7-11 waves P1-M franchise deal amid stiff competition

Convenience store operator Philippine Seven Corp. (PSC) is hatching a more affordable 7-Eleven franchising package to expand its nationwide network and bolster its leading status in the highly competitive retail sector.

PSC president Jose Victor Paterno told reporters in a briefing the firm would be piloting a program allowing an investor to pay only P1 million to put up a 7-Eleven store, lower than the P3.5-million investment package currently on offer.

The P3.5-million package usually allows the franchisee to invest in the location, thus taking higher risks but for a higher return. For the P1 million package, Paterno said the franchisee “won’t lose money but won’t make a lot.”

The company has pioneered the convenience store format in the Philippines as the master licensee for 7-Eleven stores. The profitable retailing space has attracted new players in recent years, including Gokongwei-led MiniStop, Ayala-Tantoco’s FamilyMart, Puregold-backed Lawson and SM-backed Alfamart.

Over the longer term, the company would want to have 90 percent of its store network owned by franchisees, similar to the ratio in Taiwan, Paterno said.

To date, PSC has a network of 1,760 stores nationwide. “We’re opening a little over one store a day this year. Last year, it was almost one store a day,” Paterno said.

PSC chair Jose Pardo told shareholders the company’s immediate target would be to breach the 2,000-mark soon.

Last year, 337 new stores were put up, the most number of stores opened in a single year in PSC’s history. Franchisees account for 57 percent of total stores while 43 percent of stores are corporate-owned.

“We believe this sector will remain crowded and competition more intense, but we shall capitalize on our first-mover advantage and economies of scale to maintain our dominant position in the market,” Pardo said.

Luzon remains PSC’s bailiwick with 1,474 stores, but it has been growing its footprint in Visayas and Mindanao as well. It now has 203 stores in Visayas and 63 in Mindanao.

The company has also built 10 warehousing facilities to serve its nationwide chain.

“It’s kind of a big bet but our bet is now paying off and we welcome the initiative of the new administration to grow the regions outside Metro Manila, especially since we have stores there now,” Paterno said.

He expressed hope, however, the administration would not be “too harsh on [setting up a] curfew.”