Enhancing Capital Efficiency And Profitability Through A Stronger Franchise System

By Eric H. Karp, General Counsel

The phrase which serves as the title of this article appears on side 13 of the Presentation for the First Quarter of FY 2026, issued by Seven & i Holdings Co., Ltd. (the parent company of 7-Eleven, Inc.) on July 9, 2026 (the “Q1 2026 Presentation”).⁽¹⁾ But the “capital efficiency and profitability” of franchisees is not the subject of this slide. Rather, it explains in detail one of the ways that management intends to position the company for a public offering of 7-Eleven, Inc. (“SEI”) sometime in 2027: to substantially increase the percentage of locations in the United States that are franchised as opposed to company owned. This is to be accomplished through corporate to franchise conversions, meaning the sale by SEI of a corporately owned location to be operated by a franchisee under a franchise agreement.

At the end of 2017, prior to its Sunoco and Speedway acquisitions, SEI was almost 83 percent franchised.⁽²⁾ At present, approximately 58 percent of SEI locations are franchised⁽³⁾ and the company apparently intends to restore at least some of its previous balance. But why?

In its presentation to investors on April 23, 2026 (the “IR Day Presentation”), the company touted the franchising model as one that “delivers stronger overall economics,” allowing the company to scale with lower capital intensity.⁽⁴⁾ This is starkly consistent with the Q1 Presentation, which refers to enhancing capital efficiency. What this simply means is that by paying franchise fees, franchisees reimburse the company for at least some of the capital expended in building or acquiring these locations. This frees up capital for other purposes, including building new corporate stores and the possibility of additional mergers and acquisitions.

Reducing capital intensity is one definition of franchising; a business model in which franchisees invest their capital in a brand that they do not own and accept the entrepreneurial risk of operating a business. The Q1 Presentation repeats a previously disclosed plan to execute 2,600 corporate to franchise conversions by 2030, projecting a total of 390 such conversions this year.⁽⁵⁾

The IR Day Presentation lauded franchisees by stating that that they bring improved performance to the table because of their “entrepreneurial spirit and local market insight.”⁽⁶⁾ The Q1 Presentation Report states that the 135 conversions executed in 2025 show that these franchisees generated “low to mid single-digit growth” in merchandise sales and “strong margin expansion,” in contrast to the converted stores previously operated as corporately owned.⁽⁷⁾ These presentations confirm what franchisees have long believed, which is that they are indeed better and stronger operators than corporate store managers.

But if you are an existing 7-Eleven franchisee in good standing, you are the logical choice of SEI for the purchase of a corporate store as a franchise opportunity. And you may also have friends, relatives or business associates who are contemplating the purchase of a franchise opportunity in the 7-Eleven system and who look to you for advice or guidance. If this is true, I suggest the following initial steps in your or their investigation or due diligence of this potential investment.

A. Request and carefully review a current franchise disclosure document (FDD) issued by SEI. The furnishing of the FDD is mandated by federal law as well as by the law of a number of states in the United States. In some of those states, it is illegal to make an offer or sale of a franchise unless the prospective franchisee receives that disclosure document in advance of making an investment or signing a contract.

The purpose of the FDD is to give the prospective franchisee the material information they need in order to weigh the risks and benefits of such an investment.⁽⁸⁾ Make sure you carefully review and analyze the Unaudited Statement of Average Franchise Sales and Earnings for the calendar year 2025, which appears at Exhibit H of the 2026 FDD and which is limited to the disclosure of revenue, gross margin and gasoline commissions.⁽⁹⁾ If you have any difficulty reviewing or understanding the document (the 2026 FDD has 578 pages), seek the advice of a competent and experienced business advisor, lawyer or accountant.

Questions you may have about the FDD or its contents should be submitted in writing to SEI with the expectation that you will receive specific answers in writing.

B. Request in writing at least three and preferably five years of complete profit and loss statements of the company owned location you are contemplating for purchase. The opportunity to study in detail the financial performance of the business you are considering for purchase is an elementary and basic element of due diligence. The IRS issued Revenue Ruling 59-60⁽¹⁰⁾ which states in essence that the assessment of the value of a business requires the examination of five years of profit and loss statements.

Please be assured that it is perfectly legal for SEI to provide this information to you under the Federal Trade Commission Franchise Rule; it specifically provides that the franchisor may deliver to a prospective franchisee a supplemental financial performance representation about a particular location apart from the disclosure document. The information must have a reasonable basis and written substantiation.⁽¹¹⁾ If you have questions about the financial statements, ask for written substantiation and consult an accountant or business advisor.

C. Consider asking some or all of the following questions in writing with the expectation that you will accept only a written response:

1. Why were there fewer franchisees in the United States on December 31, 2025 than there were on January 1, 2023? The 2026 FDD discloses that the turnover in franchised locations consisting of (a) franchisee to franchisee sales (632), (b) locations purchased back by SEI (567), and (c) those that ceased operations (237), was 1,436 franchised locations during that three-year period.⁽¹²⁾ How much turnover is anticipated during the course of implementing 2,600 corporate to franchised conversions between now and 2030?
2. 7-Eleven stores in Japan report higher gross margins on processed food (41.1 percent) than on daily food (35 percent) or fast food (36.3 percent). Does this indicate that increasing the sales of fresh food and daily food in the United States will yield more overall profit at the store level? Why doesn’t SEI publicly report gross margins on daily food, fast food, processed food and non-food, in a similar fashion as 7-Eleven Japan?⁽¹³⁾ What is the incremental labor cost of daily food and fast food that is not applicable to processed food and non-food?
3. Last October, 7-Eleven Japan announced the development of a new contract for the expansion of benefits for franchise owners in order to increase their profitability and to make it easier for them to manage multiple stores. The announcement indicated that there would be new systems to improve franchisees’ profit and promote new franchisees.⁽¹⁴⁾ Are similar steps planned for the United States? If not, why not?
4. In what specific ways will an IPO of SEI benefit franchisees in the United States? How much of the capital raised from an IPO will be invested in franchised stores and in improvements to store level economics? Can SEI achieve its stated goal of remodeling 7,000 stores⁽¹⁵⁾ without an IPO?
5. What enforceable guarantees are there regarding the profitability of private brand sales and 7Now sales given the company’s stated goal to substantially increase sales in those channels?⁽¹⁶⁾
6. System wide merchandise gross margin was 36 percent in 2007⁽¹⁷⁾, fell below 35 percent in 2011⁽¹⁸⁾ and fell below 34 percent in 2024⁽¹⁹⁾. In the most recent quarter, the merchandise gross margin of SEI of 33.2 percent⁽²⁰⁾was less than their publicly held competitors, Alimentation Couche-Tard (34.4 percent) and Casey’s General Stores (42.4 percent). What is behind these trends and what steps are contemplated to reverse them?⁽²¹⁾
7. Same store sales increases in the United States have not been above 2 percent since 2022⁽²²⁾ and in the most recent quarter, SEI’s increase of 1.4 percent was less than their publicly held competitors, Alimentation Couche-Tard (3.4 percent)⁽²³⁾ and Casey’s General Stores (5.5 percent)⁽²⁴⁾. Why is this the case and what steps are planned to respond?
8. Is it the policy of SEI to price gasoline to increase the number of gallons sold and thereby increase the commissions paid to franchisees and the number of in-store merchandise transactions?
9. Why did the parent company of SEI recently stop disclosing monthly data on fuel sales, average retail gallons per store, average retail price, fuel margin, and retail fuel margin?⁽²⁵⁾
10. The company’s retail gross profit on gasoline in the first quarter of 2026 was 14.3 percent, contrasted with a retail gas gross profit of 10.8 percent in the first quarter of 2025⁽²⁶⁾ and 10.5 percent in the first quarter of 2024.⁽²⁷⁾ The Q1 2026 elevated gross profit led to an increase in its gas gross profit of $349M⁽²⁸⁾, and a reported operating profit of $229 million.⁽²⁹⁾ Did this not lead, at least in part, to an 8.8 percent decrease in retail gallons sold, and a same store sales increase of just 1.4 percent coupled with a transactions decrease of 4.3 percent?⁽³⁰⁾
11. Much has been written in the financial press about the enormous investment that technology companies are making in AI infrastructure and the negative effect that widespread adoption of artificial intelligence may have on employment in the United States. On August 7, 2026, the U.S. Bureau of labor Statistics reported a decline in non- farm payroll employment of 23,000 jobs.⁽³¹⁾ To what extent will this affect the typical 7-Eleven customer and thus the revenue of franchised stores?
12. The 2026 FDD states that the Franchise Fees paid in 2025 ranged from $0.00 to $800,000.⁽³²⁾ How are these franchise fees calculated? What is the formula? Are these fees calculated the same way across the country?

