Photo by Robert Burroughs
The fee for the franchise of a 7-Eleven store today is a flat $7,500.
In the summer of 1927, the newly formed Southland Ice Company had 16 drive-up ice docks dotting the small, slumbering Dallas community of Oak Cliff. Folks could hop in a Maxwell and conveniently motor over to the nearest Southland for their twice-weekly block of ice.
Since 60 percent of customers will come from within a one- or two-mile radius, they should start to greet them by name.
Photo by Robert Burroughs
The operator of one of the docks, a shrewd man by the name of John J. “Uncle Johnny" Green, kept getting the same customer suggestions as he would strap the ice to their running boards. It would sure be handy, they’d hint, to be able to buy things like milk, eggs, and bread from him, along with the ice for their home refrigeration units. Uncle Johnny had been around just long enough to sense that opportunity was tapping at his door, and he let it right in. Stocking the recommended items, he began to make more money.
Several months later, Uncle Johnny Green walked into the downtown Dallas office of the Southland Ice Company to “settle up” with them. He handed a young executive named Jodie Thompson the company’s share of the profits—$1,000 cash money. Thompson set aside his ice sales reports for a bit later, and the “convenience store” business was off and running.
In 1929, the accommodating little stores were christened Tote M’s, and soon became known as places a body could buy not only milk, bread, and eggs, but also such extravagances as Brown’s Snow Flake Crackers, Panther City Potato Chips, and ice cream salt by the ten-pound bag.
The Tote M’s, in turn, were renamed 7-Elevens in 1946, the new name pertaining to store business hours. By 1970, the 7-Eleven chain numbered 3,734 stores in 32 states, the District of Columbia, and three provinces of Canada. Today, 50 years after Uncle Johnny Green sold his first egg, the Southland Corporation is a multi-national, two billion dollar enterprise claiming more than 6,000 operating 7-Eleven stores, and several hundred more under construction. With net earnings of $40.3 million last year, chairman of the board John P. Thompson (eldest son of Dallas's Jodie Thompson) claims modestly, “The company is doing very well.” And they still sell ice.
Prior to 1964, all of Southland's stores were operated solely by its own employees. With the purchase of Speedi-Mart’s 126 franchised stores in California that year, the corporation took a strong look at the potential of franchising, and decided to adopt the policy for its 7-EIeven chain.
The fee for the franchise of a 7-Eleven store today is a flat $7,500. “That’s for the privilege of joining the club," says regional training director A.T. “Red” Robbins. In addition, an “initial investment” is required “in an amount equal to the cost of the inventory and the cash register fund.” That sum averages $20,000, with $7,000 of that necessary up front, and an option to finance the balance. Throw in another $350 or so for business license and permit costs, and you’re looking at $12,500 and some change just to get into this thing. “Franchise” comes to our language from the old French word “franc,” and it should be clear to franchisees that Southland plans to make a few from the relationship. The kicker in the agreement is the “7-Eleven Charge,” which is Southland’s slab of the franchise pie, and may be as high as 58 percent of the gross profit.
But the corporation doesn’t want just any clown off the street who’s able to pony up the seed money running one of its stores. Earnest candidates are given two thorough, informative, “flip-book presentations,” a 94-page “Franchise Offering Circular,” a 16-page, 40-article “Store Agreement” with exhibits A through F to scrutinize, and ample time to absorb and mull over what amounts to everything anyone could possibly ever want to know about a 7-Eleven franchise. “We disclose an awful lot of information to franchisees," admits Red, the genial, cherubic, 22-year company man with a knack for understatement. “We want them to know what they’re getting into.”
What they’re getting into is the “7-Eleven System.” The system is Southland's tried and true, practically idiot-proof blueprint for profitably operating 2,400 square feet of extended-hour retail store which is open every day of the year but Christmas, preferably 24 hours a day, carrying 3,000-or-so items of “groceries, takeout foods and beverages, dairy products, nonfood merchandise, and specialties.” Learn it, Southland is telling them, and we’ll both make a nice dollar.
