The Big Gulp

Photo: Matt Hoyle

Midday on a Wednesday, Norman Jemal and his 7-Eleven field consultant, Kunta Natapraya, huddle around a computer in the back storeroom-office of Jemal’s 28th Street franchise, poring over a tiny-fonted spreadsheet. Before them lie the stories of thousands of snacks consumed. Along with a sugar-free Slurpee Lite, 7-Eleven corporate is about to roll out an empanada, and Jemal and Natapraya need to make room for it by eliminating another occupant of the hot-food case here at 28th Street and Third Avenue, one of Jemal’s three Manhattan 7-Elevens. Natapraya is something like a convenience-store social worker. He visits New York’s 7-Eleven stores on a weekly basis to help franchisees improve their bottom lines and is their main point of contact with corporate.

Eventually, the data turn up a clear laggard: the spicy beef patty. (The best performer was the $1 pizza slice.) Jemal had guessed it would be the mild beef patty. Close, but guesses won’t do—the spicy patty, whatever its merits, will be replaced by a different meat pastry. Next, the pair starts crunching the numbers on Slurpees—how much have their recent efforts improved Jemal’s bottom line on the iconic product? Last July, 28th Street sold 8,000 Slurpees for an average price of $2 each. On its best day, it sold 291. (Slurpees, Natapraya tells me, have “unbelievable” sales numbers in Manhattan.) But back then Jemal’s gross profit on the drinks was a paltry 62 percent—he was losing too many bins of syrup to expiration because of overordering. Natapraya says that through more timely Slurpee-syrup orders, the two have raised gross profit to nearly 80 percent, which could generate $165 in previously untapped profit every day during the upcoming summer. That’s $5,000 a month extra on Slurpees alone, to be shared between ­Jemal and the 7-Eleven company.

Jemal and Natapraya have been so successful at raising profits through efficient ordering that corporate asked them to give a presentation on the matter for a nationwide call, in which 7-Eleven bigwigs learned how the pair increased revenue without charging a dime more to the consumer by leveraging 7-Eleven’s proprietary Retail Information System. The RIS, as it’s lovingly called, is operated via a device that looks like a massive PalmPilot, a large tablet computer with a stylus. If you have five Buffalo-style pasta salads on Monday night and aren’t sure whether to reorder, it’ll tell you, for example, how many Buffalo pasta salads typically sell in your area on warm Tuesdays.

There’s nothing revolutionary about basing decisions on sales data, but 7-­Eleven managers can get at that data much more easily than their counterparts at unwired corner bodegas, and the company believes that’s a huge advantage. As a 7-Eleven proprietor in New York City, ­Jemal—a gregariously goofy 29-year-old—is currently the member of a fairly small club. But the company, the Dallas-based subsidiary of Tokyo-based Seven & i Holdings Co., Ltd., has its sights set on Manhattan, which at the moment has nineteen stores. If 7-Eleven gets its way, hundreds of Big Bites, hot-dog-shaped cheeseburgers, and Buffalo chicken taquitos will be rotating silently in more than 100 locations on the island by 2017. The company comes to New York armed not just with data-­processing tools but also with a system called the Business Conversion Program, whose stated goal is to entice mom-and-pop shops into becoming 7-Elevens. Will bodegas be able to compete when they rarely even use scanners to keep track of inventory? When they hire extra labor just to sell sandwiches for a pittance? When they stock outdated and unpopular items like canned clam sauce and mackerels?

The company couldn’t ask for a more enthusiastic candidate than Jemal to join the vanguard of its invasion. “Other franchises pitch their name,” he says. (He researched several franchise chains before opening his first store.) “7-Eleven, which I think has a great name, pitched their system.” Jemal, who’s from Long Branch, New Jersey, grew up in the retail world. His family owned the Wiz chain of electronics stores, which was famous for its somewhat ridiculous commercials (“Nobody Beats the Wiz!”). Dazzled by the Retail Information System, and enticed by the dearth of 7-Elevens in New York—“It was just crazy to me that such a void existed, because it’s hard to find the void in this day and age”—Jemal has also opened stores at 33rd and Madison and, as of last month, on St. Marks Place.

