A 7-Eleven Closes, and Another 7-Eleven Opens. Who Makes the Money?

Lately, I often notice closed 7-Eleven stores while driving.

The signs have been removed, paper covers the windows, and weeds are growing through the parking lot.

Why did the store fail?

Drive a little farther, and the reason usually becomes easy to imagine.

There is another 7-Eleven.

Several convenience stores with the same sign stand along the same road. What exactly are they fighting? Lawson? FamilyMart?

Or is 7-Eleven’s greatest enemy actually 7-Eleven itself?

Cannibalism With an Elegant Name

The practice of opening many stores in the same area is known in Japan as an “area-dominance strategy.”

It improves delivery efficiency, raises brand awareness, and helps secure regional market share. From a business perspective, it is a perfectly rational strategy.

But when too many stores open, they inevitably start taking customers from one another.

And the competitor is another 7-Eleven.

In ordinary language, this is called “cannibalization.”

In the business world, however, it is called an “area-dominance strategy.”

Put it in management jargon, and it sounds much more impressive.

The question is who loses once the cannibalization begins.

The franchisor collects royalties based on factors such as each franchisee’s gross profit.

Even if sales fall at one store, the franchisor’s income may rise if total sales and gross profit across the area increase.

The franchise owner, meanwhile, is still responsible for rent, wages, loans, and other expenses.

What looks like the expansion of a store network to headquarters is a war of attrition in which an owner has staked their livelihood.

A supposed ally carrying the same sign opens next door. And the headquarters you signed a contract with approved it.

At that point, it is hard to tell where the enemy is.

I Could Have Become a Second-Generation 7-Eleven Owner

For me, this is not somebody else’s problem.

Years ago, when my father left his salaried job, he was apparently invited to become a 7-Eleven owner.

The proposal even involved putting our home up as collateral.

Fortunately, my father turned it down.

What would have happened by now if he had signed the contract?

The business might have succeeded, and I might now be a second-generation owner running several stores.

But another 7-Eleven might also have opened nearby and caused our sales to collapse.

We could have mortgaged our home, taken on debt, and had the entire family working in the store to save on labor costs.

If sales fell, we would work even more hours ourselves.

Then, just as we reached the point of exhaustion, headquarters would send us a notice about a new sales campaign.

My stomach hurts just imagining it.

I am a freelancer now, but at least I can end a contract if I no longer want the work.

A convenience-store owner cannot escape so easily.

Because my father turned down that offer, I still do not have to work the late-night register at a 7-Eleven.

I have found one more reason to be grateful for my father’s judgment.

The Same Problem Happened in the United States

This is not just a Japanese problem.

At the American sandwich chain Subway, there have been cases in which opening another franchise near an existing store became a dispute and led to lawsuits.

For the existing franchise owner, it is intolerable.

After spending years building a local customer base and finally getting the business on track, another store from the same brand opens nearby.

An ordinary competitor would at least be understandable.

But this competitor uses the same sign, sells the same products, and pays royalties to the same headquarters.

The franchisor is supposed to support its franchisees, yet it also has the power to increase the number of competitors they face.

It is like discovering that someone you thought was an ally is selling weapons to your enemy.

And collecting royalties from the enemy as well.

That is an impressively efficient business.

Is It a Success as Long as Headquarters Makes Money?

I am not trying to reject the franchise model itself.

The opportunity for an individual to run a business using a major chain’s brand and distribution system is certainly attractive.

But when the interests of the franchisor and the franchisee no longer align, who bears the risk?

That is the problem.

Headquarters looks at sales across the entire area. A franchise owner lives on the sales of one store.

To headquarters, it is one store among many. To the owner, it is their entire life.

When a chain plans to open another store near an existing location, perhaps the law should require an assessment of the effect on sales, an explanation to the existing owner, and compensation where appropriate.

I keep seeing the abandoned sites of former 7-Eleven stores with their signs removed.

I wonder what happened to the owners who ran those stores.

In a headquarters management report, it may simply appear as one closed location and one new location.

But behind that one location was a person who had staked their livelihood on it.

7-Eleven sells itself on being “close and convenient.”

But for a franchise owner, nothing could be more inconvenient than another store opening close by.

What is “close and convenient” for customers can be “too close for comfort—and hell for the owner.”