A person contemplating an investment in any franchise should engage in no less due diligence than they would if they were purchasing an independent business. The purpose of due diligence when purchasing a business is to verify financial claims, uncover hidden risks, and determine fair value. It is an investigative process used to ensure the investment makes sense and that the risks that you are taking on are reasonable and manageable, before you sign a franchise contract or pay any money.

FOOTNOTES
(1) Presentation for the First Quarter of FY 2026, of Seven & i Holdings Co., Ltd., July 9, 2026 at page 13, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0709kse_01.pdf. Note that all data cited in this article was publicly available as of August 7, 2026.
(2) Brief Summary FY 2018, April 5, 2018, page 21, found at https://www.7andi.com/library/dbps_data/_template_/_res/en/ir/library/kh/pdf/2018_0405khe.pdf, page 21.
(3) Brief Summary for the First Quarter of FY 2026, July 9, 2026 at page 39, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2026_0709khe.pdf.
(4) IR Day 2026 Spring, 7-Eleven, Inc., April 23, 2026 at page 7, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0423kse_01.pdf.
(5) Presentation for the First Quarter of FY 2026, of Seven & i Holdings Co., Ltd., July 9, 2026 at page 13, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0709kse_01.pdf.
(6) IR Day 2026 Spring, 7-Eleven, Inc., April 23, 2026 at page 7, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0423kse_01.pdf., page 7.
(7) Presentation for the First Quarter of FY 2026, of Seven & i Holdings Co., Ltd., July 9, 2026 at page 13, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0709kse_01.pdf.
(8) U.S. Federal Trade Commission, Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunities, Rule Summary, found at https://www.ftc.gov/legal-library/browse/rules/franchise-rule.
(9) 7-Eleven, Inc. Franchise Disclosure Document dated April 1, 2026, at Exhibit H, page H-16.
(10) Tax Notes, Deloitte, Section 4(d), found at https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev-rul-59-60/d30t(Detailed profit-and-loss statements should be obtained and considered for a representative period immediately prior to the required date of appraisal, preferably five or more years)
(11) U.S. Federal Trade Commission, Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunities, 16 CFR §436.5(s)(4&5). See also16 CFR §436.10(a) (“…franchisors may have additional obligations to impart material information to prospective franchisees outside of the disclosure document under Section 5 of the Federal Trade Commission Act.”)
(12) 7-Eleven, Inc. Franchise Disclosure Document dated April 1, 2026, at Tables No. 1, 2 & 3, pages 60-63.
(13) Brief Summary for the First Quarter of FY 2026, July 9, 2026 at page 20, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2026_0709khe.pdf.
(14) IR Day 2025 Autumn, Seven-Eleven Japan, October 31, 2025, page 7 found at https://www.7andi.com/en/ir/file/library/ks/pdf/2025_1031kse_01.pdf.
(15) IR Day 2026 Spring, 7-Eleven, Inc., April 23, 2026 at page 5, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0423kse_01.pdf, page 5.
(16) Transformation of 7-Eleven, Seven & i Holdings Co., Ltd., August 6, 2025 at pages 17 and 19, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2025_0806kse_01.pdf.
(17) Brief Summary of FY 2008, April 10, 2008 at page 4, found at https://www.7andi.com/library/dbps_data/_template_/_res/en/ir/library/kh/pdf/kh_200802_01_e.pdf.
(18) Brief Summary of FY 2012, April 12, 2012 at page 4, found at https://www.7andi.com/library/dbps_data/_template_/_res/en/ir/library/kh/pdf/2012_0405khe.pdf.
(19) Brief Summary for FY2024, April 9, 2025, page 26, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2025_0409khe.pdf.
(20) Brief Summary for the First Quarter of FY 2026, July 9, 2026 at page 24, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2026_0709khe.pdf.
(21) Alimentation Couche-Tard, Inc. Announces its Results for the Fourth Quarter and Fiscal Year 2026, June 22, 2026 found at https://corporate.couche-tard.com/2026-06-22-ALIMENTATION-COUCHE-TARD-ANNOUNCES-ITS-RESULTS-FOR-ITS-FOURTH-QUARTER-AND-FISCAL-YEAR-2026 and Casey’s Announces Fourth Quarter and Fiscal Year Results, June 9, 2026, found at https://investor.caseys.com/news-releases/news-release-details/caseys-announces-fourth-quarter-and-fiscal-year-results-1.
(22) Brief Summary for the First Quarter of FY 2026, July 9, 2026 at page 24, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2026_0709khe.pdf and Brief Summary for FY 2022, April 6, 2023 at page 12, found https://www.7andi.com/en/ir/file/library/kh/pdf/2023_0406khe.pdf.
(23) Alimentation Couche-Tard, Inc. Announces its Results for the Fourth Quarter and Fiscal Year 2026, June 22, 2026 found at https://corporate.couche-tard.com/2026-06-22-ALIMENTATION-COUCHE-TARD-ANNOUNCES-ITS-RESULTS-FOR-ITS-FOURTH-QUARTER-AND-FISCAL-YEAR-2026.
(24) Casey’s Announces Fourth Quarter and Fiscal Year Results, June 9, 2026, found at https://investor.caseys.com/news-releases/news-release-details/caseys-announces-fourth-quarter-and-fiscal-year-results-1
(25) Compare Monthly Business Performance, Fiscal Year Ending February 28, 2026 to Monthly Business Performance, Fiscal Year Ending February 28, 2025, found at https://www.7andi.com/en/ir/financial/monthly_highlight.html.
(26) Brief Summary for the First Quarter of FY 2026, July 9, 2026 at page 24, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2026_0709khe.pdf. For the first quarter of fiscal year 2026, the average retail price of gasoline was $3.29 per gallon and the retail fuel margin was 47.04 cents/gallon (.04704/3.29 = 14.29 percent). For the first quarter of fiscal year 2025, the average retail price of gasoline was $3.15 per gallon and the retail fuel margin was 34.14 cents/gallon (.03414/3.15 = 10.8 percent).
(27) Brief Summary for FY2025, April 9, 2025, page 26, found at https://www.7andi.com/en/ir/file/library/kh/pdf/2025_0409khe.pdf. For the first quarter of fiscal year 2024, the average retail price of gasoline was $3.32 per gallon and the retail fuel margin was 34.79 cents/gallon (.03479/3.32 = 10.5 percent).
(28) Presentation for the First Quarter of FY 2026, of Seven & i Holdings Co., Ltd., July 9, 2026 at page 11, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0709kse_01.pdf.
(29) Presentation for the First Quarter of FY 2026, of Seven & i Holdings Co., Ltd., July 9, 2026 at page 21, found at https://www.7andi.com/en/ir/file/library/ks/pdf/2026_0709kse_01.pdf.
(30) Id. at page 24.
(31) Employment Situation Summary, Bureau of Labor Statistics, August 7, 2026, found at https://www.bls.gov/news.release/empsit.nr0.htm
(32) 7-Eleven, Inc. Franchise Disclosure Document dated April 1, 2026, at Item 7, page 17.

