For many 7-Eleven franchisees, Seattle brings both boom and bust
At a pair of 7-Elevens barely a mile apart, two starkly different versions of Seattle’s entrepreneurial economy are playing out.
On a recent morning near Woodland Park Zoo, 28-year-old Shweta Sharma was busily checking inventory at her new 7-Eleven while her father, Sunil, who also manages the store, sold coffee, energy drinks, hot dogs and other convenience fare to a stream of commuters, construction workers and students.
Business has been so brisk at the Phinney Avenue store that the Sharmas, who emigrated from India eight years ago, think they’ll need less than three years to earn back the $200,000 they paid 7-Eleven last fall for the franchise.
Although Shweta, a former corporate HR manager, initially saw the 7-Eleven as “a side business,” she’s now made it her sole focus — and is already looking for more stores. “It’s all I want to do,” she says.
The mood is more somber a few minutes south in Fremont, where Shawn Bhamipuri, 26, is helping his 69-year-old father, Ron, sell the 7-Eleven he bought nearly 30 years ago.
Though sales are still strong at the compact corner store, the last few years have been tough. Staffing is a constant struggle, especially for the night shift, which 7-Eleven requires franchises to be open for.
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The night shift is also when the Bhamipuris see much of the shoplifting, vagrancy and other crime, including assaults, that have beset the neighborhood, especially since the pandemic.
“We’re sitting ducks,” Shawn says, who grew up in the store but says he won’t be taking over from his father or carrying on the family business. For a 7-Eleven franchisee in Seattle, he says, “Today’s business climate is not what it was.”
Despite their differing trajectories, the Sharmas and the Bhamipuris offer a revealing look at one of America’s most ubiquitous brands — and a long-celebrated pathway to the American dream that is much rockier than it used to be.
As the world’s largest convenience store chain — with around 13,000 U.S. stores, including more than 150 between Everett and Tacoma — Texas-based 7-Eleven owes much of its success to the independent franchisees who have run the majority of its stores.
For an often hefty franchise fee, operators — many of them immigrants — get a store, equipment, training, a distribution system and a powerful brand — in theory, everything they need to build financial independence and even wealth.
It’s a formula that still appeals to many Seattle-area entrepreneurs.
Danny Yohannes, a 34-year-old Eritrean American, grew up working in his uncles’ 7-Elevens in Lynnwood before getting his own franchise in Pioneer Square in 2017. Since then, the soft-spoken businessman has done well enough to buy two homes, marry and start a family.
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“For me, it’s been a great opportunity,” says Yohannes, who recently took over the long-shuttered 7-Eleven on Stone Way in Fremont after his Pioneer Square store was closed by fire.
But for other Seattle-area 7-Eleven franchisees, that opportunity has become more complicated.
At least four Seattle-area franchisees are selling their businesses, while many others have simply handed their stores back to 7-Eleven and forfeited their investment.
The company website lists 28 corporate-run locations between Everett and Tacoma as available for franchising; many were formerly franchisee-owned, according to franchisees. At least two corporate locations are boarded up.
Owners exit 7-Eleven for many reasons, but there are common complaints. Many say the 7-Eleven concept is especially vulnerable to the labor shortage and costly crime.
Complaints that 7-Eleven now takes too large a cut of store profits while dictating everything from gasoline prices to inventory to store hours are also prevalent.
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In a statement Thursday, 7-Eleven said it “is committed to supporting franchisees, offering world-class training and broad ongoing business support to help their independent franchised businesses succeed.”
But some franchisees have lost faith.“You can make way more money working for somebody else,” says Davinder Dhami, who has tried for two years to sell the Tacoma 7-Eleven he bought in 2003.
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Things were less complicated when Ron Bhamipuri got the Fremont store in 1995. He’d arrived from India a decade before with an economics degree and $50 to his name but had saved enough working at a 7-Eleven in California to move to Seattle and buy the Fremont franchise for $30,000. He still has the handwritten letter from 7-Eleven officials congratulating him for “your new store.”
For Bhamipuri, it was a bargain: a turnkey business in a prime neighborhood at a fraction of the cost of a stand-alone convenience store.
