaints

April 26, 2012
7-Eleven franchise owners are invited to share their complaints, frustrations and advice with prospective franchise owners below.
UnhappyFranchisee.com believes that no franchise system is perfect, and that it benefits everyone when new franchisees sign on with realistic expectations and advance knowledge of the challenges and frustrations they may face.
7-Eleven franchise website promises its franchisees world-class support:  “Because we want you to spend your time operating your store and growing your business, we provide you with a level of support that is not just among the best in the convenience store industry—our support goes above and beyond, setting standards for franchises across all industries.”
7-Eleven franchise website boasts that it provides support by sending a business consultant to each store twice per week:
7-Eleven named the #1 franchise in Entrepreneur magazine’s 2011 Franchise 500. (See theUnhappyFranchisee.com  discussion here: Top 100 Franchise Opportunities 2011: Behind The Hype) and has now been named the #3 franchise in Entrepreneur magazine’s 2012 Franchise 500 as well.
Are the accolades well-deserved?
Does 7-Eleven provide the training, support, marketing and systems it promises?
Is 7-Eleven genuinely dedicated to the success of its franchise owners? 
Please share a comment, opinion or insight below. 
ARE YOU FAMILIAR WITH THE 7-ELEVEN FRANCHISE?  WHAT COMPLAINTS DO 7-ELEVEN FRANCHISEES HAVE?  PLEASE SHARE A COMMENT BELOW.
7-Eleven, Lawson ‘Violate Permits’
Camelia Pasandaran & Jonathan Vit | September 05, 2012
Convenience store giants 7-Eleven and Lawson have been told that they lack the proper permits to sell retail goods in Jakarta and face being shut down in the latest blow to foreign-linked companies imposed by the nation’s regulators. 

Trade Minister Gita Wirjawan told reporters at the State Palace in Jakarta on Tuesday that the stores had only secured permits from the Jakarta Tourism Agency to operate restaurants. 

“The fact is, however, they also sell retail goods, not just food,” he said. 

According to regulations, companies that run stores that sell retail goods must secure permits from the Trade Ministry. The permit, known as an IUTM, is required for businesses such as convenience stores, minimarkets, department stores and wholesale outlets. 

Gita on Monday said the government plans to issue a regulation that will centralize franchising permits, including in the food and beverage industry so that the “gray” area can be eliminated. He said the restaurant permits issued by Jakarta Tourism Agency do not regulate the sale of retail goods. 

7-Eleven convenience stores are operated by Modern Putra Indonesia, a subsidiary of photographic, electronics and telecommunications product retailer Modern Internasional. Lawson outlets are operated by Midi Utama Indonesia, a listed firm that also operates Alfamidi, Alfaexpress minimarkets. 

Nurlaila Nur Muhammad, the Trade Ministry’s director of domestic business development and enterprise registration, said the ministry had sent official warning letters to the two companies. 

Nurlaila said 7-Eleven management came to the Trade Ministry in 2009 to register the 7-Eleven franchise in Indonesia, as well as seeking an IUTM. However, she said, the ministry only registered franchise permits for the company to run restaurants. “As far as I know, they did not get the IUTM,” she said. 

Nurlaila said that after the warning letter by the Trade Ministry, the management of Modern Putra came to meet her, and surprised her by showing an IUTM. The authority that signed the permit was the local government, she said. 

“We will review it, whether the IUTM was the right one and [issued] in accordance with procedures,” Nurlaila said. The IUTM permit is only issued by the Trade Ministry. 

Meanwhile, Midi Utama’s IUTM was for its Alfamidi franchise rather than Lawson. “They must change the name of Lawson into Alfamidi, in accordance to the permit. Lawson has yet to reply to our warning letter,” Nurlaila said. 

On Monday, Gunaryo, the Trade Ministry’s director general of domestic trade, threatened to shut down 7-Eleven and Lawson outlets if they did not reformat their businesses in accordance to permits they had secured. 

Modern Internasional spokeswoman Neneng Sri Mulyati denied 7-Eleven had permit problems. 

“Our focus is on providing fresh food and beverages for customers’ needs and convenience. We sell fresh food like rice bowls, nasi goreng, mie goreng, hot dog, nasi capcay and many others. We sell our proprietary beverages — Slurpee and Gulp — as well as coffee and tea,” she said. 

“The business that we ran from the first [day] is what we are running right now. Our main business is fresh food and beverages. Yes, we have some convenience items for urgent needs, but [they are] a small percentage only.” 

Modern Putra signed a master franchise agreement with the international company behind 7-Eleven in April 2009 and opened the first Indonesian store in November 2009, in South Jakarta. The chain has flourished into 79 stores in Indonesia, and may grow further, as Modern Internasional has more than 1,500 outlets in Indonesia for its photographic, electronics and telecommunications products. Some of the 7-Eleven outlets were the result of conversion of these 1,500 outlets. 

The management of 7-Eleven has successfully developed its stores into places for nongkrong, a slang term for “hanging out.” 

The Trade Ministry’s Gunaryo was quoted by media last month as saying that the government still tolerates 10 percent deviation of the core business as registered in business permits. 

With convenience stores proving a spirited competition to long-established traditional family-run outlets, regulators have been cautious in the past to allow them to proliferate too widely. 

Additional reporting by Muhamad Al Azhari 

What Type of Software and Equipment 7-Eleven use......?

