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Gulp! 7-Eleven unseats Subway as top franchise

After knocking on the door and being in the top 10 an impressive 16 times, 7-Eleven Inc. has claimed the top spot of Entrepreneur's 29th Annual Franchise 500 for the very first time.
7-Eleven Reports Sales Increase
Entrepreneur's top franchise brought you the Big Gulp and the Slurpee. Customers such as these in Des Plaines, Ill., enjoy the local flavor and convenience of 7-Eleven.Tim Boyle / Getty Images
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It's a new year and a new No. 1.

After knocking on the door and being in the top 10 an impressive 16 times, 7-Eleven Inc. has claimed the top spot of Entrepreneur's 29th Annual Franchise 500 for the very first time.

If you think you know the famed retailer because you hit 7-Eleven for your morning coffee and muffin or a Big Gulp after work, think again. There are new developments a-brewing at 7-Eleven Inc. that are pushing it into the stratosphere. Its store base has grown — specifically with a push toward having more franchisee-owned stores and fewer corporate-owned ones.

"Our big reason for that is our franchisees have a vested interest in being successful," says Joseph DePinto, president and CEO of 7-Eleven. "They know their customers, and it's about delivering great customer satisfaction and the products our customers want. Our franchisees do that extremely well."

There are currently 5,580 7-Eleven franchises in the U.S. and 25,062 abroad. In fact, a new 7-Eleven opens somewhere in the world about every four and a half hours, says DePinto. The company boasts a proprietary IT system that helps franchisees determine their specific in-store product assortment and makes a pipeline of new products available on a weekly basis.

Franchisees benefit not only from exclusive brands, but also from the economies of scale that being part of a huge network entails. Still, it's the local flavor that gives 7-Eleven its soul.

"We're a very nimble retailer," says DePinto. "Although we're a global company, we act and operate our stores as if they're local. So [franchisees] can take advantage of local trends and local products that customers want."

In fact, after seeing a demand in the Latino market for a beer mixed with clam sauce and tomato juice, the franchisor partnered with Anheuser-Busch to develop Chelada brand beer.

"We tested it in our stores, and it's been selling really well," says DePinto. Another successful match was with Citibank, which provides ATMs in 7-Eleven stores. It's those kinds of partnerships that help give 7-Eleven its cachet. "Partnering with other organizations allows us to develop programs and products to create innovative items we can bring to customers that they can't get anywhere else," says DePinto, who has been at the helm of the company for two years.

It was a strategic partnership with 20th Century Fox Film Corp. and Gracie Films, creator of "The Simpsons," that led to a juggernaut of publicity last summer. To promote the long-awaited release of "The Simpsons Movie," 7-Eleven turned 12 stores throughout the country into Kwik-E-Marts, the name of the famed fictional convenience store in the show. To complete the transformation, 7-Eleven even worked with vendors such as Cott Beverages and Malt-O-Meal to bring fictional products like Buzz Cola and Krusty-Os cereal to life.

"It was astounding," says DePinto. "There were lines coming out of those stores, and some of their volumes were unbelievable." He says the overall promotion was much greater than they anticipated, but that they "had plenty of product and everybody had a lot of fun."

Times haven't always been fun for 7-Eleven, though. In 1991, the company declared bankruptcy after being taken private in a leveraged buyout. When interest rates rose, the debt couldn't be paid, says DePinto. With a renewed focus on customer service, detailed reports on what customers are purchasing and a network of merchandisers always searching for trends, the company has bounced back in a big way.

"If you're truly focused on customers and truly passionate about giving the customers what they want, that's how you keep them coming back," says DePinto. "And that's how we've grown and excelled since the bankruptcy." Today, the company is owned by Seven & i Holdings in Japan.

Echoing the best in franchising history, DePinto credits the franchisees with the continued explosive success of the 7-Eleven brand. By establishing a core of Servant Leadership, DePinto is making sure the company not only thinks about what customers want and need, but also strives to serve the needs of franchisees.

"All the folks that work here at 7-Eleven will take on a Servant Leadership mentality in that they'll support and work with franchisees and provide the things they need to be successful," he says.

To serve the needs of franchisees on the local level, the 7-Eleven management team meets with the Presidents Leadership Council (made up of the company's Franchise Owner Association presidents) on a quarterly basis to discuss 7-Eleven strategies and changes in the direction of the general marketplace.

"With their input, we make decisions for the entire organization that we believe will not only benefit our franchisees, but also the organization and customers," says DePinto. "It's a collaborative approach, and it's been very effective for us." There are also eight operating divisions in North America where issues on local franchisees' minds have various forums.

Franchisees in the system benefit, and franchisees leaving the system have a unique benefit as well.

"When they decide they want to leave the business, they can sell their store and, based on the market value of their store at the time, receive ‘goodwill' [payment]," says DePinto. "So in fact, they build equity in their store. And that equity can be pretty significant."

According to Jeff Schenck, senior vice president of franchise and development for 7-Eleven, the number of franchisees accepting the goodwill price has been growing by double digits for the past several years.

In 2008 and beyond, 7-Eleven plans to continue to grow its store numbers. The Business Conversion Plan is one way it's achieving that. BCP enables independent convenience store owners to convert their shops into 7-Eleven stores, complete with all the benefits.

"[The program] has had some phenomenal success so far, and we plan to continue to expand it," says DePinto. "A lot of entrepreneurs are looking to partner with a great trademark like 7-Eleven to grow their businesses."

From the individual franchisee to the corporate headquarters, 7-Eleven is creating a world of convenience.

"Our culture is about working to support our franchisees to make them successful," says DePinto. "It's our belief that when our franchisees win, we win."