7-Eleven 11A: An Easy Guide To The Detailed General Ledger Report

By Teeto Shirajee, NCASEF Vice Chair

One of the most important things I always tell franchisees is that you cannot fully understand your store’s financial health unless you understand your reports. The 11A Detailed General Ledger Report is one of the most useful tools available because it gives you a complete breakdown of the charges, credits, adjustments, and account activity tied to your store each month. Yet many franchisees either overlook it or only review it when there is already a problem. I wanted to put together this simple guide to help franchisees better understand how to read the 11A, spot errors early, verify charges, and make sure their Franchise Statements stay accurate.

What This Report Is

The 11A is essentially a monthly record of all charges, credits, and adjustments made to your store’s accounts. I often describe it as a detailed receipt for the month because it allows franchisees to see exactly where money is moving and why certain balances change over time.

Why It’s Important

One of the biggest reasons the 11A matters is because it helps franchisees catch mistakes before they become larger issues. Reviewing the report regularly can help you verify whether charges are correct, identify missing credits, confirm vendor invoices, and reconcile information with other reports like the Cash Report, Merchandise Report (DMR), and AP9/APD. When these reports do not match, the 11A is usually the best place to begin looking for the source of the problem.

What To Focus On

The first thing franchisees should review is the beginning balance. That number should match the previous month’s ending balance. If it does not, there may be an adjustment or error that needs further review. Even a small difference should not be ignored because it can lead to larger accounting discrepancies later.

From there, franchisees should carefully review each transaction line. Every line on the report provides information about where the entry originated (Cash Report, Merch Report (DMR), AP9/APD, etc.), what the charge or credit is for, how much the transaction changed the account, and the updated balance after the entry was posted.

The descriptions included on the report are extremely important because they usually tell you where supporting documentation can be found. For example, if an entry says “See AP9,” you should review the vendor invoice tied to that charge. If it says “See APD,” that refers to your Daily A/P. Entries tied to the Cash Report or Merchandise Report should also be verified against those corresponding reports—Cash Report or DMR—to confirm everything matches properly.

Also, make sure your End balance matches the same account total on your Franchise Statement.

How To Use The Report

I always encourage franchisees to pay close attention to charges they do not immediately recognize. Repairs, fees, supplies, insurance charges, and various adjustments should never simply be ignored or assumed to be correct. If something looks unfamiliar, review the AP9/APD and investigate it further, or ask Accounting. In many cases, what appears to be a small issue can actually reveal duplicate charges, missing credits, or posting errors.

Cash entries are another area that deserves careful attention. Franchisees should confirm that cash postings match bank deposits, lottery activity, and the Cash Report Summary. Any differences should be investigated immediately because cash discrepancies can quickly create larger financial reporting issues.

Merchandise entries should also be reviewed carefully. Check your DMR report, costs, retail amounts, and credits. Watch closely for duplicate postings or missing credits. Small merchandise posting issues can significantly impact profitability over time if they continue month after month.

Adjustments are especially important because they often involve reversals, corrections, vendor disputes, or errors. Whenever you see an adjustment you do not fully understand, make note of the batch name and review the supporting details. If the issue still cannot be explained, franchisees should create an accounting case through 7-Hub so the matter can be reviewed further.

At the end of the review process, franchisees should confirm that the ending balances on the 11A match the balances shown on the Franchise Statement, AP9/APD totals, and Cash Report totals. If the numbers do not reconcile properly, the 11A usually provides the detail needed to identify where the discrepancy occurred.

Monthly Quick Check

Each month, franchisees should perform a quick review of the report by checking new entries, flagging anything unusual credits, matching AP9/APD records to the 11A, reviewing all fees, looking for duplicate charges, reconciling ending balances, confirming vendor invoices, and making sure all cash and merchandise postings are accurate. Spending a little extra time reviewing the 11A each month can help franchisees avoid larger financial problems later.

The Easiest Rule

The simplest rule I can give franchisees is this: if you do not recognize a charge, do not ignore it. Check the batch name and description, review the AP9/APD, the Cash Report, or DMR, and investigate the issue until you fully understand it. If the charge still cannot be explained, create an accounting case through 7-Hub and continue following up until the matter is resolved.

The Faces May Change, But The Goals Remain The Same

By Sukhi Sandhu, Chairman, NCASEF

The past several months have brought significant changes to the leadership team at 7-Eleven, Inc. Long-time executives who were familiar faces to franchisees and FOA leaders—including former CEO Joe DePinto and Senior Vice Presidents Randy Quinn and Dennis Phelps—have departed the organization. Like many franchisees across the country, I was surprised by the management transition and have spent time reflecting on what it may mean for our system moving forward.

Whenever leadership changes occur, questions naturally follow. Will priorities change? Will communication remain strong? Will progress continue? While none of us can predict exactly what the future holds, I believe it is important to focus on what has helped make our system successful and what must continue if franchisees, SEI, and the 7-Eleven brand are going to thrive together.

Throughout my tenure as Chairman of NCASEF, one principle has remained constant: meaningful progress occurs when franchisees and SEI engage in honest, respectful, and productive dialogue. That does not mean we always agree. In fact, some of the most important discussions have involved differing opinions and spirited debate. However, those conversations have been productive because both sides remained committed to finding solutions and moving the system forward.

Over the years, NCASEF has worked diligently to build strong working relationships with SEI leadership. At my invitation, senior executives regularly attended NCASEF Board meetings and participated in discussions with FOA leaders from across the country. These meetings provided opportunities for franchisees to share concerns, ask questions, and offer recommendations directly to decision-makers. Just as importantly, they provided SEI leaders an opportunity to better understand the realities franchisees face every day in their stores.

The value of collaboration can be seen through several meaningful accomplishments.

One example is the successful passage of Proposition 36 in California. NCASEF worked alongside franchisees, local FOAs, business organizations, community leaders, and law enforcement advocates to support stronger measures aimed at combating organized retail crime and repeat theft offenses. Retail crime has had a direct impact on convenience stores and small businesses throughout California, and Proposition 36 represented an important step toward creating safer environments for our employees, customers, and communities. The overwhelming voter approval demonstrated what can be accomplished when stakeholders unite around a common objective.

Another example is the ongoing collaboration between NCASEF and SEI surrounding franchisee profitability initiatives, including the Earned Gross Profit Growth Sharing (EGGPS) program. While there have been differing viewpoints regarding program structure and opportunities for improvement, both NCASEF and SEI remained engaged in constructive discussions focused on increasing sales, improving execution, and enhancing profitability. Through those efforts, franchisees across the system have generated millions of dollars in additional earnings opportunities through EGGPS incentives. More importantly, the dialogue continues as we explore new ways to strengthen store economics and create sustainable growth opportunities for franchisees.

These examples demonstrate an important truth: progress is rarely achieved through confrontation alone. It is achieved through communication, collaboration, and a willingness to work through challenges together.

The reality is that leadership transitions are part of every organization. Companies evolve, strategies adapt, and new leaders emerge. While relationships matter, the long-term success of the 7-Eleven system cannot depend on any single executive, franchisee leader, or organization. Success depends on maintaining a shared commitment to stronger stores, improved profitability, operational excellence, and delivering value to customers.

As new leaders assume key positions within SEI, NCASEF remains committed to building productive relationships with them. Trust is earned over time through open communication, mutual respect, and a willingness to listen. Just as previous leaders took the time to understand franchisee concerns, we look forward to establishing those same relationships with the next generation of SEI leadership.

I am encouraged that, since the transition, NCASEF has continued to maintain an open and constructive dialogue with SEI’s leadership team. We appreciate their willingness to engage in conversations regarding franchisee priorities and system opportunities. While there is always more work to do, these ongoing discussions reflect a shared understanding that the strongest systems are built when stakeholders work together toward common goals.

