Franchise loss revelation: 10 million yuan to open 21 convenience stores, became the most regrettable investment

Li Tong joined 711 three years ago. This convenience store pioneer has more than 6,600 stores worldwide and has been in China for the longest time. It now has more than 3,500 stores in China. Because he has enough filters for the brand, Li Ning decided to join after several inspections.

The franchise fee for Shandong 711 is 200,000 yuan. After investing hundreds of thousands of yuan in rent, manpower, and purchasing, Li Tong found that he did not make as much money as he had imagined. Li Tong told Tech Planet that he has joined two stores and has been operating convenience stores for three years. Currently, he is not losing money, but he is not profitable.

One of the reasons for not making money is the high labor cost. Li Tong said that because he also has his main business, he does not have much time to manage the convenience store himself, so he entrusted it to the store manager. The labor cost in Shandong is very high. The store manager earns 10,000 yuan a month, and the ordinary clerk earns 6,000 yuan a month. A store needs at least four employees, and the night shift employees earn even more, about 7,000 yuan. Add to that the rent, water and electricity bills, and the daily turnover is 8,000-10,000 yuan. In a month, he is almost working for the brand and employees.

There is a certain gap between expectations and actual implementation. The gross profit figures officially announced by convenience store brands to franchisees are inconsistent with the actual operating figures of franchisees. The average non-tobacco gross profit margin promised by the Meiyijia convenience store brand is about 25%. The single-store profit model introduced by Lawson is: a 40-square-meter store with a monthly turnover of about 80,000 yuan, a monthly gross profit of about 32,000 yuan, a monthly net profit of about 19,000 yuan, and an annual profit of about 238,000 yuan. A 711 franchise business manager told Tech Planet that the gross profit of fresh food products such as rice balls, buns, and oden can reach 50%-60%, and the average gross profit of SKU is about 38%.

However, the actual operation is not as high as the official claims. Li Tong said that franchisees place orders according to the brand's specified standards, but 711's price advantage is not big. Compared with other convenience store prices, 711's prices are even more expensive. The gross profit is not high either. In actual operation, the gross profit is usually 19%, and 35%-40% is completely unrealistic.

The brand commission also makes the franchisee's profit thinner. 711 has three commission modes. The amount of franchisee's investment is directly linked to the share ratio. The brand commission ratio can be as high as 32% of the gross profit. Specifically, if the franchisee does not invest in store decoration and equipment purchase, the franchisee and 711's official gross profit sharing ratio is 68% and 32%; if the franchisee invests in decoration but not equipment, the franchisee and 711's gross profit sharing ratio is 78% and 22%. If the franchisee invests in everything and purchases brand equipment and decoration, the franchisee and 711's gross profit sharing ratio is 88% and 12% respectively. The 32% share means that the franchisee is divided a large part of the profit every day.

In addition, fierce competition is also one of the factors that make convenience store business increasingly difficult. In Li Tong's view, the three-year epidemic has had a huge impact on offline business formats. He thought that business would improve after the epidemic, but after the epidemic, he found that business was even more competitive and worse than before the epidemic. The convenience store model has a very low threshold and is very easy to copy. There is a convenience store almost every few steps near Li Tong's convenience store, and there are many convenience store brands.

Convenience stores that cannot expand their business will also find it difficult to survive. Xiao Li, who has joined five Lawson convenience stores in three years, revealed that among the five stores, two stores are doing OK business, while the two stores near schools are doing worse business. When things are good, the daily turnover of the convenience store can reach about 9,000 yuan, and generally it is around 5,000-7,000 yuan. Xiao Li decided to sell another store because it could not obtain a tobacco license. The gross profit of tobacco and alcohol is about 10%-12%. Xiao Li said that convenience stores without tobacco basically won't survive for long.

There are many factors that affect whether a franchised convenience store can be profitable, including geographical location, rent, employee costs, franchise brand commission rate, and daily turnover. Each indicator is crucial to profitability.

The life and death line of the convenience store industry in Shanghai is a daily turnover of 5,000 yuan. Convenience stores with a turnover below 5,000 yuan are almost not allowed to join. A manager in charge of the franchise business of 711 revealed to Tech Planet that the closure rate of 711 convenience stores is around 3-5%. The situation of convenience stores in each city is different. It is not clear in other cities. In Shanghai, the daily turnover of franchised convenience stores cannot be less than 5,000 yuan, otherwise there is no profit. The loss rate is generally 3% of the order. The rent must also be controlled within a certain range, preferably not more than 30,000 yuan/month.

Priority locations for opening stores include: large office areas, community entrances and exits, and areas around transportation hubs and subway stations. 711 headquarters will first help evaluate the location for free. If the location is not good, it will not be recommended for franchise. The above-mentioned 711 franchise business manager revealed that many people have consulted about joining this year, and the headquarters has also rejected many franchisees who chose inappropriate locations.

There are very few profitable franchisees, and even if they have made a profit, they cannot guarantee that their successful experience can be replicated in the second store. Franchise owner Lao Jin has been a Meiyijia convenience store for 4 years. The store area is 120 square meters, which is a large store compared to the small stores of more than 40 square meters. The monthly rent is as high as 17,000 yuan. When he first joined, Lao Jin invested a total of more than 900,000 yuan, including the transfer fee, and then hired employees to manage it. According to him, the current monthly turnover is 450,000 to 500,000 yuan, and the annual net profit is about 500,000 yuan.

Even if you make money, Lao Jin does not recommend players to enter the game blindly. Lao Jin told Tech Planet that you should be more rational. No industry is 100% profitable, and no industry cannot make money. There is actually no experience to follow in this industry. "There are more Meiyajia stores that cannot make money. I can only say that my store is one of the top few among the 200 Meiyajia stores in our city, that's all."

In Lao Jin's opinion, any industry or brand that can be among the top in the city will definitely make money. However, being among the top cannot be attributed to experience, sometimes it depends more on luck. If he were to copy a second store like this, he would not be able to do it. Because convenience stores are all about location, and the unique locations are either scarce or already occupied by others.

It is becoming increasingly difficult to run a convenience store business. Lao Jin said that now that low-priced snack shops are so popular, convenience stores' high-profit products: beverages and packaged snacks have become the snack shops' lead products, and they have no way to compete with snack shops.

Franchisees have almost reached a consensus that franchising convenience stores is a project with a very low return on investment. Franchising convenience stores means working all year round and having to monitor the business 365 days a year, which is both time-consuming and laborious. Stores with poor performance will lose money, and stores with average performance may not even be as easy as working outside to earn 10,000 yuan a month.

But this is how the industry works. Some people come in, some people leave, and some people want to leave but can't. In the past two years, convenience stores including 711 and Lawson have slowed down their franchise pace, and many convenience stores have even been forced to close. Convenience Bee itself has also experienced a period of major industry shocks such as layoffs and store closures. Now it is betting on the franchise model and trying to ease operating pressure through the franchise model. But now franchisees who have no advantages have gradually been abandoned by franchisees.

This article was authorized by the author to be published on Operation Party. The copyright belongs to the author.