“It’s part of an overall growth strategy,” explains Sean Duffy, corporate’s senior vice-president of development. “We saw an opportunity in Manhattan—huge traffic counts, huge pedestrian traffic, [and] the need for convenience.” 7-­Eleven is betting that time-starved New Yorkers will come to appreciate the convenience of its more-than-just-­sandwiches spread of fresh food, which has, to 7-Eleven’s credit, expanded considerably from its stoner-pleasing roots. While the company is still talented at making food cylindrical in a way God never intended, and Buffalo-ing things that the Lord might never think to Buffalo, it has also introduced fruit and yogurt cups, salads, and other healthier items. “If we went into Manhattan twenty years ago with our normal offerings, I don’t know if it would be as appealing,” says Duffy. A company exec told the trade publication QSR (which stands for “quick-service restaurant”) in 2008 that 7-Eleven wanted its stores’ ­prepared-foods sections to start resembling those at high-end local grocers. “Nice wines, fresh-baked pizza—it’s not what you think of when you think of convenience stores,” one franchisee said. “But it is what they’re becoming.”

Photo: Matt Hoyle

In 2009, a new 7-Eleven Commissary and Combined Distribution Center opened in Bohemia, a Long Island town about 55 miles from the city. It provides stores in the region with fresh food. “The more scale we can get off of that distribution center the better,” says Duffy. The company doesn’t operate the center itself—a third party does—but more stores mean more inventory is flowing through Bohemia warehouses, which means that said third-party operator can charge less per item to store owners and still make back its fixed costs, which eventually means more profits shared between stores and 7-Eleven corporate. With most of production and distribution outsourced, 7-Eleven focuses on what it believes to be its strength: figuring out what to sell to rushed shoppers and how to sell it to them.

To that end, I attended a meeting at Jemal’s 28th Street storeroom at which he promised over $1,000 in cash rewards to his staff if they could help earn a high score on the store’s next surprise audit. Once a month, a roving corporate hard-ass—who, Jemal says, graduated from West Point—drops in to ensure things are shipshape, giving the store a cleanliness grade and rating it on a 39-point service checklist. If employees don’t sell suggestively (“Would you like another fill-in-the-blank for only $1?”), they get dinged. Don’t thank every customer for their business? Dinged again. Spots on the bananas? Dingdingding. According to the terms of Jemal’s contract with 7-­Eleven, the company could even take his franchise rights away if he repeatedly scored poorly. Given his hypermotivation, that seems unlikely—but good audit performances will go a long way in determining if 7-­Eleven lets him open a fourth, fifth, or sixth store of his own, and he’d like to open as many as twenty. The mere fact that Jemal could hold a meeting with nine crew members and a journalist in what is ostensibly a storeroom is a testament to how lean his operation already is: It was barely being used for storage at all. After the meeting, three of his employees began arguing vehemently about who was responsible for ordering a few unnecessary bottles of Advil.

New Yorkers, like everyone, enjoy their local quirks, and bodegas are a great source of quirk, from their cats to their strangely worded, handwritten credit policies. But most bodegas are really the same where it counts: Each sells the same assortment of junk food and toiletries as the next—Utz and Wise chips, Breaktime cookies, Scott paper towels. If 7-Eleven can stock those things reliably and cheaply, its total deficiency in the quirk department probably isn’t going to make it any less of a threat to the city’s bodegueros.

And yet: “It’s impossible to get them involved. It’s like getting my grandma to deal with a BlackBerry,” says Jose Fernandez, president of the Bodega Federation of the United States, and former president of the Bodega Association of the United States, when asked if his members will ever widely adopt electronic scanners and computer systems. “They don’t want to deal with computers, they don’t want to deal with ­technology.” We’re sitting in his small, neat office above a thrift store deep in Jamaica, Queens. Fernandez has owned two bodegas: one which he voluntarily stopped running in 2005, and one that crashed in the late nineties because of his complete lack of experience.