At the same time, the role of NCASEF and local FOAs remains as important as ever. Our responsibility is to ensure that franchisee voices are heard and that the realities of operating stores are clearly communicated. We must continue bringing forward practical solutions, advocating for improvements, and helping shape the future of our business. Effective communication is a two-way street, and strong partnerships require active participation from all parties.

Although leadership may be changing, many of the challenges facing franchisees remain the same. Store profitability, labor costs, insurance expenses, technology reliability, operational efficiency, merchandising decisions, and regulatory pressures continue to impact franchisees across the country. These challenges do not disappear simply because new names appear on an organizational chart.

That is why NCASEF will continue to advocate aggressively on behalf of franchisees while maintaining a collaborative approach with SEI. We will continue providing candid feedback, identifying opportunities for improvement, and pursuing solutions that strengthen both franchisee businesses and the overall 7-Eleven system.

The foundation built over many years of dialogue and cooperation provides a strong starting point for the next chapter. We stand ready to work with SEI’s leadership team just as we have worked with previous leaders—in pursuit of a stronger, more profitable, and more successful future for all stakeholders.

The faces in leadership positions may change, but the goals remain the same.

Franchisees want profitable stores. We want safe communities, reliable operations, strong brands, and opportunities to grow our businesses. We want a healthy partnership built on communication, trust, and shared success. NCASEF remains committed to those goals and to the franchisees we represent.

By continuing to engage in open dialogue, embrace collaboration, and focus on our common objectives, I am confident that together we can build an even stronger future for the next generation of 7-Eleven franchisees.

What About Franchisee Gross Profit, Net Profit And Goodwill Value?

By Eric Karp, General Counsel To NCASEF

The parent company of 7-Eleven, Inc. (SEI) held an Investor Relations Day on April 23, 2026, based on a detailed PowerPoint presentation, 15 slides of which were devoted to SEI. On the following day, the parent company posted a video of a presentation to investors based on that PowerPoint deck. These presentations followed the decision of the parent company to delay the previously planned public offering of SEI shares to the first quarter of 2027, at the earliest. The presentation was designed to answer questions that investors may have about the financial condition and prospects for the parent company and SEI. But it raised more questions than answers about the role that franchisees will play in the future; questions that we invite SEI to answer.

I urge every reader of this column to review the PowerPoint and the video presentation, which you can find here: https://www.7andi.com/en/ir/library/irday/202702.html.

One of the presenters stated with accuracy that SEI has entered a decisive inflection point in the business. For that reason, the company has developed and presented a detailed plan to address the key challenges faced by the business. Some elements of this plan are already underway.

One of the key challenges identified in slide #2 is “Franchisee profitability.” And while the slides that follow contain detailed plans and goals to develop a modern store network, no concrete steps are identified to make unit level economics for franchisees better than they are at present. And some of the initiatives identified have the potential to reduce franchisee profitability and value; moreover, SEI does not claim that they will increase profitability or value.

Among the five priorities listed on slide #4 under the heading Modern Store Network are a remodel program, building new standard stores, franchising, restaurants, and digital & delivery.

Remodel Program

Slide #5 states that more than 7,000 stores will be remodeled by 2030. The stated rationale is that elevating the customer experience requires fundamentally improving existing stores first, which will unlock everything that follows. The presentation states that all stores will receive exterior remodeling and interior store simplification and that locations will be evaluated on a case-by-case basis relative to other program rollouts. Not stated is:

• How much money the company expects to spend on these remodels.
• How will remodels be prioritized in a United States network that includes nearly 12,000 total locations across the 7-Eleven, Speedway, Sunoco and Stripes brands.
• The potential competitive disadvantage for those stores that are deemed not appropriate or ineligible for other program rollouts.
• Whether these remodels can be carried out if the company does not actually sell shares to the public.

New Standard Stores

Slide #6 states that SEI will build 1,300 new stores by 2030, on the basis that new standard stores outperform the existing network with 30 percent more traffic and 44 percent more sales. But in some ways, that is an apples-to-oranges comparison, because SEI concedes in slide #5 that its existing store network needs remodels and refreshes. Not stated is:

• How much capital will be required to build these stores?
• The rate at which they will be built, given that over 5 years, that works out to 260 new stores per year, compared to 122 new stores built in 2025.
• How many of these new stores will have restaurants and thus be counted towards the goal of 1,100 restaurants by 2030?
• Because it is reasonable to assume that building a new store entails costs materially more than remodeling an existing store, can this program be carried out in the absence of a public offering?

Franchising

Slide #7 addresses the goal of creating 2,600 corporate to franchise conversions by 2030, counting the 237 such conversions that occurred in 2025. That works out to approximately 472 such conversions per year over the next five years. According to its 2026 Franchise Disclosure Document, SEI sold an average of 238 franchises per year over the last five years.

This slide appropriately lauds franchisees for their entrepreneurial spirit, local market insight and overall improved performance compared to corporate stores. The slide indicates that “Franchising delivers stronger overall economics,” but that appears to apply to improved economics for SEI. The current franchising model insulates SEI from increases in operating and labor costs. The slide accurately indicates that a strong franchise system enables SEI to grow more rapidly with lower capital intensity, meaning that some material portion of the capital is ultimately furnished by the franchisees through franchise fees. But it does not address:

• How unit level economics can be improved to incentivize franchisees to buy many more stores than they have in the recent past.
• How franchisee fees will be set or computed.
• Which stores will be part of this conversion? Will it include the newly built standard stores, stores with restaurants attached and/or existing other brands such as Sunoco, Speedway and Stripes?
• Will SEI furnish multi-year store level profit and loss statements for each corporate store its offers to franchisees, which is explicitly permitted under Section 436.5(s)(4) of the FTC’s Franchise Rule?

Restaurants

Slide #8 states that SEI will invest in 1,100 new restaurants by 2023, citing its data that locations where there are restaurants have 28 percent higher sales and 32 percent higher traffic. This initiative also raises many questions, not the least of which are:

• What qualifications will be applied to franchisees and their locations who wish to add a restaurant to their convenience store location?
• To what extent will fresh food sales be cannibalized by the restaurant operation? Will SEI share its experience and data? Does such data take into account both Fast Food and Daily Food, disclosed by SEI’s parent as amounting to 13.2 percent and 3.8 percent of revenue in FY 2025, respectively?
• The potential competitive disadvantage for those stores that are deemed not large enough or otherwise not appropriate or ineligible for a restaurant operation.
• Where are the stores that are included in the data regarding sales and traffic? Are they all 7-Eleven stores? Are any of these locations retrofits?
• How many of these new restaurant locations will be retrofits as opposed to restaurants built in conjunction with new standard stores?
• What are the average merchandise sales, merchandise traffic counts, number of square feet and merchandise Net Margin of the locations with a restaurant, by brand?
• Will SEI provide detailed multi-year profit and loss statements for its existing locations that have restaurants?
• Are any of the locations cited on slide #8 retrofits, as opposed to new stores built with both merchandise and restaurant offerings?
• Will SEI provide any proposed contract for restaurant sales to be reviewed and commented on at least 30 days prior to issuance?
• Will SEI charge an advertising fee for restaurant sales?
  • Will that revenue be segregated from advertising contributions from franchise locations that offer only merchandise?
  • Will the advertising be market specific?
  • Will corporate restaurants make the same contribution to the advertising fund, over and above advertising allowances, payments and credits received from vendors?
  • Will franchisee leaders have input into strategic decisions regarding expenditures?

Private Brands

Slide #9 presents the goal of increasing private brand sales to $2.6B by 2030—double the sales in 2025—by focusing on high growth categories including nuts and seeds, hydration, Hispanic, and protein. The slide states that private brands yield a gross margin 18 percent higher than national brands.

• Since SEI affiliate, 7-Eleven Distribution Company, sells private label and proprietary items, will SEI make a binding agreement to maintain these elevated margins?
• If not, how can franchisees be assured of the impact of private brands on their profit and goodwill value in the out years?
• How will doubling private brand sales affect the relationships between SEI, as well as franchisees, with national brand manufacturers?