The work was all-consuming. To cut his biggest expense, labor, Bhamipuri came in every day. He put in so many hours that when he did the math, “it was really eight days a week,” he jokes.
The long days paid off. 7-Eleven took its cut, which was roughly half of gross profits, or sales minus the cost of goods sold. But even after Bhamipuri paid expenses out of his half, he was well ahead. The business, which eventually included his wife, son, three brothers and their wives, did well enough that they bought a nearby commercial building and a second 7-Eleven franchise.
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Stories like the Bhamipuri’s are the latest variation on a narrative that stretched back to the 1940s, when 7-Eleven, freshly renamed for its expanded 7 a.m. to 11 p.m. hours, was building a retail empire around a single, simple reality: Car-centered Americans would pay a premium for convenience.
By the mid-1960s, 7-Eleven had invented to-go coffee and was running some 24-hour locations. It had also adopted the franchise model, which brands as diverse as McDonald’s, Holiday Inn and H&R Block used to rapidly expand.
By the 1990s, following decades of oft-tumultuous growth (including a corporate bankruptcy), many of 7-Eleven’s first franchisees were aging out, longtime Seattle franchise attorney Howard Bundy says. As that largely American-born “old guard” left, he says, their franchises were often bought by immigrants.
The appeal was obvious. A 7-Eleven franchise came with training and other corporate support, which were useful for new Americans. Stores were typically small enough to be run by a single employee, which fit a family business model common among immigrants that used filial labor to minimize costs.
Plus, after 20 or 30 years of eight-day weeks, franchisees knew they could sell their 7-Elevens and all the built-up equity, or “goodwill,” for considerable sums.
For many immigrants, a 7-Eleven store embodied the classic idea of free enterprise, where “it was literally up to you how much money you made,” Shawn Bhamipuri says.
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That idea was especially resonant among South Asians, who by the mid-2000s would own more than half of all 7-Eleven U.S. franchises, according to a 2007 estimate by the National Coalition of Associations of 7-Eleven Franchisees.
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But over the last two decades, a 7-Eleven franchise has become a more complicated venture, franchisees say.
It’s more expensive to get started now. Upfront franchise fees in the Seattle area are upward of $200,000 or more, on top of whatever the prior owner is asking, franchisees say.
Stores are also just as labor intensive if not more so, given today’s higher wages.
While operators can make a nice income — 7-Elevens with $2.5 million or more in annual sales can generate upward of $150,000 in income — they’re still putting in 70 to 80 hours a week, franchisees say.
7-Eleven owners who think they’ll hire “cheap employees and sit at home … I don’t think you make it,” says Yohannes, owner of the Stone Way franchise.
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The new challenges also reflect strategic changes at 7-Eleven, especially since 2005, when it became wholly owned by Japan-based Seven & I Holdings.
In the mid-2000s, for example, 7-Eleven reduced franchisees’ share of gasoline profits from 25% of profits to just a penny or two per gallon, which is less than the cost of maintaining the pumps, according to franchisees.
7-Eleven also required franchisees to pay more of the operating costs and began taking as much as 59% of gross profits for higher performing stores, according to media accounts and franchisees.
Dhami, the Tacoma operator, said the changes cost him “$7,000, $8,000 a month in profits — our profits.”
7-Eleven also stepped up enforcement of the myriad rules — everything from product placement to store appearance and hygiene — franchisees must follow or risk losing their stores, according to franchisees and media reports.
Bundy, the attorney, says most 7-Eleven franchisees recognize that if company field reps “want to find you in violation of the contract, they can do it probably within 10 minutes.”
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“It’s a huge stress,” adds a 7-Eleven franchisee who worries about losing the $500,000 he paid for a Seattle store.
“You’re just thinking in the night, OK, maybe tomorrow’s the day they might come … and say, ‘Hey, you’re out of the system,’ and all my money is down the drain,” said a franchisee who requested anonymity to avoid backlash from the company.
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Those anxieties come amid a broader set of worries for the convenience store industry, which has faced steadily higher costs and new competition by everything from fast food restaurants to hardware stores.
