SAN ANTONIO – Following a report questioning the business practices of some companies in the franchise industry, the National Coalition of 7-Eleven Franchisee Associations (NCASEF) renews its calls for the Federal Trade Commission (FTC) to is revising its franchise rule and, in the words of the report, “offering greater protection to investors by recognizing that voluntary disclosure of financial performance has failed to provide accurate information to investors.”
The report, “Strategies to Improve the Franchise Model: Prevent Unfair and Deceptive Franchising PracticesDetails the problems reported by franchisees of 10 brands, including 7-Eleven, and cites anonymous franchisees describing the “pervasive control” that 7-Eleven exercises over its owners both financially and operationally. As previously reported in CSP Daily News, the report was published by US Senator Catherine Cortez Masto (D-Nev.).
In one example, the report states that 7-Eleven’s current franchise agreement requires owners to pay a marginal rate as high as 59% on all gross profits, despite declining gross profits at the store level. Franchisees are required to pay 100% liability insurance for property and equipment, even if the company owns the property and equipment. Gasoline, which is sold in 48% of US 7-Eleven stores, accounts for 66% of 7-Eleven’s total sales. 7-Eleven sets the price of gasoline in its franchise stores. Franchisees must maintain the area around the pumps, but only receive a commission of 1.5 cents per gallon sold.
“This report accurately highlights the inherently unfair nature of the 7-Eleven franchise agreement, even emphasizing that 7-Eleven requires us to keep our stores open on Christmas Day,” said Michael Jorgensen, executive vice president NCASEF, an elected independent body representing more than 7,200 7-Eleven franchise locations in the United States. “We thank Senator Cortez Masto for shining a light on the issues facing the franchise industry and support her legislation to ensure fair treatment and real oversight.” Click here to view the full report.
Responding to the NCASEF effort and the Masto report, 7-Eleven said in a statement that its franchisees “are independent business owners and solely responsible for the day-to-day operations of their stores, including exercising complete control over pricing decisions, hiring / supervising / firing employees, ordering and assortment of products, and more. “
He also said in a statement provided to Daily news from the CSP that the gross profit sharing model has been successful for 7-Eleven franchisees for many years, noting that 7-Eleven is consistently recognized as a leader among franchisors, recently ranking # 2 in the Franchise Times Top 200 .
“7-Eleven’s gross profit allocation model ensures that 7-Eleven as a franchisor remains very focused on supporting the profitability of franchisees,” he said. “7-Eleven’s support for franchise business owners has generated over $ 21 billion in gross revenue for franchise business owners over the past 10 years. In 2020, the average gross income of franchisees increased by 1.9% and remains at an all time high. … We remain focused on supporting and promoting the profitability, safety and success of franchisees.
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