Japanese convenience store giant 7‑Eleven has long been known for its rigid franchise system and uncompromising “rules.” However, in the recently released financial report for the second quarter of fiscal year 2025, this once‑unyielding company announced its first comprehensive adjustment to franchise contracts in 50 years.
According to the financial report, as of the end of August, 7‑Eleven’s parent company Seven & i Holdings saw its net profit surge from 30.85 billion JPY (about USD 201.96 million) in the same period last year to 72.79 billion JPY (about USD 476.69 million)—more than doubling and far exceeding analysts’ expectations.
Yet behind this impressive profit data, 7‑Eleven chose to bow its head to its franchisees—announcing up to five years of “operating guidance fee” reductions. This uncharacteristic move reflects the deep‑seated survival anxiety of the convenience store giant.
Behind the Financial Report: Hidden Risks Behind the Profit Surge
On the surface, 7‑Eleven’s parent company delivered a stellar performance. In the first half of fiscal 2025, the group’s operating profit reached 9.86 billion CNY (about USD 1.35 billion), up 11.4% year‑on‑year, while net profit attributable to the parent company rose to 5.77 billion CNY (about USD 790 million), a jump of 133.1%.
However, a closer look tells a different story. The group’s total operating revenue was 265.6 billion CNY (about USD 36.34 billion), down 6.9% year‑on‑year. The decline was not due to core business weakness but rather falling oil prices in the North American market.
Profit growth stemmed mainly from two factors:
- Supermarket subsidiaries such as Ito‑Yokado returned to profitability through store closures and structural optimization.
- Overseas 7‑Eleven stores performed strongly in the food sector.
The problem is that the Japanese 7‑Eleven business—the group’s backbone—is losing momentum. Its operating revenue was 21.87 billion CNY (about USD 2.99 billion), flat year‑on‑year, while operating profit fell 4.6% to 5.76 billion CNY (about USD 788 million).
Although average transaction values and same‑store sales continued to grow, customer traffic has yet to stop declining. By contrast, competitors Lawson and FamilyMart are showing stronger growth momentum.
Competitive Stalemate: Rivals Closing In, Growth Momentum Lost
In the ongoing “shadow war” of the convenience store industry, 7‑Eleven is facing real challenges from Lawson and FamilyMart.
Operating data from the three giants reveals a worrying trend. While 7‑Eleven still leads the market with average daily sales per store of about 33,000 CNY (about USD 4,520), its five‑year growth rate of 7.8% lags far behind Lawson’s 17.9% and FamilyMart’s 16.2%.
More notably, Lawson and FamilyMart both achieved around 29,200 CNY (about USD 4,000) in average daily sales per store in fiscal 2024, narrowing the gap with 7‑Eleven to roughly 20%.
Consumer behavior indicators further confirm this trend. 7‑Eleven’s same‑store daily sales growth rate plummeted from 3.0% in FY 2023 to 0.2% in FY 2024; customer traffic growth dropped from 1.6% to 0.2%, and average transaction value growth fell from 1.4% to 0.0%.
This “triple‑zero” situation suggests 7‑Eleven’s growth momentum has hit a bottleneck. In contrast, Lawson maintained 3.2% same‑store daily sales growth and 2.1% average transaction value growth, while FamilyMart, despite customer traffic slowing from 3.2% to 0.4%, still achieved a solid 2.5% growth in transaction value.
Operating profit margins also reveal shifting competitiveness. Although 7‑Eleven retains a high margin of 25.8%, it broke its three‑year upward trend, falling 1.4% year‑on‑year. Lawson and FamilyMart, meanwhile, rose to 15.9% and 16.9%, respectively.
Structural Crisis: The Fatigue of the Franchise Model
7‑Eleven’s challenges go beyond short‑term competition—they stem from structural changes in the industry.
Japan’s convenience store sector is in a period of structural fatigue. Under inflationary pressure, consumers have become more cost‑conscious. Drugstores and small grocery supermarkets, with their low‑price advantage, are siphoning away traffic. Constrained by its franchise model, 7‑Eleven cannot easily cut prices, and its growth has slowed noticeably.
According to Japan’s Ministry of Economy, Trade, and Industry, convenience store food sales grew only 2% in 2024, while the drugstore sector saw nearly double‑digit growth.