The 28 franchisees seated around the banquet table in the Valley Room of the Mission Valley Inn at 7:30 Monday morning are in San Diego to attend the 7-Eleven training school. Upon successful completion of a five-day course of study, they will become legitimately “certified.” This means that by Monday morning of next week they should all be smartly smocked and fingering cash in their very own 7-Elevens.
But just reaching this get-acquainted breakfast is, like the ham/egg/home fry platter placed before them, no picnic. By the time a franchisee innocently nibbles the first insipid muffin in the Valley Room, he or she is already two full “Phases” into training. Phase I was the flip-book experience, store agreement, et al. Phase II was ten grueling days of “Training-Store training" in their home districts, where they got to see for themselves exactly what it means to hold down an eight-hour shift in an operating 7-Eleven. There they were treated more or less like $2.50 per hour employees, while learning the nuts and bolts of running a store. Boot camp out of the way, and all required fees paid, they were sent to school.
So here they sit, front-line veterans now, fully checked out on slurpee machines and monster cups, wearing stick-on Hello My Name Is Ted or Fred or Estele nametags, and sipping watery orange juice. They’re ready for Phase III.
Jim McCary, instructor, rises from his place at the head of the table and asks for everyone’s attention. He is a tall, folksy, and neatly groomed Dale Robertson look-alike. Sipping and chatter stop as all eyes shift to Jim, the representative of the System.
“Welcome to sunny San Diego,” he grins. “I wish.” An appreciative murmur breaks the ice as Jim beams at the franchisees. He is very good at what he does, but his robust Rotarian warmth will be slow to catch on. Not even bubonic plague is contagious at 7:35 on an overcast Monday morning.
The first order of business is the introductions. Eldon “Al” Anderson, another instructor, stands and tells a funny little story about his dad not wanting Al to be stuck in groceries all his life. The story gets a laugh and has a reassuring “welcome to the club” tone about it. Al’s mid-thirtyish face is framed by a scrupulously barbered black beard. Like Jim, he is sincere, enthusiastic, and boyishly agreeable. Watching the pair of them work this crowd, you think you know what Explorer Scouts wind up doing when there are no knots left to tie.
The introductions continue as people pop up around the table, one by one, giving their names and towns and previous pursuits. The franchisee backgrounds are fascinating. Paul and Mary Wu, for example, are Chinese and met in Taiwan. Paul was a cargo ship captain for six years. Mary “likes church life.” .
Larry Robinson, 20, and his wife Becky, 21, are the youngest franchisees ever accepted by Southland.
The couple will take over the 7-Eleven they both used to work in. “It’s a good corporation,” Larry asserts seriously. “They take care of all the advertising and accounting, and they keep up the equipment.” “That looks like a yummy breakfast,” says Becky, who will study secondary English education in her spare time.
The group of students includes a marine biologist, a nuclear engineer, a Pan American pilot, a police sergeant, an ex-blackjack dealer “looking for an investment,” and a former Peace Corps volunteer and USO club manager who is “searching for a new career.” The room is full of doers.
The breakfast plates are cleared and it’s time to go to school. The group is split by a roll call, with one half assigned to Jim and the blue van outside, the other half going with Al in the yellow van. The franchisees converse and begin to get neighborly as they spill from the Valley Room and out to the 15-seat Dodge Maxiwagons. Al and Jim are directing, pumping hands, laughing and maintaining Good Vibes. Chock full of students, the vans pull carefully from the parking lot and head for the school about a mile away.
The San Diego 7-Eleven Regional Training Center takes up 7,000 square feet of the fourth floor of a new office building called Mission Center Court. The building is clean, bright, and functional. Muzak oozes from round, overhead speakers.
