The Yomiuri Shimbun
Seven & i Holdings Co. will lower the royalty fees it collects from franchisees in its 7-Eleven convenience store chain from March 2020, a move aimed at reducing the burden of rising labor costs stemming from labor shortages and excessive competition in the sector.
With the measure, individual 7-Eleven stores will see an average increase in annual profits of about 500,000, yen while the corporate headquarters will take a hit of about 10 billion yen in reduced income.
In the franchise system, the convenience store chain operator concludes a contract with the individual stores in which the former develops products and systems, while the latter pays royalty fees based on sales and other factors.
Currently, for example, a franchisee that has operated a 7-Eleven store for less than five years on land it owns and has gross profits of 5 million yen after deducting product costs will pay about 2.1 million yen in royalty fees.
However, there have been growing calls to reduce such fees from franchisees being burdened mainly with labor shortages.
Slated to be implemented in March next year, monthly payments will be reduced by 200,000 yen for franchisees with monthly gross profits of 5.5 million yen or less, and by 35,000 yen for those of over 5.5 million yen.
Seven & i Holdings has decided to be more generous with its support for less profitable franchisees. Out of the 20,000 affiliated stores nationwide, about 7,000, or one-third, have gross profits of 5.5 million yen or less.
Speaking on the latest move, Seven & i Holdings President Ryuichi Isaka said labor shortages and rising labor costs are making franchise management more difficult.
"It is necessary to create a system that allows franchisees to concentrate on store management without worries," Isaka said.
At the end of September, domestic convenience stores operated by Seven-Eleven Japan Co. numbered 20,993, a reduction of 24 from the previous month -- marking the first decrease in five years. The fall reflects the company's holding back on new store openings due to rising labor costs stemming from the labor shortage and other factors.
Up to now, Seven-Eleven Japan has continually expanded through new store openings. However, this strategy has reached a turning point. The company plans to limit the increase, calculated by subtracting the number of closed stores from the number of new ones, to 100 in the business year ending February 2020.
Seven-Eleven Japan and other major convenience chain operators have until now used what is called the "dominant strategy" of concentrating new stores in specific areas. But that has resulted in stores from the same chain fighting each other for customers, obliging chain operators to limit new store openings.
100 Lawson stores to close on New Year's Day
Lawson Inc. plans to carry out on a trial basis the closure of about 100 outlets on Jan. 1, mainly in central Tokyo.
The move is in response to requests from franchise owners to close on New Year's Day due mainly to labor shortages.
The company will decide whether to move forward with full-scale implementation of the measure in 2021 based on results of the trial.
The move is aimed at lessening the burden of franchise owners. The specific time of closure on Jan. 1 will be decided individually depending on the location and the situation of franchisees.
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