So you’re thinking about buying a 7-Eleven and would like to know how much money you could make.
Well, contrary to popular belief, 7-Eleven owners don’t typically make Hundreds of Thousands of Dollars.
What they make varies greatly on their individual store, but here are some rough estimates:
To get a very rough idea of the income a 7-Eleven can produce, just take 5% of store sales.
- So a store that does $1,300,000 in sales will make roughly $65,000.
For a slightly more accurate forecast, you will need the following key factors to determine the possible income:
- Store sales
- Store GP% - how much out of every dollar you actually keep (roughly 36%)
- GP split with 7-eleven, 48-52 for the typical store (in favor of 7-Eleven) but will be worse if this is a high volume store, since your GP percent decreases as your total GP dollars increase.
- Payroll (including taxes & benefits) - A rough guideline is about 9% of sales, but this will increase if you choose to have a full time manager, get more traffic, or sell a lot of coffee.
- Other Expenses – A rough guideline is about 3% of sales, but could change significantly with inventory & cash shortages.
Based on these factors, a typical store without gasoline having sales of:
- $900,000 * 36% GP * 49% split = $158,800 GP
- - $108,000 expenses = $50,000 income
- $1,300,000 * 36% GP * 48% split = $224,600 GP
- - $156,000 expenses = $68,000 income
- $2,000,000 * 36% GP * 47% split = $338,400 GP
- - $240,000 expenses = $98,000 income
These are still rough numbers, but I would guesstimate that the standard deviation is about $10K, meaning that 95% of all 7-Eleven’s with the above sales will have incomes between $50K – $100K with a variation of +-$20,000 depending on the operations of the specific store.
So the overall range for the income of a 7-Eleven (without gas), with sales between $900K – $2mm is between $30K - $120K.
If you are considering purchasing a 7-Eleven and would like unbiased answers to all of your questions as well as advice on specific store locations:
Contact me at: c-store-expert@greatconsult.com for a FREE e-mail consultation.
If you would like me to visit the particular location I will be able to provide you with a more exact estimate of the store’s income potential .
October 1, 2008 at 3:07 pm
Dear Sir,
Based on your estimates, which I am sure are close to reality, the rate of return on my investment actually dramatically DECREASES as the store sales increase:
1) Below Average: Sales $900,000
Investment:$156,600
Income 5%: $45,000
ROI: 45,000 / 156,600= 28%
2) Average: sales $1,300,000
Investment: $377,000
Income: $ 65,000
ROI: 65,000 / 377,000= 17%
3) Above Average: Sales $2,000,000
Investment: $ 710,000
Income: $100,000
ROI: 100,000 / 710,000= 14%
I am sorry but this whole thing does not make sense. It goes opposite to the law of economies of scale. Could yoy please clarify?
Saleem Khan
October 1, 2008 at 4:19 pm
Saleem,
You are absolutely right in your observation.
There are two main factors that cause this phenomenon:
1. In the current franchise agreement – as the gross profit dollars that a store produces increase, the split increases in favor of 7-Eleven Corporate. This is very similar to the US Tax system… The more you earn, the higher percent you are taxed.
2. An increase in store sales will lead to an increase in store payroll (a franchisee’s biggest expense) , so it is easily possible for a $1.3mm store to be more profitable than a $1.4mm store (because you are forced to hire an additional employee around $1.3mm). Ofcourse as sales continue to grow, the profit they produce starts to overtake the payroll expense. It would be rare for a $1.6mm store to be less profitable than a $1.3mm.
The last thing I didn’t include in the calculations was the number of hours that a franchisee would be putting in per week. For store #1, the franchisee would more than likely be working one shift themselves (while doing ordering, cleaning, or paperwork) thereby saving about $15K – $20K a year on payroll).
Let me know if you have any other questions.
October 14, 2008 at 12:40 pm
Does your ROI analysis assume that you have the cash to put down as an investment rather than borrowed money?
thanks
October 15, 2008 at 5:45 pm
Jerry – The numbers I listed were just the profits you can expect from a 7-eleven with given sales and gp% … But in Saleem’s comment the ROI was calculated with 100% cash invested.
January 31, 2009 at 4:25 pm
Dear Guru,
You are way underestimating what a 7-eleven franchisee can make. I own 3 7-eleven franchises. Trust me, the potential for a husband wife team to make over 200k annually on a high volume store is very real.
February 2, 2009 at 12:13 am
Dear Tony T.,
I’m glad to hear that you have some great stores.
You are correct that there are stores out there that are producing great income for franchisees… I’ve heard of some stores that make as much as 300K. Unfortunately those stores are few and far between. In the area I worked… out of 105 stores, the store with the highest income only generated 130K for the franchisee. Income varies tremendously on store location, gas, and other factors. The numbers I give are a general averages for the country and do not include income from gas, which can be very substantial in certain cases.
7-Eleven is a great business, as long as you have the right skillset, temperament, and do your due dilligence before selecting a location.
June 30, 2009 at 5:29 am
T. Trotter,
I am about to become a 7-11 franchisee and would love to speak with you for a few minutes about your experiences. Is that possible?
Thanks..
March 23, 2009 at 6:37 pm
Need more information, i have emailed you on the email but didnt get any reply, please any help will be much help.
by the way i love your articles.
thanking you
takashi
July 16, 2009 at 11:44 pm
Guru,
Great articles. I really enjoy how you “tell it like it really is.” Trust me, after 16 yrs in the Marine Corps, I really appreciate that. I am entertaining the idea of buying into the 7 eleven franchise, and one of my question were; with a store with gasoline, how much more of a pain would that be to manage and is the return worth considering buying a franchise with gas pumps?
July 22, 2009 at 9:50 pm
I really enjoyed this article, I would like to find more information like this in the near future. Specifically, experience and educated needed to open a 7 eleven franchise.
Kevin