Are you interested in starting your own 7-Eleven franchise, but have no idea what a 7-Eleven franchise actually costs? How do you even go about starting a 7-Eleven franchise? This quick guide will help answer most of your franchising questions and set you on the right path to 7-Eleven franchise ownership.
7-Eleven Store Franchise and the Market
7-Eleven is an incredibly large franchisor. The brand boasts over 58,000 convenience stores operating in 17 countries worldwide. 7-Eleven was the first 24/7 convenience store, has been a convenience retailer for over 80 years, and has offered franchises for more than 40 years.
The Store
The company began operating in 1927 as the Southland Ice Company. As customers came to buy ice, enterprising employee John Jefferson Green also began selling other staples. Green sold milk, bread, and eggs after hours in order to reduce the need for customers to travel long distances for basic items. The ease of shopping appealed to customers, and the profitable business model turned into one of the first convenience stores.
Initially, stores went by the name Tote’m, since customers “toted” their packages away. The company extended store hours in 1946, opening at 7 a.m. and closing at 11 p.m. The move was unprecedented at the time, and the chain was given a new name to reflect that.
This Dallas-based company is now the world’s largest convenience store retailer. 7-Eleven has proven its resiliency time and again. In the wake of the coronavirus, while other businesses are being dealt with crushing blows, 7-Eleven has faired well.
The convenience store industry has seen steady growth over the past few years. Although industry stat trackers have not finalized 2019 convenience store data, sales surged in 2018 and were on pace to do the same in 2019. In 2018, total sales jumped 8.9% to $654.3B, led by a 13.2% increase in fuel sales. In-store sales increased by 2.2% to a record of $242.2 billion. Foodservice sales accounted for 22.6% of in-store sales
Government restrictions aimed at curbing the coronavirus will obviously impact retail sales across the board. But comparatively speaking, convenience stores seem better positioned to absorb, and even profit from, the restrictions and current economic climate.
How Much Does a 7-Eleven Franchise Cost?
There are actually three types of 7-Eleven franchises, per the company’s Franchise Disclosure Document (FDD):
A traditional 7-Eleven. The franchisor offers franchises for a single unit that it owns or leases.
The Business Conversion Program (BCP) franchise. The franchisee is responsible for acquiring land and a building. A BCP franchisee pays a different royalty than traditional franchisees. The franchisee of a BCP is also subject to a different disclosure document than the franchisee of a traditional store
A Micro Market franchise. The franchisee owns or leases the site and most equipment to operate an unmanned 7-Eleven branded stand-alone retail space or an unmanned retail space. These locations are typically located in an office building, hospital, university, hotel or similar location and within limited square footage. The Micro Market franchise is also subject to a different disclosure document than a traditional store franchise.
The initial investment cost to launch a traditional 7-Eleven franchise will set you back between $53,600 and $1,163,000. The below table provides a complete breakdown of all initial investment costs for a traditional 7-Eleven in 2019.
Initial Cost Breakdown
Expenditure
Low
High
Initial Fee
$0
$1,000,000
Training Expenses
$0
$9,000
Down Payment for Opening Inventory
$20,000
$20,000
Additional Opening Inventory
$15,100
$44,500
Cash Register Fund
$500
$1,500
Store Supplies
$250
$2,500
Licenses and Permits
$8,000
$10,000
Real Estate and Equipment
* Covered in “7-Eleven Charge”
Insurance
$1,500
$7,500
Grand Opening Fee
$8,000
$8,000
Goodwill
**
Additional Funds During First 3 Months
$0
$60,000
ESTIMATED TOTAL
$53,600
$1,163,000
*A portion of the 7-Eleven Charge covers the required lease of the land, building and equipment. In the traditional 7-Eleven franchise system, the franchisor obtains the land, building and equipment, as well as does the leasehold improvements, including fixtures, furnishings and decorating at its expense. As part of the franchise agreement, franchisees must lease the property from 7-Eleven. The 7-Eleven Charge is charged once a month as a variable percentage of the franchise’s gross profit.
**Only applicable to incoming franchisee’s buying a current franchisee’s interest in a franchise.
Ongoing 7-Eleven Cost Breakdown
In addition to the above initial investment costs, it’s important to know what else will ultimately play into a 7-Eleven franchise cost. Perhaps most significantly, you’ll be required to pay a 7-Eleven Charge (essentially a royalty). The 7-Eleven Charge is based on a gross profit multiplier calculation. At the low end, the 7-Eleven Charge is as follows:
If the store’s Gross Profit for the 12-month period before the current month is $200,000 or less, the 7-Eleven Charge for the current month will be 45% of the current month’s Gross Profit.
At the high end, the charge is calculated as follows:
If the store’s Gross Profit for the 12-month period before the current month is over $1,600,000, we will calculate the 7-Eleven Charge for the current month according to the following formula: $893,000 + .56(Gross Profit for last 12 months – $1,600,000) Gross Profit for last 12 months.
The multiplier varies in between.
Franchisees will also be responsible to pay an advertising fee of 1% of Gross Profit each month, a Mystery Shop Fee of between $6.50 and $13.00 per shop (if the franchisee chooses to participate), a $133 monthly fee for payroll processing, and a closeout fee to $200 upon the termination of the agreement. Franchisees could be responsible for about thirteen other fees in certain circumstances.
How Do I Start a 7-Eleven Franchise?
If you want to become a 7-Eleven franchisee, you have to meet certain requirements. You should not consider applying unless you have enough money tucked away to meet 7-Eleven’s capital cutoffs. 7-Eleven requires prospective franchisees to have liquid assets of between $50,000 and $250,000. The liquid assets requirement is the amount of money a franchisor requires a franchisee to have in savings and be able to access quickly in case of emergencies and unexpected situations when starting the business.
In addition, you must meet the below general requirements before consideration:
Be at least 21 years old and have U.S. citizenship or permanent resident.
Be able to obtain and maintain all licenses necessary for the store operation.
Have excellent credit and not have filed for bankruptcy within the last seven years.
Have no prior record of felony convictions or other criminal records that could impact the ability to operate a store.
Understand the need to be involved in the day-to-day operation of the store.
Retail, operations or management experience.
Pass the required assessments.
As with all franchise purchases, it is very important to review the figures you obtain from the franchisor carefully with a professional business advisor before deciding to purchase a franchise.
Now that you have a better sense of a 7-Eleven franchise cost, if you’re interested in franchising, you can apply here.
