Franchising: Final Quiz CASE STUDY "7-Eleven: A Way of Life"

LICEO DE CAGAYAN UNIVERSITY
Rodolfo N. Pelaez Boulevard, Kauswagan

Cagayan de Oro City, Misamis Oriental
FRANCHISING
FINAL QUIZ
CASE STUDY “7-Eleven: A Way of Life”
Submitted By:
Charrysah T. Tabaosares
BSBA – FM4
Submitted To:
Mario E. Temporada
Date Submitted:
December 10, 2020

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 at-
tract 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
under-stand 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. 7-
ELEVEN 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.
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 7-ELEVEN 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 re-fund 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.
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?
 7-Eleven would maintain a policy allowing the franchisee to completely back out
after being selected, trained and assisted into operations as a full-fledged franchise
due to not being able to uphold the business relationship. 7-Eleven requires a
training program which includes expenses related to the initial training which is
required once certified. If any of the trainees fail to become certified as having
satisfactorily completed the initial training program, the franchisee agree to be
responsible for all expenses related to the initial training, including lodging, but
excluding the costs of providing the initial training.
 At any time before the effective date, if any of the trainees do not show an
understanding of the training, are not satisfactory to the franchisee in any respect,
or are otherwise not progressing in the initial training program in a manner
satisfactory, 7-Eleven will stop providing initial training to such trainees or refuse to
certify, or revoke the certification of, any such trainees. The Agreement will not
become effective and will be null and void and agree to refund the down payment
and the franchise fee, without interest, after deducting any amount owed., including
any initial training expenses in attempting to obtain a 7-Eleven Store Franchise.
2. Do you think the policy of refunding the franchising fee should be more
common in franchising? Why or why not?
 The policy of refunding the franchising fee should not be more common in
franchising. A franchisee fee is a sum of money that you pay to the franchisor
periodically. The franchise agreement usually specifies how much you have to pay
and when. Typically, the fee is based upon your sales of the goods or services that
franchisor has agrees to let sell, and more often than not it is a percentage of your
sales.
3. What costs and benefits accrue to 7-ELEVEN by having such a refund policy?
 The costs having this refund policy is the time, money and efforts. But with this
refund policy, the 7-ELEVEN could choose the best partners and as we can say as
good business partners. The one they would survive the training and understand all
of it would be their asset and would-be part on their upgrowing success.
4. How might this policy affect the selection of representatives and training
staffs of 7-ELEVEN stores?
 This policy is a big help to 7-ELEVEN stores as what I say on the question no. 3, the
one that survive and shows interest on training would become their asset and
would be able to help their store success.

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LICEO DE CAGAYAN UNIVERSITY

Rodolfo N. Pelaez Boulevard, Kauswagan

December 10, 2020

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

1. Why would 7-ELEVEN want to maintain a policy allowing the franchisee to

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