Former 7-Eleven franchisee admits food stamp fraud and money laundering

May 17 2012 Brett Wolf

The former owner of a Rhode Island 7-Eleven convenience store has pleaded guilty to running a food stamp fraud scheme and laundering the proceeds, federal prosecutors in Providence announced Wednesday. Syed Shah, 44, of Lincoln, Rhode Island, admitted that he allowed food stamp recipients to use their electronic benefit cards to obtain cash and ineligible merchandise such as cigarettes at his store in Providence, despite knowing that his actions were fraudulent. Shah also helped train his employees to exchange cash for food stamp benefits. Between July 2008 and December 2010, Shah bilked the food stamp program out of roughly $650,000. Food stamp recipients who wanted cash or prohibited merchandise allowed Shah and his employees to charge their cards a "surcharge," court documents state. For instance, those that wanted cash had to permit their cards to be charged two times the amount of cash they received.
7-Eleven BCP Store—Is It Right For You?????

By Arnold J. Hauptman, Esq., General Counsel

According to my copies of SEI offering circulars, the Business Conversion Program (BCP) was rolled out by SEI in 2006. There are enormous differences in the business model between traditional stores and BCP stores, and you should be aware of these distinctions if you are thinking about investing in a BCP store.
The major differences are:
  1. You will not be obtaining a lease or sublease for your store from SEI, nor will you be getting a turnkey operation as you would with a traditional store. 
  2. You are expected to either convert an existing c-store, which you own and operate to a 7-Eleven store or, as seems to be occurring frequently, locate a site which is acceptable to SEI and then purchase or lease it for the purposes of building a store from scratch.
If you do decide on a BCP Store:
  1. It will be you, and not SEI, who will be responsible to pay rent or mortgage payments, real estate taxes, and all other expenses associated with leasing or owning real estate. 
  2. You will also be responsible for utilities and maintaining the physical structure of the store, including HVAC, landscaping, etc.
  3. Of course, the biggest expense will be with respect to building the actual 7-Eleven model store. 
  4. Depending on whether you are converting and remodeling an existing c-store with acceptable floors, ceilings, lighting, etc., or are actually fully constructing an essentially vacant ready-to-build site, the costs can range from a relatively small amount to several hundreds of thousands of dollars.
  5. Keep in mind you can’t go shopping for your own contractors. Prior to the effective date, SEI will provide specifications and requirements that you must follow for the design and layout of the store, with the work to be performed by SEI contractors. SEI will lease to you any 7-Eleven equipment it deems necessary, as well as any fixtures and improvements, which may include counters and cabinets. A good deal for SEI; for a small investment, it gets another store with a 7-Eleven sign on it.
Here is the other side of the coin.

  1. Instead of paying a franchise fee of up to several hundred thousand dollars for a traditional store, depending on its actual or projected gross profit for the prior 12 months, the current franchise fee for a BCP store is a flat $25,000. 
  2. Moreover, with a traditional store, the 7-Eleven charge can vary greatly, from as little as 48 percent to as much as 57 percent. 
  3. In a BCP store, on the other hand, the charge ranges from 22 percent to 25 percent, depending upon the gross profit.
Whether or not to consider establishing a BCP store???

  1. Especially one that is a totally new c-store location, is a huge business decision. 
  2. The biggest risk, obviously, is that the prediction of the volume of business is just that—a prediction. 
  3. If that prediction does not materialize, you will still have to pay the rent or mortgage installments, real estate taxes, and other costs. SEI/&-Eleven will not bear this risk and, even if you are a corporation, it is more than likely that your landlord or mortgage lender will require you to personally guarantee the rent or mortgage debt.
So what if things don’t turn out as planned?

  1. Get this....mmmmm. If you decide that you made a big mistake, and you find yourself continually putting money into the store instead of taking out money and must give up the franchise,
  2. Or if your agreement is terminated by SEI because of the many grounds for breaches.
  3. Then you will have to pay to SEI/&-Eleven what is known in legal circles as liquidated damages. Those damages range from a flat $200,000 if the termination occurs during the first two years, down to 40 percent of the prior 12 months 7-Eleven charge if the termination occurred 108 or more months after the effective date. 
  4. Keep in mind that the entire agreement is only for a term of 10 years or 120 months. Of course, SEI also gets to remove the leased equipment.
Since the inception of the BCP Program, I have gained personal knowledge of some of these operations. For sure, many BCP stores have been very successful, even exceeding expectations, with both franchisor and franchisee being happy campers.

However, I have also been contacted by BCP franchisees who have related horror stories to me.
Those unfortunate franchisees found themselves with high rents and other related costs that could not be paid from disappointing revenue, and with other high expenses that continually put them under equity requiring a constant infusion of money. In one case, unanticipated store encroachment was the villain.
So what is a franchisee left with should disaster strike? 

  1. More than likely, a private c-store requiring the replacement of the leased 7-Eleven equipment, removal of all 7-Eleven signs and design motif, and a liquidated damage payment of as much as $200,000. 
  2. Even that scenario may not be possible because of the agreement’s non-compete clause, which prevents you—for 2 years—from operating that store as a c-store if it is located within a half-mile of any existing or intended 7-Eleven store.
  3. Maybe even worse is the necessary total abandonment of the business and site. In that case, and in addition to the above issues, rents and/or mortgage payments and other expenses continue because of personal guarantees you have given—and without any income stream at all.

So, as you can well imagine, an unexpectedly poor BCP store can be infinitely worse than a traditional store where you can just walk away with only the loss of your franchisee fee. 

That is bad, but better than years of debt and perhaps bankruptcy. The only answer is to minimize your risk, as best as possible, by doing due diligence and seeking the advice of a good business consultant. The rest is up to lady luck.