Digital and Delivery

Slide #10 states that 7NOW delivery time is down to an industry-leading 27.5 minutes, that the average basket is 80 percent higher than in-store sales, and that this channel has experienced 20 percent same store sales growth. The stated goal is to increase sales to $1.8 billion by 2030 in part by extending the program to 8,500 stores and expanding the number of proprietary products sold. The question is not whether this franchise system needs to compete in this channel, but how the proceeds will be shared between the franchisor and its franchisees. The franchisee community leaders in the National Coalition are deeply concerned about the profitability of 7NOW transactions and how increasing the digital traffic will affect their labor costs. Nothing in this presentation addresses these questions:

• Will SEI share its internal analyses of 7NOW profitability in corporate stores?
• Will SEI share its internal analyses of 7NOW profitability in franchised stores?
• Will franchisees share in the revenue from sales of Gold Pass, offered at $95/year and $55/year as of 5.14.26?
• What portion of 7NOW customers are in the Gold Pass program?
• What portion of 7NOW revenue is derived from sales of private label and proprietary items?
• How are advertising allowances, payments and credits received from vendors and third-party delivery companies accounted for?
• Who pays for the free drinks, delivery savings, fuel discounts, product discounts, and cash back to Gold Pass subscribers?

Conclusion

At the end of 2017, before the Sunoco and Speedway transactions, SEI was nearly 90 percent franchised. By comparison, at the end of 2025, less than 60 percent of the locations in the system were franchised. It is heartening to see SEI’s parent company tell the investment world that franchisees bring stronger local execution and that this is good for the franchisor. Unanswered is the question of whether (a) the array of initiatives announced by the parent company will benefit franchisees by elevating their profit and goodwill value, and (b) any of the advantages to these initiatives, or specific and quantifiable improvements to franchisee profitability and value that may be offered in the future, are enshrined in contract and not in mere policies.

Understanding Gross Profit In The 48A Financial

By Teeto Shirajee, NCASEF Vice Chair

Gross profit is the difference between total sales and cost of goods sold (COGS). On the Financial 48A, this is calculated by:

• Tracking sales revenue across all categories.
• Subtracting COGS, which is based on beginning inventory + purchases – ending inventory.
• Expressing the result as both a dollar amount and a margin percentage.

This margin is the lifeblood of your store—it determines franchise charges and ultimately your net income.

Practical Tips To Improve Gross Profit Margins

1. OPTIMIZE PRODUCT MIX

• Focus on high-margin items like hot foods, coffee, fountain drinks, non-carb vault, and private-label snacks.
• Use the 48A trend reports to identify which categories consistently deliver stronger margins.

2. CONTROL SHRINKAGE

• Shrinkage (losses from theft, spoilage, or errors) directly reduces gross profit.
• Implement tighter inventory controls and regular cycle counts.
• Train staff to spot and prevent common sources of loss.

3. MANAGE INVENTORY SMARTLY

• Avoid overstocking items with short shelf lives (sandwiches, dairy, etc.).
• Use the Supplemental Schedule in the 48A to monitor ending inventory levels.
• Leaner inventory reduces waste and improves cash flow.

4. LEVERAGE PROMOTIONS STRATEGICALLY

• Pair loss leaders (low-margin items) with high-margin upsells
• Track promo (bill backs) effectiveness in the 48A to see if sales volume offsets margin dilution.

5. NEGOTIATE VENDOR DEALS

• Work with suppliers to secure better pricing or rebates.
• Even small reductions in purchase costs improve gross profit when multiplied across thousands of units.

6. MONITOR CATEGORY TRENDS

• The rolling six-month trend in the 48A highlights shifts in customer demand.
• Adjust your product mix quickly to ride seasonal trends (e.g., Slurpee in summer, coffee in winter).

7. TRAIN STAFF ON SUGGESTIVE SELLING

• Encourage employees to upsell high-margin items at checkout.
• Example: “Would you like a hot dog with that drink?”—simple prompts can lift gross profit.

Example: Turning Numbers Into Action

Imagine your 48A shows a Gross Profit Margin of 37 percent and Shrinkage of 3 percent of sales. By reducing shrinkage to 1 percent through better controls, you could add thousands of dollars back into gross profit annually—without increasing sales.

Key Takeaway

The Financial 48A is more than a report—it’s a profit playbook. By analyzing gross profit margins and acting on the insights gained (through inventory control, product mix optimization, and shrinkage reduction), franchisees can significantly improve their bottom line.

Franchise Survival Card

DAILY HUSTLE HACKS

• Push the Perks: Coffee, fountain drinks, hot food, and non-carb vault = margin magic.
• Shrinkage Sleuth: Count it, track it, crush it. Every percentage saved = $$$ in your pocket.
• DMR Check‑In: Morning ritual—Review gross profit percentage like it’s your horoscope.

WEEKLY WINS

• Spot the Slackers: Which category is dragging? Swap low-margin SKUs for high-margin heroes.
• Staff Pep Talks: Train the team on upselling—“Hot dog with that drink, etc.?” is pure profit poetry.
• Promo Patrol: Don’t let discounts eat your margin. Pair loss leaders with tasty upsells.

MONTHLY MASTERY (48A TIME)

• Margin Match‑Up: Compare your numbers to GGPS. If you’re above target, you’re winning.
• Inventory Reality Check: Ending inventory + shrinkage adjustments = the truth behind the numbers.
• Celebrate the Overachievers: Categories beating benchmarks deserve a victory lap.

SURVIVAL MANTRAS

• “Shrinkage is the silent thief—catch it daily.”
• “High‑margin items are your best friends—treat them well.”
• “DMR is the daily pulse, 48A is the monthly heartbeat.”

Restoring Franchisee Profitability: The Urgent Path Forward

By Sukhi Sandhu, NCASEF Chairman

For the past three years, franchisee net income has continued to decline. That reality is becoming harder to ignore—especially at a time when inflation, labor costs, and everyday operating expenses continue to rise. Whether you are a business owner or a working family, income must move forward, not backward. Yet today, too many franchisees are doing everything possible just to keep their heads above water.

This challenge is particularly difficult for single-store and small multi-store operators. The current model increasingly pushes franchisees toward owning more stores as a path to stability. But growth is not as simple as adding locations. As stores are added, overhead rises quickly—additional managers are required, labor costs increase, and administrative complexity grows. What was once a hands-on small business can quickly begin operating like a corporation, complete with office staff and HR personnel. Meanwhile, the ability for a franchisee to personally work the front line—historically one of the ways to offset labor costs—diminishes. The result is often thinner margins per store, not stronger returns.

Compounding this issue is the growing practice of bundling high-performing stores with weaker locations. While this may serve broader strategic objectives, it can dilute the profitability of strong units. A store that once stood successfully on its own now carries the weight of another, reducing overall return for the franchisee.

These pressures did not emerge overnight. Since the 2019 franchise agreement, more expenses have steadily shifted to the franchise side. Programs and subsidies that once helped offset operational costs—such as support for 7NOW, equipment maintenance, and credit card fees—have been reduced or eliminated. Each change individually may appear manageable, but together they have significantly eroded franchisee profitability over time.

At the same time, SEI continues to invest in important long-term growth strategies. Programs such as 7NOW, expanded food service, and future restaurant concepts represent meaningful opportunities. I support these initiatives. They reflect evolving customer expectations and are essential to keeping the brand competitive.

However, these programs are labor-intensive. They require accuracy, fresh food, clean facilities, well-maintained restrooms, and strong customer service. None of that happens without people. As these initiatives expand, operating costs expand with them—often faster than the incremental income they generate at the store level.