Out of the vans and up the elevators, the students first get the tour. Red’s office and those of the instructors are there towards Interstate 8. In the center of things is the reception area, a pragmatically comfortable lobby where Marge and Edna stay ahead of the weekly paper chase, while preserving a cheery, would-you-like-some-coffee? atmosphere. Two large classrooms, a mock-up “cash register room,” and a cafeteria with a 7-Eleven clock on the wall sit off to the side. The clock reads 8:45. Jim, who has been leading the tour, suggests a 15-minute acclimation break after which classes will officially begin.
Franchisee conversation buzzes around the cafeteria, as chum groups begin to form. No one is sure what to expect. Four mornings from now, however, they will know the System. They will absorb it, and be absorbed by it. Their knowledge will come from lectures, discussions, in-class practice, and “evening projects.” Al and Jim will guide their charges through topics like management skills, loss prevention, vendor relations, property protection, and employee hiring, training, and firing. The students will squint over forms, reports, charts, and graphs. They will endure pop-quizzes, 7-Eleven sandwiches, and Hot-to-Go coffee breath, because to survive all of this without going loco is to be finally, genuinely enfranchised.
The scholars will then be able to work crazy hours for years and years, selling milk and mustard and beer to people in too big a hurry to care that they are paying too much. They do this because there is good money and a future in the convenience store business. Everyone will graduate.
On Friday morning, everybody knows a whole lot more than they did Monday about 7-Elevens, Southland Corporation, and San Diego nightlife. The franchisees now “recognize the importance of promoting and plus-selling high-gross-profit merchandise like slurpees and Hot-to-Go coffee.” (To plus-sell is to suggest additional goodies to the customer at point of sale. For example, if someone asks for a pack of Camels, “Why not suggest two packs instead?") They have been taught that sales of tobacco products account for nearly 15 cents of every 7-Eleven dollar taken in. As for the famous java, they must remember to push cake, cookies, doughnuts, newspapers, and smokes at the sap who’s hot-to-go anyway.
And a store owner must be friendly. Since 60 percent of all their customers will come from within a one- or two-mile radius, they should start to greet them by name. “People,” Al had said, “are not used to being treated like human beings.” The Wus nodded in agreement to that. Pour on the charm and consideration, and “the price starts to become very insignificant.”
Exposed to all of Southland's stratagems, they might have friends shop the store, and “report their observations.” They will suggest the larger size on fast food sales, and recommend higher-profit items such as company-label merchandise over regular label. They know the necessity of maintaining scrupulous logs, records, and reports. Al and Jim have emphasized the importance of “communicating,” and the essential art of management, or, “getting things willingly done through others.” The franchisees are now masters of pricing, product selection and inventory control. They know what to stock, shelve, and sell, and most importantly, how to compute their share of the profits after the “7-Eleven Charge.” Finding the nearest bank should represent no problem.
On graduation day, Al Anderson talks to his students for the last time about the simplicity of the System. “It was designed,” he says, comfortably half-seated on a corner of his desk, “for someone who’s never been in business before." He advises them to now take the system and apply it to their actual store operations. “It makes me feel good,” he sums up, “to get up here every week and teach, and know that what I’m teaching works.”
Al suggests a short, free-form discussion on the experiences of the past five days, and leaves the room to attend to paperwork. The reactions, after the inevitable cracks, are varied.
“I enjoyed the merchandise reports."
“The hotel was too close to the airport.”
“When I came in I thought, well, this is gonna be a bear.”
“More on budgeting.”
Roger the cop, nominated as the discussion leader, leans back in the chair beneath a cloud of his own cigarette smoke. The Wu’s remain serene, composed. It’s over.
Al returns and hands out the official nametags, plaques, and gaudy window banners which will announce the new regimes. He shakes every hand and wishes everyone well. “You take care of one another,” he says to the Wus.
Returning to the front of the classroom, Eldon Anderson tells his former pupils that they will have fun and that they will make money. Hands in the air as if in benediction, be says, “God bless you all, you’re beautiful people, and thank you.”