7-Eleven’s new franchising model revealed

7-Eleven franchisees are being offered a three-tiered business model as the 24-hour convenience chain attempts to clean up its act and deal with serious allegations of employee underpayments.

Franchisees with gross profit of up to $500,000 a year are being offered a 50-50 profit share with 7- Eleven head office, while stores with a gross profit of between $500,000 and $1 million are being asked to give 53% of their profits to the franchisor.  

Stores earning more than $1 million, meanwhile, will be asked to give 56% of their profits to 7-Eleven’s head office – a figure close to the 57% that, until recently, applied across the board.

7-Eleven’s previous 57-43% profit sharing model has been labelled “unusual” by the founders of some of Australia’s most well-known franchises, including Boost Juice.

While 7-Eleven stores take care of staffing costs as well as store supplies, phone calls and cleaning costs, the embattled convenience chain has agreed to fund bank and credit card fees as part of the new agreements.

In a document distributed to franchisees and seen by SmartCompany, 7-Eleven’s interim chief executive Bob Baily said he was pleased to provide details of the company’s new franchising model. 

“I believe the finalised model meets the test of both fairness and mutual benefit,” Baily said.

“As a result, I am pleased to provide you with the details of the finalised model, which will enable you to run your business effectively, efficiently and sustainably. All of us want to be in a position to keep growing the business and meeting the needs of our customers. With continued hard work and commitment, this finalised model will allow us to do that.”

In the letter, Baily says the new franchising model has the “right balance of flexibility to accommodate the different circumstances” facing individual stores.

7-Eleven store owners must meet their obligations in regards to payroll compliance and record-keeping in order to gain access to the new franchising model, according to the document.

This will ensure “zero tolerance” for unlawful activity, according to Baily.

“I have appreciated the feedback from franchisees in finalising the model and I look forward to working with you to improve and grow our business in the years ahead,” the letter concludes.

A spokesperson for 7-Eleven told SmartCompany district managers will have “one on one meetings” with franchisees starting next week to discuss the new model.

“They’ll go through the benefits this finalised model brings to each store,” the spokesperson says.

“The benefits and outcomes will be different for each store and that’s what this model is designed to do. We think it’s a good model and… it is designed to ensure that there is increased governance, oversight and compliance.”