7-Eleven franchisees in Japan close temporarily with the company’s quiet blessing
It took an outbreak, but 7-Eleven in Japan is letting stores take a break
TOKYO» On April 14 in a residential neighborhood of Kawasaki, Japan, Takehiro Shimada did the unthinkable. He turned off the lights and locked the doors of the 7-Eleven he has owned and operated for more than 20 years.
As recently as January, the decision would have seemed like a radical act of defiance against one of the country’s most powerful and ubiquitous companies and its long-standing commitment to 24hours-a-day, seven-days-a-week operations.
But when Shimada, 54, closed his shop to wait out the coronavirus outbreak, he became the first of a growing number of 7-Eleven franchisees across Japan to do so with the company’s quiet blessing.
A deadly contagion has done what a chorus of pleas from owners could not: forced the company that controls the 7-Eleven chain, Seven & I Holdings, to exempt some of its locations from policies it has spent years fiercely defending.
It is a relief for store owners who were already putting in grueling hours for meager returns before the virus struck and have since watched business dry up as Japan’s workers sheltered at home under a state of emergency.
As Japan moved earlier this month to lift that declaration across much of the country, however, some franchisees were wondering if the change of heart would outlast the pandemic.
Allowing an owner to close shop for a few hours in the dead of night or during a national holiday might not seem like a big deal. But 7-Eleven, so omnipresent in Japan that it is considered part of the national infrastructure, believes that consistent service across all of the country’s 21,000 locations is crucial to the brand’s value. Like many franchises, it has strict expectations for everything from shops’ layout to how employees dress and greet customers.
In December, the company severed the contract of one owner, Mitoshi Matsumoto, after he decided to close his shop in the Osaka area on New Year’s Day, Japan’s most important holiday. 7Eleven has said the decision was in response to the high number of complaints registered by customers against Matsumoto. The matter is now the subject of competing lawsuits.
Even during the pandemic, 7Eleven has seemed to bend its rules only reluctantly.
In late March, as the virus spread and Shimada began to worry about the risks to his store and its employees, he pressed the company to let him temporarily shut down. He had closed his doors only once before, during a two-week renovation.
At first, Shimada said, management did not respond. At the same time, though, it was taking a very different position toward its own employees, advising commuters to its corporate headquarters in Tokyo to stay home and telling managers to reduce visits to stores. It allowed some locations in train stations to close.
When Shimada, who has spent nearly his whole tenure with the company fighting for more control over his store’s operations, pointed out what he saw as a double standard, the company quickly relented.
Since then, 7-Eleven has started giving owners a “pretty substantial amount of freedom,” said Takanori Sakai, head of a small union representing convenience store owners.
“The stores that want to are for the most part shortening their hours,” said Sakai, who owns a Family Mart, part of a rival chain, in Hyogo prefecture, west of Kyoto.
“Nothing like this has happened before,” he said, adding that “when the pandemic is over, there will be an opportunity to make this the standard.”
As of May 17, 7-Eleven said it had closed 236 locations across the country. It declined to say how many stores had shortened their hours — an indication of the issue’s continued sensitivity.
The company also declined to comment about Shimada. About the store closings, it said: “Current closures or changes to operating hours related to the virus are temporary measures on an individual basis.”
In theory, franchisees have the right to choose their own hours, but owners say that pressure from management, restrictive conditions and punitive incentive structures keep them from exercising the option.
Many stores have carried on business as usual. In Tokyo’s once bustling business districts — where another chain, Lawson, has reported a 70% drop in sales — 7Eleven’s signs continue burning late into the night.
Complaints about long hours are not limited to 7-Eleven, but the company, which has been controlled by a Japanese firm since 1991 and accounts for nearly 40% of the 55,000 convenience stores nationwide, sets the tone for the whole industry.
Shimada and other maverick owners say the company’s insistence on round-the-clock operations is one of several business practices that squeeze franchisees for profit while making them bear a disproportionately large share of the costs of running their shops.
They argue that the policies, such as pressuring owners to overstock perishable goods — which they buy directly from the company — and charging them large penalties for quitting their franchise contract, can push stores into a debt trap.
The complaints led the Japanese government to move to open an inquiry last summer into the industry’s business practices. Around the same time, after months of pressure, 7-Eleven allowed Shimada and other owners to join a pilot program to test how stores would perform under shortened hours.
In an interim report to the government issued at the end of April, 7-Eleven said it had allowed a small fraction of its franchisees — 234 locations — to shorten their hours under the program. Those owners had to forfeit 2% of their profits to do so.
The company’s tolerance of closures has been one of the few silver linings for owners during the pandemic, which has added to the intense pressure on many of their businesses.
The virus has placed other financial burdens on owners. While 7-Eleven has provided some masks and protective equipment, many owners have purchased additional gear such as gloves and goggles at their own expense, and installed plastic barriers to protect their employees and themselves from the pathogen.
Since March, at least 32 7-Elevens across the country have closed for periods ranging from a few days to nearly a month after employees contracted the virus.
The financial burdens of the closings fall mostly on the franchisees. Replacing spoiled food alone can cost $3,000 or $4,000 — equal to a few weeks of earnings for some 7-Elevens. And after stores reopen, customers are often hesitant to enter the site of a known infection.
The convenience store chain has taken modest steps to compensate owners and their employees. In April, the company offered each store a one-time payment of about $930 and said it would give employees prepaid cards that could be used to buy groceries and other necessities.
Earlier this month, it announced that it would extend interest-free loans of about $4,700 to owners and make an additional $930 available to those whose sales have dropped 10% or more.