Convenience stores have countered with new offerings. 7-Eleven’s pizza, taquitos, glistening hot dogs and other hot foods, for example, are among its biggest draws. But these innovations often come with more labor costs.
In Washington, the number of convenience stores fell 7%, to 2,126 between 2005 and 2022, according to data from the state Department of Revenue, even as the state population rose 24%.
Business is even tougher in urban areas where convenience stores face higher labor costs and, often, greater security problems.
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Seattle’s convenience store count fell 20%, from 257 to 205, between 2005 and 2019, according to Department of Revenue data. Nationally, just 15% of convenience stores are urban, according to the National Association of Convenience Stores.
COVID-19 made everything that much harder.
The labor shortage, already severe in higher-cost cities like Seattle, became a full-blown crisis for 7-Eleven franchisees. Where other retailers could curtail hours, 7-Eleven’s 24-hour mandate meant franchisees, some in their 50s and 60s, were often pulling double shifts and working nights.
At the Bhamipuri’s 7-Eleven, an opening for a night clerk paying $23 an hour has gone unfilled since November. “We’re … not even getting clicks on the ad,” Shawn says.
Theft, already a serious problem before COVID, is now so routine that Shawn has replaced some of his more expensive inventory with cheaper brands to minimize losses. “If somebody’s going to walk out the door with some ice cream, I want it to be a $4 pint, not a $10 pint,” Shawn says.
The costs aren’t just financial.
At one North Seattle 7-Eleven, fear of physical assault became so grave the owner finally closed the store at night. Although that’s counter to 7-Eleven’s 24-hour policy, the owner felt he has little to lose, given his store’s deteriorating financials.
“If you’re at zero, what do you do?” he says.
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7-Eleven is feeling the heat. It has been sued by numerous franchisees, and the parent company, Seven & I Holdings, also has been under pressure to spin off its 7-Eleven stores by two large shareholders who said the chain is underperforming.
But the real backlash seems to be happening on the ground. Between 2018 and 2019, the number of franchisee-run 7-Elevens for sale jumped by 57% nationally and by 60% in Washington, according to the franchisee coalition.
That rush may continue. In 2021, three-quarters of franchises said they wouldn’t become franchisees if given the chance to do it again, according to a franchisee coalition survey. Nearly as many said would sell their stores if they could do so without losing their investment.
But even getting out has become complicated.
Although high-volume 7-Eleven stores tend to find buyers, some owners who have tried to sell lower-volume stores or stores in challenging locations say demand is so weak many owners eventually give the store back.
The last few years “just wiped out everything,” says a Seattle-area franchisee who paid more than $200,000 in the 1990s but recently “had to give the keys back to the company” after concluding his store had “no resale value.”
7-Eleven declined to say how many U.S. franchisees have given their stores back to the company since 2018.
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Dhami, who has already given back another store, is close to doing the same for his Tacoma location. “If I’m not able to sell it by the end of this year, I’m giving up,” he says. 7-Eleven can “take it back.”
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In a sense, the challenges of the last decade have forced many franchisees to look at 7-Eleven differently.
For some, a 7-Eleven store simply isn’t the opportunity it once was.
Shawn Bhamipuri worries the model no longer works in a climate of labor shortages and security risks.
His father shares those concerns but also worries about the sustainability of a business that requires so much of an operator’s life.
Despite his own history of eight-day weeks, Ron Bhamipuri has encouraged Shawn to take a different career, one “with five days a week, two days off,” Ron says. “This kind of store is not for the new generation.”
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For others, the franchise is still a pathway to prosperity.
At the Sharmas’ 7-Eleven by the zoo, success has meant sticking to the classic formula: watch your labor, scrutinize every operational detail and focus relentlessly on “creating a space in the community,” Shweta Sharma says.
Franchisees may need to adjust their expectations.
For Danny Yohannes, success still requires a lot of legwork — he anticipates working 80 hours a week at his new store.
But Yohannes also thinks successful 7-Eleven owners will be the ones who actually like the work, rather than those who see a store mainly as an investment.
Getting a 7-Eleven is like “buying a job,” he says. “For the next 15 years, you know what you’re going to be doing.”
Source: The Seattle Times