Fuel operations present similar concerns. New stores are larger, with expanded lots and additional pumps. That means higher landscaping expenses, more trash removal, snow clearing, lighting, and ongoing maintenance. Yet the fuel commission has remained at one and a half cents for more than 15 years. Inflation alone has significantly reduced its value, making it increasingly difficult to sustain these expanded operations.

Food service and potential restaurant concepts must also be evaluated through the lens of franchisee net income. These categories can be powerful growth drivers, but they must add to profitability—not consume what little margin remains after rising operational costs. Growth cannot come at the expense of sustainability.

To be clear, conversations with SEI leadership have been healthy and constructive. With new leadership in place following Joe DePinto’s departure, there has been openness and a willingness to engage. That is appreciated. There is a shared understanding that adjustments are necessary.

But franchisees are approaching a breaking point. Net income has declined year after year, and many are asking a simple question: where does this stop? Dialogue is important, but solutions must move with urgency. A model that once provided stability and opportunity no longer delivers the same results for many operators.

Franchisees are actively seeking solutions at the store level—identifying higher-margin products, negotiating stronger vendor programs, and introducing new services to improve profitability. Through local FOAs and NCASEF, franchise leaders are also engaging with state and local lawmakers to advocate for clear, consistent regulations that allow compliant small business owners to compete fairly. This includes efforts around skill games and regulated adult-use categories such as vape and CBD-infused products, where inconsistent enforcement creates competitive disadvantages.

In many markets, customers are shifting to competitors who openly sell products that fall into legal gray areas or operate without proper oversight. When customers leave a 7-Eleven for those purchases, they often complete their entire shopping trip elsewhere. The loss extends beyond a single item—it affects beverages, food service, fuel, and the full market basket.

While I value the ongoing conversations with SEI leadership, dialogue must now translate into measurable action. Every new initiative should be evaluated not only by top-line growth or systemwide expansion, but by one fundamental question: does it increase franchisee net income at the store level?

A sustainable franchise system must reward the operators who carry the daily operational responsibility and financial risk. Without healthy store-level economics, no long-term strategy—no matter how innovative—can succeed. Profitability is not a secondary outcome of growth; it is the foundation that makes growth possible.

Franchisees want to grow with the brand. We believe in the system, and we believe deeply in the long-term strength of 7-Eleven. But for that future to remain viable, profitability must be restored and protected at the store level.

When franchisees are financially strong, the entire ecosystem benefits. The brand becomes more resilient. Vendor partnerships become more productive. Customers receive better service. Communities remain supported.

 Store-level profitability is not simply a franchise issue—it is a systemwide imperative.

Labor Law Compliances, Forms, And Keeping Forms For Audits Or Other Verification Purposes

By Raj Singh, NCASEF Treasurer

Understanding Form I-9 Requirements
When hiring or rehiring employees in the United States, every employer—regardless of company size or industry—must comply with federal employment eligibility verification laws. The cornerstone of this process is Form I-9, issued by the U.S. Citizenship and Immigration Services (USCIS). Properly completing, maintaining, and retaining this form is not just good practice, it’s a legal requirement.

What Is Form I-9?
Form I-9, officially titled Employment Eligibility Verification, is used to verify the identity and work authorization of individuals hired to work in the U.S. The form ensures that employers only hire people who are legally permitted to work—U.S. citizens, permanent residents, or individuals authorized to work under specific visa categories.

Who Must Complete Form I-9
Every new hire, regardless of citizenship or immigration status, must complete Form I-9. This also applies to rehired employees if:

• The previous I-9 is more than three years old, or
• The employee’s work authorization or documentation has expired.

Where To Find Form I-9
The most current version of Form I-9 and its detailed instructions are available for free on the USCIS website: https://www.uscis.gov/i-9.

Employers should always download the latest version directly from USCIS to ensure compliance with current rules and document lists.

How To Complete Form I-9

• Section 1—Employee Information and Attestation: The employee must complete and sign this section no later than their first day of work.
• Section 2—Employer Review and Verification: The employer must review the employee’s identity and work authorization documents and complete this section within three business days of the employee’s start date.
• Section 3—Reverification and Rehires: Used when an employee’s work authorization expires or when rehiring within three years of the original I-9.

Employers must examine the original documents (not copies) and ensure they appear genuine and relate to the employee presenting them.

How Long To Keep Form I-9
Employers are required to retain each Form I-9 for a specific period, whichever is later:

• Three years after the date of hire, or
• One year after the date employment ends.

Forms may be stored on paper, microfilm, microfiche, or electronically, but they must be accessible for inspection by authorized government officials such as the Department of Homeland Security (DHS), Department of Labor (DOL), or Immigration and Customs Enforcement (ICE).

Consequences Of Incorrect Or Missing I-9 Forms
Failing to properly complete or maintain I-9 forms can lead to serious penalties. Common violations include missing forms, incomplete sections, use of outdated versions, or accepting invalid documents. Consequences may include:

• Civil Fines: Fines range from hundreds to several thousand dollars per violation, depending on the severity and frequency of the errors.
• Criminal Penalties: Knowingly hiring or continuing to employ unauthorized workers can lead to criminal charges and higher fines.
• Loss of Business Licenses or Contracts: Repeated or willful noncompliance may lead to the suspension or loss of federal or state contracts and business licenses.
• Reputation and Compliance Risk: A poor record in immigration compliance can trigger audits and damage a company’s credibility with regulators and partners.

Best Practices For Compliance

• Always use the latest USCIS Form I-9.
• Train hiring managers and HR staff on proper I-9 completion.
• Conduct periodic internal audits.
• Store I-9s separately from personnel files for easier access during inspections.
• Never discriminate based on citizenship or national origin when completing the form.

Final Thoughts
 Form I-9 compliance may seem routine, but it’s a critical part of responsible hiring. Accurate completion, timely verification, and proper recordkeeping protect your business from costly penalties and help maintain a lawful workforce. Staying informed and organized ensures that your hiring process remains compliant, efficient, and audit ready.

Understanding W-4 Requirements For New Hires & Rehires
The IRS Form W-4 (Employee’s Withholding Certificate) is a mandatory document that every employer must collect from each new hire (and rehire) before processing payroll. It ensures the correct amount of federal income tax is withheld from an employee’s paycheck.

Where To Find The W-4 Form

• The current version of Form W-4 is available directly from the IRS website at irs.gov/w4.
• Employers can also provide the form as part of their new hire onboarding packet, either in paper or electronic format.
• Payroll and HR software platforms often include the W-4 as part of their employee setup workflow.

When & How Employees Should Complete The W-4

• A new hire must complete Form W-4 before their first paycheck is processed.
• A rehire should complete a new W-4 if any personal or financial circumstances have changed since their previous employment (e.g., marital status, dependents, or other income).
• Employees can update their W-4 at any time during employment if their tax situation changes.

How Long Employers Must Keep W-4 Forms
Employers are required to retain each employee’s W-4 for at least four years after the date of the last tax return filed using that form or four years after the employee leaves the company, whichever is later.

• Forms may be stored electronically or on paper, as long as they are easily accessible for IRS inspection.

Consequences Of Incorrect Or Missing W-4 Forms

1. For Employers:
   • Penalties and Fines: The IRS may impose fines for failing to maintain or produce a W-4 during an audit.
   • Incorrect Tax Withholding: Employers may be held liable for unpaid taxes if they fail to withhold the correct amounts due to missing or incorrect W-4 data.
   • Backup Withholding: If a valid W-4 is not on file, employers must withhold taxes as if the employee is single with no adjustments, which can cause employee dissatisfaction.
2. For Employees:
   • Incorrect Tax Withholding: Underpayment can result in a tax bill and penalties at year-end.
   • Over-withholding: May lead to a smaller paycheck and a large refund later, reducing take-home pay unnecessarily.

Best Practices For Employers

• Always ensure a completed and signed W-4 is on file before processing the first payroll.
• Encourage employees to review and update their W-4 annually or after major life events.
• Store all W-4s securely and ensure easy retrieval for IRS or state audits.

