The troubled retail franchise 7-Eleven has offered to make significant changes to its business model to help franchisees achieve profits.
The changes to the franchise system could bring about an average increase to franchisee incomes of 4.5 percent. However there is not yet any sign that franchisees will accept the proposal.
According to Fairfax Media a staggered profit split is central to the new business model. A 50/50 split of profits between franchisees and head office for 138 stores whose franchisees have a pre-wage income of $300,000.
Franchisees with an turnover of $300,000 to $500,000 (estimated at 360 outlets) would receive 48 percent of the gross profit.
The top performing stores earning more than $500,000 would receive gross profit shares lowered by one percent for every additional $100,000 their store turns over.
The proposal also incudes slight cumulative increases in franchisees’ fuel commission.
Updated model
7-Eleven chairman, Michael Smith, said “The updated model recognises the changing retail landscape and is part of a suite of measures that provide an appropriate and lasting remedy to the challenges being confronted by all of us.
“7-Eleven’s success has been founded on strong, deep and open relationships with franchisees, and the initiatives will help ensure this remains the case into the future,” he said.
Inside Retail reports that franchisees signing up to the new model will be required to meet compliance, reporting and oversight conditions.
There is also talk that the franchise agreement will be amended to add a clause allowing the franchisor to terminate a franchisee’s agreement because of payroll issues.
Franchise research
You can read more:
- 7-Eleven’s franchise crisis: Are banks lending to franchise buyers?; there is no head office cover up; employee pay back
- What happens if you want to leave your franchise early?
- Find out the limits of protection for franchisees under the Franchising Code of Conduct