Seven Eleven (7-11) Case Study

Eleven Situation

The strategy developed and implemented by 7-Eleven is not common in the field of franchising. This strategy is based on allowing the franchisee to discontinue the franchising relationship with the company if the conditions are considered unsatisfactory or if the franchisee considers that this activity does not provide him the intended results. In such situations, the company is expected to refund the franchising fees except the training expenses.

Some could find this practice as inefficient for the company. But 7-Eleven is determined to continue its application. Although the company invests in training and assisting franchisees, it is more efficient to allow franchisees to back out of the business (Entrepreneur, 2011). There are several advantages that the company is focusing on when using this strategy. For example, 7-Eleven relies on service quality. This can be achieved by motivated people that are really interested in developing a 7-Eleven franchise. There are situations where such people consider starting a 7-Eleven business for the wrong reasons, or that realize during the training process that this is not what they wanted or expected.

In such cases, the franchisees do not work as hard as they should, and they are not as interested in developing this business. This leads to reduced levels of performance, which significantly affects the company's activity. Therefore, it is important that the franchisees are genuinely interested in developing this business with the objective of improving their situation, but also of developing a successful business that can help this company.

Although this strategy can be considered an inefficient investment for the company, on medium term and on long-term the company can significantly reduce its costs. If 7-Eleven forces the franchisees that are unsure about developing this business to continue with the process, a series of business mistakes can take place determining the company to intervene in order to counteract their effects.This leads to increased investments from the company.

2. The policy of refunding the franchising fee should be a common practice to other companies also. The success that 7-Eleven has with its franchising system reveals the fact that the refund policy is a good idea that can help the company expand its business. Therefore, its example should be followed by other companies interested in developing franchising systems.

However, it is not recommended that companies exploit too much this opportunity. Instead, they should develop sets of strict conditions that must be met by franchisees that want companies to refund their fees. This way, companies can be assured that franchisees do not change their minds that easily simply because they can get their money back. This is the reason for which this strategy can prove to be quite risky in the case of other companies. Although the refund strategy is successfully applied by 7-Eleven, this does not mean that all companies can benefit from the same conditions.

In order to reduce the risks associated with this strategy, like an increasing number of franchisees that require their refund, it is recommended that companies also modify the conditions for applying in such programs. This allows companies to better identify franchisees that are less likely to change their minds. This is intended to help these companies reduce the costs associated with frequent situations where franchisees decide they want their money back.

Therefore, it is important that when making a decision about whether to develop such a refund strategy companies take certain facts into consideration. These facts refer to the costs associated with this strategy, but also to different effects produced by not allowing franchisees to get their money back. This decision must be made in accordance with the….....