In Summary
The W-4 form is not just a formality—it directly affects tax compliance and employee satisfaction. Keeping accurate, up-to-date W-4s for every employee protects both the employer and the worker from unnecessary tax issues and penalties.

Labor Compliance Audits
Preparing for a labor compliance audit is essential for avoiding penalties, ensuring smooth operations, and demonstrating that your business follows federal and state employment laws. Here’s a clear, step-by-step guide to help you get ready.

1. Understand What’s Being Audited

            Labor compliance audits typically review:

• Employee records (hiring documents, payroll, time sheets)
• Wage and hour compliance (minimum wage, overtime, breaks)
• Work eligibility verification (Form I-9, E-Verify)
• Tax and withholding documentation (Form W-4, payroll taxes)
• Workplace policies (anti-discrimination, harassment prevention, safety)
• Posters and notices (mandatory federal and state postings)

2. Review Employment Records
   Make sure all employee files are complete, organized, and up-to-date:

• Form I-9: Verify that forms are completed correctly and stored separately from personnel files.
• Form W-4: Ensure current versions are on file for all employees.
• Pay Records: Keep detailed records of wages, hours worked, and deductions.
• Employee Classification: Verify that employees are correctly classified as exempt/non-exempt and employee/independent contractor.

            Retention Tip: Keep payroll and employment records for at least 3 years, and I-9 forms for 1 year after termination or 3 years after hire (whichever is later).

3. Audit Your Payroll Practices

• Check that employees receive at least minimum wage and overtime as required.
• Ensure all deductions are legal and authorized.
• Verify that payroll taxes (FICA, federal and state withholding, unemployment) are filed and paid correctly.

4. Verify Required Workplace Posters
   Post updated federal and state labor law posters in visible areas (break room, near time clocks, etc.). These include:

• Fair Labor Standards Act (FLSA)
• OSHA Job Safety and Health
• Equal Employment Opportunity (EEO)
• Family and Medical Leave Act (FMLA)
• State-specific wage and hour notices

5. Check Policies & Training
   Confirm that your company’s written policies and employee handbook cover:

• Non-discrimination and harassment prevention
• Leave policies (sick, family, medical)
• Workplace safety (OSHA compliance)
• Complaint and reporting procedures

Also ensure employees have received any required trainings (e.g., harassment prevention, safety training).

6. Conduct An Internal Self-Audit
   Before the official audit:

• Assign HR or a compliance officer to perform a mock audit.
• Identify gaps and correct errors proactively.
• Document all corrective actions taken.

Tip: Keep a checklist of all required compliance items for future audits.

7. Organize Documentation For Easy Access
   Prepare a well-labeled binder or secure digital folder with:

• Hiring documents (I-9s, W-4s, applications)
• Payroll and tax records
• Employee handbook and policy acknowledgments
• Posters and training certificates
• Any correspondence with labor agencies

8. Train Supervisors & Managers
   Supervisors should understand:

• Employee rights and company obligations.
• What to do during an audit.
• How to handle auditor requests professionally and accurately.

9. During The Audit

• Be cooperative but only provide what is requested.
• Designate one spokesperson to interact with the auditor.
• Keep copies of all documents you provide.

10. After The Audit

• Review the audit findings carefully.
• Address any violations or corrective recommendations immediately.
• Document your response and maintain a record for future reference.

7-Eleven, Inc. Restaurant Initiative: A Good Investment? For Whom?

By Eric Karp, General Counsel To NCASEF

Faced with headwinds from a number of directions, the parent company of 7-Eleven, Inc. has publicly announced plans to transform the company (but not the store level economics for franchisees) in a number of ways. Those initiatives have been described in my previous columns and at National Coalition Board meetings with frequency. In my most recent column, I asked SEI 20 specific questions about those initiatives and offered to give up my space in Avanti in return for detailed and supported answers. That offer was not accepted and therefore in this column I’d like to focus on the Restaurant Initiative.

The presentations from SEI’s parent company are focused on convincing the investment community they have a solution to the challenges that have faced the company for a number of years. Their position is that these initiatives will increase the profitability of 7-Eleven, Inc. and by extension the parent company, which will, in turn, enhance shareholder value, not to mention elevate the likelihood of an IPO of SEI in 2026.

Many of the multiple initiatives announced involve enhanced and distinctive fresh food offerings. SEI’s parent company has informed investors that one of the primary drivers of growth will be investing in restaurants. This will be done, they say, with three different brands: Laredo Taco, Raise the Roost Chicken and Biscuits, and Speedy Café. These presentations indicate that there will be 50 such restaurants by the end of 2025 and 1,100 such restaurants by the end of 2030, five years hence. That means on average more than 200 such restaurants are to be opened each year.

For the franchisee community, the central issue is whether the restaurant initiative will add to or subtract from the revenue, profitability and value of their franchised businesses. It should go without saying that the burden of demonstrating the benefit or even the viability of the restaurant initiative to the franchisees rests with 7-Eleven, Inc. And whatever business case analysis is furnished must be marked with complete transparency and accompanied by widely distributed and specific and supportable historical and pro forma written data.

SEI’s parent company published statistics indicating that their existing restaurants, when paired with convenience stores, drive higher sales and traffic to the convenience stores. More specifically they state that in those circumstances, average daily sales of merchandise increased 34 percent, food sales increased 146 percent, traffic increased 42 percent, and gross margin increased by 50 basis points. This data is apparently derived from the less than 50 restaurant locations that were open for the month of September 2025.

Other than the fact that at least some of these small sample of restaurants are paired with convenience stores, we have no data on where these convenience stores are located, how long they have been open, their gross sales and merchandise gross margin, the condition of the stores or how much competition they have. What are their sales? What percentage of revenue is devoted to food cost, employees, insurance, and other elements of overhead? As just one example KFC reported that in 2024 average franchisee product cost was 32 percent and labor 35.8 percent. By the time this article is published, SEI will have data on all of its company owned restaurant locations for all of 2025. A full, complete and detailed presentation of the characteristics and financial performance of all SEI restaurants is certainly in order.

The restaurant initiative presents an unusual form of co-branding. Co-branding refers to the practice of collaborative marketing of two or more distinct brands, such as Dunkin’ Donuts and Baskin-Robbins. Here the brands may be distinctive, but the product assortment is not. Given the company’s push towards fresh food and daily food for its convenience stores, a restaurant linked to a 7-Eleven convenience store will have side-by-side businesses selling some of the same products and/or products that will be competing with each other for the same consumer dollar.

If the restaurant initiative is proved out to be at least part of the solution for franchisees, is it not clear that the initiative could not and cannot be made available to all franchisees? There are thousands of locations in the system where the stores are too small and the land area inadequate to add a restaurant facility to an existing convenience store. SEI needs to be clear on how many franchised locations are candidates for the restaurant initiative and whether there is an alternative for those that cannot accommodate the additional square footage required. And if the restaurant initiative proves to be advantageous, will those franchisees left behind be at a competitive disadvantage?

And then there is the issue of the costs that would be paid by franchisees that are not currently being paid by the corporate restaurants that are open. If we assume that restaurant franchisees will pay a royalty on the gross sales of the restaurant component, how much will that royalty be and will it be commercially reasonable under the circumstances? One way of looking at this is to compare what the typical QSR franchisee pays. For example, McDonald’s franchisees pay a royalty of 4-5 percent of gross revenue and KFC franchisees the same. But these comparisons can be misleading, because the gross sales of these restaurants are expected to be but a fraction of what a typical QSR restaurant grosses. This means that even a 4-5 percent royalty might not make sense because of the fixed costs involved.

If SEI decides to charge an initial franchise fee, it should consider that both McDonald’s and KFC charge an initial franchise fee of $45,000. But that’s for a business that’s going to create revenue that is a multiple of what this restaurant initiative has produced in the 7-Eleven corporate stores so far. For example, according to QSR Magazine, the average annual sales of McDonald’s locations in the United States in 2024 was $4 million.

