Investors who desire optimal opportunities for triple net lease properties may not have considered 7-Eleven stores. 7-Eleven is a known for its Slurpee drinks, but people may not realize that it is the world’s largest convenience store business. It’s consistently ranked as a top-10 franchisor and boasts of 69,000 stores in 17 countries; more than 10,000 company-owned and franchise stores are located in North America. In 2021, Entrepreneur magazine rated it ninth in its ranking of the top 500 franchises.
The U.S. convenience store industry includes about 153,000 stores and generates annual revenues of nearly $650 billion, with more than half of sales coming from motor fuel, according to Statista. Convenience stores generally stock a range of everyday items such as snack foods, soft drinks, beer, groceries, confectionery, ice cream, tobacco products, over-the-counter drugs, toiletries, newspapers, and magazines. Other leading U.S. convenience stores include Circle K, Speedway, Casey’s, and CST Brands.
The c-store industry continued to be impervious to difficult economic times and performed well during the COVID-19 pandemic. In a NACS Retailer Member Pulse Survey, 59% of U.S. convenience business store owners reported an in-store sales increase during the pandemic, compared to 30% who reported a decrease. Many convenience store owners adjusted the mix of products offered in the store last year and emphasized take-home meals and grab-and-go meal options to generate more business.
Investing in 7-Elevens
7-Eleven’s history dates back to 1927 when Joe C. Thompson, an employee of the Dallas-based Southland Ice Co., started selling milk, bread, and eggs, along with the ice blocks. Thompson eventually purchased the company and renamed it the Southland Corp. The first stores were known as Tote’m because customers “toted” away their purchases. When the businesses’ hours were extended from 7 a.m. to 11 p.m., the name was changed. 7-11 stores are now open 24 hours a day, but the name has endured.
There are two ways to invest in a 7-Eleven store for sale. The first is to become a franchisee, and the corporate website offers the opportunity to either purchase a new store or an existing one. The franchise fee ranges from $100,000 to $1 million, depending on several factors such as the store you select, a down payment on the store’s inventory, supplies, business licenses, permits, bonds and initial business cash register funds.
7-11 and the franchisee split significant expenses. For example, the corporation pays for real property and building rent or acquisition cost; certain equipment purchases or rent; real property taxes; select utilities; a portion of building maintenance; certain equipment replacement costs; and a few others. The franchisee pays for payroll; workers’ compensation, business taxes and licenses, indemnification and insurance; cash and inventory shortage; store supplies and miscellaneous store expenses; all taxes other than real property taxes; and several other costs.
Name recognition: As a high-profile brand business, 7-Eleven is well known and customers are aware of what the store offers when they see the sign.
Streamlined system: 7-11 designed a streamlined franchising system that allows you to begin operating your store quickly—generally, in three to six months.
Corporate support: 7-Eleven corporate pays many expenses, and there is a royalty system.
Lower initial investment: While still a significant investment, 7-11 has a lower initial investment than many other franchises.
Territory: The 7-Eleven franchise license covers only one location, and does not include territory protection, which protects franchisees from other approved franchisees entering your area and opening competing businesses.
Profits and fees: Several franchise owners have complained about business fee arrangements that have reduced their personal salaries and store profits.
Corporate support: The monetary support is strong, though some franchisees think that the parent company micro-manages their business.
24/7 operation: The stores are 24/7 operations, and that is non-negotiable for all franchise owners. As a result, it can be a challenge to staff all the shifts.
Investing in NNN 7-Eleven Properties for Sale
Instead of becoming a franchisee, another attractive option is to purchase 7-Eleven triple net properties (NNN) for sale. With a NNN lease, the tenant is responsible for paying most of the costs: usually rent utilities, property taxes, building insurance and most structural and common area maintenance expenses.
7-Eleven stores for sale are considered great NNN investments for several reasons, including their ability to perform well in both good economies and recessions, industry-leading market share and a strong record of profits. 7-Eleven is a dominant brand in the net lease investment sales market because of the corporation’s investment-grade credit rating, reasonable price points for individual business and the high quality of its underlying real estate.
Most of the stores are located in urban locations that feature desirable demographics due to population density and favorable median household income. Also, the majority of 7-11 stores are on prominent corner locations with traffic counts that exceed 25,000 daily with high visibility and convenient access.
Another plus is that the U.S. subsidiary, 7-Eleven Inc., guarantees every 7-11 business lease agreement, regardless if the location is a corporate or franchise-owned store. The chain’s stores also have one of the lowest relocation rates in the net lease industry.
Because 7-Eleven properties are considered profitable, low-maintenance investments, they are in high demand and typically do not remain on the market for long.
The Two Types of 7-Eleven Stores: Locations with Gas Pumps and Those Without
The two major types of 7-Eleven business locations are those that feature gas pumps and convenience stores without gas. The non-gas store is typically smaller with 1,000 to 3,000 square feet of gross leasable located in small retail strip centers, community shopping centers, retail condo spaces or single-tenant parcels between 0.5 to 0.75 acres. These leases are generally structured for 10-15 years in length and have rent escalations of 10%-15% every five years.
Individual lease structures can be quite different, but most 7-11 c-store-only locations are “modified” NNN leases, which means the tenant pays for all landlord expenses.
7-Eleven leases for sale can also be double net, in which the landlord is responsible for roof, structural repairs, and parking lot maintenance, while the tenant pays for property taxes, insurance, and interior repairs and maintenance (HVAC repair and replacement may be either a landlord or tenant expense, which varies with each lease). Investors also prefer to find locations that are close to major employers, schools and other retailers.
With 7-Eleven locations with gas pumps, the company prefers to sign corporate-operated ground leases at major corner locations including community shopping centers or power center outparcel sites of 0.8 to 1.25 acres in size. The gas site ground leases are typically 20 years in length, have rent escalations of 10%-15% every five years through the base term with options to extend.
These leases are absolute NNN in structure, meaning the tenant pays property taxes, insurance, all repairs and maintenance. Many 7-Elevens with absolute NNN lease properties have proof of their existing sales and financial longevity, which can make their price point more than $3 million.
With more than 10,000 locations in North America, there are many individual 7-11 stores to choose from; you can pick according to your benchmarks for a profitable investment, i.e., a desirable location with excellent demographics and a corporate, full-term 15-year modified NNN lease.
Keep in mind the main factors that make a 7-11 store or any excellent triple net property desirable, that is often location, location, location. 7-Eleven stores are located in neighborhoods and along interstates of small towns, mid-sized cities and large cities. Look for a 7-11 store that is in a good location and is the right property for you.
The triple-net real estate experts at Sands Investment Group have helped investors close deals on many 7-Eleven stores, and other convenience store business properties, including various locations across the U.S.
The trusted advisors at Sands Investment Group can bring more to the table than merely identifying commercial properties for you. We can help with existing real estate assets, acquiring new operators or businesses and working to restructure leases to reduce your costs. We have handled one-off deals and acquisitions of many 7-11 stores to obtain the right property for your portfolio. If you have a different net lease property in mind, we can help. We have handled deals on some of the most popular NNN business types.
For more information or to begin finding your next successful triple net lease investment, get in touch with a Sands Investment Group broker. These advisors can help you identify and secure a great investment opportunity. Call 844.4.SIG.NNN or send us an email to get started.