Adele Ferguson and Sarah Danckert, 20 October 2015

7-Eleven head office raked in close to $200 million from fuel sales across its network over the past financial year while its franchisees received only an $18 million cut of the sales during the same period.

The details of 7-Eleven’s fuel sales and the breakdown of the income split for head office and franchisees are detailed in internal documents seen by Fairfax Media.

Fuel sales and the commission paid to franchisees have been a sticking point for some store owners as they negotiate new franchise agreements with 7-Eleven head office.

As part of a broader new deal with franchisees that would feed $60 million a year back to franchisees 7-Eleven has offered to increase the commission paid to franchisees to 1.5c per litre.

That may not satisfy disgruntled franchisees some of whom have told Fairfax Media they would like the fuel commission to increase to 3c for every litre.

7-Eleven has proposed the new business deal with store owners in the wake of revelations of rampant underpayment of workers at 7-Eleven stores and the financial plight of many franchisees struggling to make enough income to pay full wages.

Fuel sales separated from profit split

Fuel sales at 7-Eleven stores sit outside of the current gross profit split between head office and franchisees that sees head office receive 57 per cent of the income from non-fuel sales and franchisees 43 per cent.

Currently franchisees receive a 1c per litre commission on fuel sold at their stores. The remaining income flows back to head office which covers expenses including environmental licences, depreciation and maintenance.

Internal documents show 7-Eleven made a total gross profit of $229.9 million from the sale of petrol and LPG for the year ending June 2015.

Gross income came in at $219.7 million after deducting the $18.3 million in commission paid to franchisees but adding back in the $8 million the company made from ‘stock gains’ during the period.

After a host of expenses that cover environmental costs, fuel maintenance costs, fuel depreciation and credit card fees, 7-Eleven books a fuel gross income excluding rent and head office expenses of $197.5 million.

Thefts cut franchisee take

The documents also show fuel drive-offs by customers reduced the total $18.3 million commission received by franchisees by 16.2 per cent to $15.3 million.

According to the documents, 7-Eleven’s margin on the fuel sales was 13.02c per litre for petrol, which made up the bulk of sales, and 5.42c per litre for LPG.

7-Eleven declined to answer questions regarding the total net profit the business receives from fuel sales. It also declined to clarify former chief executive Warren Wilmot’s claim that head office also only received 1c per litre on fuel after all costs were taken out.

“The quantum of sales and margins on fuel are operational matters and 7-Eleven doesn’t intend to comment on those and thereby provide competitive business intelligence to our franchisees’ competitors,” a spokesman for the company said.

“The company is continuing to engage with franchisees about the new business model to ensure sustainability, fairness and compliance.”

Last week the company met with franchisees in Melbourne with several franchisee sources telling Fairfax Media after the meeting that many franchisees were unimpressed by the company’s proposed changes to its business model.

Franchisee sources said company representatives described the proposed deal as being “open for negotiation” but asked for franchisees to deal with the company directly rather than agitating for change through the media or lawyers.

Extracted in full from the Sydney Morning Herald.