In addition, if the advertising contribution required of restaurant franchisees remains at the 1 percent fixed in the current 7-Eleven franchise agreement, one could argue that this is less than the typical QSR franchisee pays because marketing and advertising is crucial to the business. In most systems the advertising contribution is split between a national advertising fund controlled by the franchisor and local or regional cooperatives controlled by the stores in that region. And in most franchise systems the franchisor is contractually bound to make the same advertising commitment as its franchisees make. Not so in the 7-Eleven system. That would need to change in a restaurant initiative.

Finally, if there is to be a separate franchise agreement for the restaurant initiative or an addendum to the existing franchise agreement, SEI will be required to amend or issue a new Franchise Disclosure Document which describes this proposed investment in fulsome detail. It is my hope that before any such document is published, the National Coalition and its General Counsel will be given an opportunity to review and comment well prior to dissemination.

Some of you may know that I am a very enthusiastic tennis player. So, I say to 7-Eleven: the ball is in your court. Send us the business case and then let’s roll up our sleeves and sharpen our pencils.

How The Franchise Owners Association Benefits 7-Eleven Franchisees

By Teeto Shirajee, NCASEF Vice Chair

Franchising has become a popular business model, allowing entrepreneurs to operate under established brands while benefiting from their reputation and operational support. Among these franchises, 7-Eleven stands out as one of the most recognizable convenience store brands worldwide. However, the success of 7-Eleven franchisees is not solely attributed to the brand itself; the support provided by Franchise Owners Associations (FOAs) plays a significant role. This article examines the benefits that Franchise Owners Associations provide to 7-Eleven franchisees.

Collective Bargaining Power

One of the primary advantages of being part of a Franchise Owners Association is the collective bargaining power it offers to franchisees. By banding together, franchise owners can negotiate better terms with suppliers, vendors, and service providers. For 7-Eleven franchisees, this can mean reduced costs on inventory, promotional materials, and equipment, ultimately leading to increased profit margins.

Advocacy and Representation

Franchise Owners Associations serve as a voice for franchisees, advocating for their interests at various levels. This representation is crucial in discussions with SEI regarding policies, pricing strategies, and operational practices. In the case of 7-Eleven, the association can help ensure that franchisee concerns are heard and considered, promoting a more collaborative relationship between franchisees and corporate.

Training and Development

A well-informed franchisee is a successful franchisee. Franchise Owners Associations often provide training programs, workshops, and seminars that equip 7-Eleven franchise owners with the necessary skills and knowledge to run their businesses effectively. These educational resources cover a range of topics, including marketing strategies, customer service, inventory management, and financial planning, ensuring that franchisees are well-equipped to meet the challenges of operating a 7-Eleven store.

Networking Opportunities

Being part of a Franchise Owners Association allows 7-Eleven franchisees to connect with one another, fostering a sense of community and collaboration. These networking opportunities enable franchise owners to share best practices, troubleshooting tips, and innovative ideas that can enhance their operations. This camaraderie can be especially beneficial for new franchisees who may benefit from the experience and insights of seasoned owners.

Access to Resources and Support

Franchise Owners Associations often provide members with access to a wealth of resources, including marketing materials, operational guidelines, and legal advice. For 7-Eleven franchisees, having access to these resources can streamline operations and improve efficiency. Furthermore, FOAs typically offer dedicated support during times of crisis or change—whether it’s navigating new regulations, managing supply chain disruptions, or addressing labor challenges. This ongoing assistance helps franchisees adapt quickly and maintain business continuity, even when market conditions shift unexpectedly.

Strength in Community Engagement

Another key benefit of joining an FOA is the opportunity to give back to the communities franchisees serve. Many FOAs organize charity golf tournaments, fundraising events, and local partnerships that benefit organizations like Children’s Miracle Network Hospitals and other regional causes. These initiatives not only strengthen the reputation of 7-Eleven stores within their neighborhoods, but also bring franchisees, vendors, and customers together for a shared purpose. Participating in these efforts reinforces the core values of teamwork, compassion, and social responsibility that define the 7-Eleven brand.

In essence, Franchise Owners Associations are an indispensable part of the 7-Eleven ecosystem. They empower franchisees through collective strength, open communication, and shared knowledge, ensuring that independent operators never have to face challenges alone. By working together through their local FOAs and the National Coalition of Associations of 7-Eleven Franchisees (NCASEF), franchisees can build stronger businesses, create lasting partnerships, and contribute to the overall success of the 7-Eleven brand nationwide.

Tough Times Call For True Partnership

By Sukhi Sandhu, NCASEF Chairman

Across the country, families are still feeling the pinch. Prices keep rising, paychecks aren’t stretching as far, and even though the government has reopened—and federal workers and SNAP recipients are finally receiving their pay and benefits again—the strain hasn’t lifted. For many households, recovery doesn’t happen overnight. Their local 7-Eleven remains more than a convenience store; it’s one of the few places they can count on to be open, stocked, and welcoming. As franchisees, we’re seeing the pressure our communities are under every single day.

Every day, customers seem to walk into our stores with tighter budgets. They’re making trade-offs, counting every dollar, and looking for value wherever they can find it. And while the cost of doing business keeps going up—from wholesale prices to credit card fees to utilities—our profit margins remain razor thin. Franchisees are working harder than ever just to keep up, serving their neighborhoods faithfully while absorbing more of the financial burden themselves.

In moments like these, it becomes clear that our system’s strength depends on partnership—real partnership, not just in words but in actions. Franchisees, SEI, and vendors all play essential roles in keeping the 7-Eleven brand strong. But when times are tough, that strength is tested. It’s easy to talk about teamwork when sales are up and costs are down; it’s much harder when every line on the P&L feels like it’s pulling in the wrong direction.

The reality is that franchisees can’t shoulder these challenges alone. Rising product costs, inflationary pressures, and reduced customer spending all combine to create a situation where stores need flexibility, not rigidity, from the system above them. This is when SEI should be working closer with franchisees to find ways to relieve pressure and protect profitability. In the long-term, we need to be reviewing the Franchisee Agreement, focusing on franchisees’ net profitability and the health of the franchisee model. In the short-term, this means revisiting policies like the Gradual Gross Profit Split (GGPS), adjusting supply chain markups, and ensuring that promotional programs truly help stores drive traffic and sales, not just move product.

Our vendor partners are part of that solution, too. Many of them have stood with us through difficult times, offering strong promotions, supporting FOA trade shows, and helping franchisees identify new items that excite customers. Those relationships matter. Vendors who step up now, who understand that affordability drives volume and that franchisee success equals their success, will earn lasting loyalty.

At the same time, communication and transparency have never been more important. Franchisees need timely information about pricing changes, program updates, and supply issues so they can plan properly and make informed decisions. Too often, these conversations happen after the fact, leaving storeowners reacting instead of preparing. True partnership means making sure every franchisee has the knowledge and support to adapt quickly when circumstances change.

We also need to recognize what our stores represent during times like these. When government services slow down or stop altogether, when families can’t rely on a paycheck or benefits, 7-Eleven stores remain open. Franchisees keep their doors unlocked, lights on, and coffee brewing, providing small comforts and daily essentials to communities that depend on them. That reliability is a core part of the 7-Eleven promise, but it comes at a cost that franchisees continue to bear.

So this is a moment for unity. For SEI to stand beside the franchisees who carry its brand every day. For vendors to strengthen their partnerships and look beyond short-term numbers to long-term relationships. And for franchisees to continue working together through their FOAs and NCASEF, making sure our collective voice stays strong and clear.

The economy will recover—it always does. But the decisions we make during hard times reveal the kind of brand we truly are. When we act with fairness, empathy, and collaboration, we build trust that endures well beyond any crisis.

In times like these, the only way forward is together.