“I had to do everything by myself,” he says. “And because of that, I ended up losing my bodega. Because I didn’t have experience, I was buying expensive stuff. I was buying the wrong stuff. I didn’t know how to get a license.” By the time he got his beer and cigarette licenses in order, his business was already doomed. Out of this failure, Fernandez recognized the need for an organization that looks out for bodegueros by helping them navigate the unexpectedly complicated terrain of running a convenience store in New York—which isn’t dissimilar to what 7-Eleven does for its franchisees. With a friend, he launched the Association; then, in 2007, Fernandez started the Federation, which has a more national focus and is funded in part by down-market food giants like Krasdale and Goya.

7-Eleven isn’t trying to put Fernandez’s constituents out of business so much as it is trying to win them over. That’s what the Business Conversion Program is for. In a traditional 7-Eleven franchise store, franchise fees run approximately $200,000 to $400,000. If the company deems you worthy of a franchise, it’ll find you a location so long as you have the money. But stores that already own or lease their own space can buy rights to become a 7-Eleven for just a $25,000 fee. 7-Eleven also offers franchisees loans through its own private program, which could appeal to would-be entrepreneurs at a time when banks are often unwilling to lend.

Photo: Matt Hoyle

The company hopes that early adopters like Jemal will trigger a cascade of conversions; 134 stores by 2017 is the target for Manhattan, but more could be easily added. In America, 7-Eleven is still largely seen as a symbol of suburbia, but it’s achieved urban density elsewhere. Copenhagen, for example, is frequently ­described as having a 7-Eleven on every corner. (In total, there are 197 7-Elevens in Denmark, a country of only 5.5 million people.) The company’s successful expansion in densely populated East Asia preceded its takeover by a Japanese group. According to 7-Eleven itself, the company was once hesitant to open urban stores because it wasn’t confident that urban customers would be interested in the limited product selection of smaller stores; the Retail Information System, it says, solves that problem. (The company also believes that its expanded fresh-food offerings will appeal to time-pressed city-dwellers used to buying food and necessities in the same place.)

Perhaps if bodegas were selling locally made Claritin, paper towels, and condoms, corporate convenience wouldn’t be so successful. But they didn’t. “A lot of [New Yorkers] do say, ‘We prefer mom-and-pop stores, but we actually shop at chain stores,’ ” says sociologist Sharon Zukin, author of Naked City: The Death and Life of Authentic Urban Places. “The very same person who buys fresh apples at the Greenmarket is going to buy Tylenol at Duane Reade.” In fact, given its franchise model and the Business Conversion Program, 7-Eleven could plausibly claim to simply be giving moms and pops the means to take their entrepreneurialism to new heights: The 7-Eleven takeover may merely involve the same people we already buy Doritos from selling us bags of Doritos from a different supply chain. In that case, all that will ­really be lost are some cats and the possibility of occasionally persuading a clerk to sell a single cigarette rather than a whole pack—that, and another set of idiosyncratic storefronts, to be replaced, à la banks and pharmacies, by the nationally uniform palettes of corporate chains. (And 7-Eleven has a particularly eye-catching, pulsatingly neon color scheme.) But will the desire to preserve the city’s visual character be enough to keep the independent bodega alive? 7-Eleven’s generic ubiquity doesn’t seem to have hurt it in other aesthetically minded cities—in Austin, for example, there are 37.

Norman Jemal has faced his own little bit of anti-corporate blowback. Last month, a black-clad group of anarchists attacked the window of his not-yet-opened St. Marks store. Though the window had to be replaced, Jemal was still up and running five days later. With assistance from the parent company, his location had blossomed from empty space to fully formed convenience store in a week’s time. On opening day, a small crew counted every last item in the store. After confirming it was fully stocked, a 7-Eleven handler offered Jemal some documents to sign, which he spread out on a coffee island. With three signatures, the store and its $50,000 worth of initial inventory became his. His first customer, at 11:30 a.m., bought two Buffalo chicken taquitos, two Monterey Jack chicken taquitos, and five fried chicken wings. She had asked for fewer wings, but the clerk’s suggestive selling was quite persuasive.

The Big Gulp