7-Eleven Poised to Take Bigger Gulp of North American Market (6/24)
Jun 24, 2009 5:00 PM, By Lauren Shepherd
Each month, Site Optimizer will discuss industry trends — most importantly, leasing issues—with experts in the retail real estate industry. This month, we spoke with Dan Porter, senior vice president of real estate and new store development at 7-Eleven Inc.
The iconic convenience store chain is now poised to take a bigger gulp of North America. The Dallas, Texas-based chain is planning to add 200 new stores in North America this year after opening 170 outlets in 2008. Porter talks about the chain's growth strategy and what makes 7-Eleven an attractive tenant in a recessionary economy.
Site Optimizer: I know you have plans to add about 200 stores this year. Which markets are you looking at and why?
Porter: Los Angeles, San Diego, San Francisco, Denver, Dallas/Fort Worth, Orlando/Daytona Beach, Tampa/St. Pete, Washington D.C., Baltimore, New York City and the Tidewater area. Those are established markets for 7-Eleven where we have a strong store presence today. Our stores perform well in those markets and we see the demand for additional 7-Eleven stores.
SO: What challenges have you encountered when it comes to dealing with landlords given the real estate environment?
Porter: As far as doing new stores, we really haven't seen a lot of challenges from a landlord perspective. The landlords have been pretty accommodating.
SO: What opportunities are there right now for companies like yours that are expanding?
Porter: The market has certainly opened up opportunities for a company like us because other retailers have scaled back their growth and we've actually ramped up our growth which is good, giving us other opportunities we might not have seen. We are an anchor tenant with a long history of growing stores and we've become an excellent opportunity for landlords to put us into their space as the retail anchor.
SO: What makes 7-Eleven, in particular, attractive to landlords?
Porter: We have more than 36,000 stores worldwide, so we're a global retailer. We're a national credit tenant and again, we're pretty flexible. We can go into a shopping center site, we can go into a downtown walkup building store front. We're even looking at college campuses, airports and other non-traditional venues. We have a few on college campuses but we haven't done probably as many as we could have.
SO: Have landlords been more amenable to reviewing rental rates?
Porter: Yes, landlords have been more flexible due to the current economic conditions and we've actually been able to go into some of our existing stores and negotiate rental reductions in return for additional term on the lease. And in some cases, we've negotiated rental reductions at an underperforming store so we didn't have to go dark. The landlords are willing to listen. I think they would rather have a national credit tenant like 7-Eleven stay in the space open and operating.
SO: I know you're planning to grow, in part, through the company's Business Conversion Program. How does the program work?
Porter: The Business Conversion Program is a … franchising program where qualified independent operators of convenience stores or other retail businesses can convert and operate their business as a 7-Eleven store. 7-Eleven invests about $250,000 to $300,000 in store proprietary equipment and signage. What the operator receives in return is the full 7-Eleven franchise system, which includes the 7-Eleven brand image, trademark, and all the business services and support that goes along with the 7-Eleven franchise system. The term of that franchise agreement is 10 years.
SO: About how many outlets have been converted to 7-Eleven since the program started and what's the response been from operators?
Porter: About 115. The operator feedback has been great, to say the least. What they like is the fact that they're able to get the 7-Eleven brand and proprietary products that have been so successful in the world of convenience. What they've really enjoyed is the daily distribution of fresh foods and products to their stores, which is different than every other convenience retailer.
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