Faced with these shifts, 7‑Eleven’s franchise system appears powerless. As of August 2025, 7‑Eleven had 21,552 stores in Japan, of which only 186 were directly operated—meaning over 99% were run by franchisees.
While the proportion of multi‑store operators has increased, it remains just about 30%, meaning most franchisees still operate a single store. These single‑store owners have weak risk resistance and high operating costs, making them highly vulnerable to market fluctuations.
By contrast, competitors have long embraced multi‑store franchise models. As of the end of February 2025, Lawson’s 14,694 stores were run by 5,262 franchise owners, half of whom managed two or more stores. In terms of distribution, 80.7% of Lawson stores were operated by multi‑store owners, with some top franchisees running as many as 48 locations.
FamilyMart shows a similar structure: among its 14,885 stores, 38.9% of franchisees control 68.2% of total locations.
Breaking the Ice: The First Franchise Fee Reform in 50 Years
Faced with mounting pressure, 7‑Eleven has been forced to lower its stance, announcing its first franchise fee reform in half a century.
At the financial results briefing, 7‑Eleven Japan President Tomohiro Akutsu stated that beginning as early as fiscal 2027, new franchisees opening stores will receive up to five years of “operating guidance fee” (franchise fee) reductions.
This marks the first comprehensive adjustment to franchise contracts since 1974.
Under the current “gross profit distribution” system, 7‑Eleven headquarters and franchisees share store gross profit according to a pre‑agreed ratio. Headquarters provides products and operational support, while franchisees pay the operating guidance fee in return.
The fee ratio varies depending on property type, but for new stores within the first five years of operation, the rate can reach about 60%. Many store owners have complained that such a high commission burden is unsustainable before sales stabilize. The reform directly addresses this pain point.
7‑Eleven plans to lower the fee rate starting in fiscal 2027, with specific details to be announced in spring 2026. In the short term, this may compress headquarters’ profit margins, but in the long run, it is expected to expand overall store numbers and strengthen system stability.
Strategic Adjustments: Seeking Breakthroughs on Multiple Fronts
Beyond the franchise reform, 7‑Eleven is pursuing breakthroughs on several fronts.
On the technology side, the company is accelerating the rollout of self‑checkout systems and has established a New Business Promotion Department to explore future store formats and innovation models.
On the product strategy side, 7‑Eleven is expanding its freshly prepared food offerings near checkout counters and continuing to strengthen its “Joyful Price!” low‑price product line.
7‑Eleven Japan has also begun its first wave of store renovation projects. Currently, about 10 stores in the Tokyo metropolitan and Kansai areas are undergoing renovations. The company aims to refurbish 100 stores by the end of 2025 and 500 stores by February 2027.
Specifically, existing 6‑7 meter‑long counters will be extended to about 8.4 meters. Roughly 4,000 stores—about 20% of total locations—have shorter counters. Renovated counters will feature not only coffee machines but also display cabinets for fried chicken, freshly baked bread, and pastries, alongside expanded selections of fruit‑and‑vegetable smoothies, tea, and other made‑to‑order beverages.
Due to declining magazine sales, the magazine racks once placed near windows will be reduced from 5 to about 2, freeing space for daily necessities and household goods.
Additionally, unused store space will host new display sections for the in‑house brand “7‑Eleven Premium”, featuring frozen foods and popular candies.
Root Cause: Corporate Bureaucracy and Growing Distance from Customers
At its core, 7‑Eleven’s predicament is a classic case of “big company disease.”
While overseas operations now rival its domestic scale, the foundation of its Japanese market is beginning to erode. The rise of drugstores and discount stores reflects fundamental shifts in consumer demand and shopping scenarios.
If convenience stores continue to rely on the old logic of “convenience premiums” without genuine innovation in product strength, pricing, and experience, it will be difficult for them to escape their current stagnation.
President Tomohiro Akutsu of 7‑Eleven Japan admitted, “Compared with our competitors, consumers believe our product mix is lacking.” This assessment is supported by data: in May, existing‑store sales rose 4.9% at Lawson, 2.9% at FamilyMart, while 7‑Eleven remained flat.
7‑Eleven’s founder Toshifumi Suzuki once said that the real competitor is not “industry peers,” but the customer. Only by continually exceeding customer expectations can a company stay ahead in a changing market. It was this “customer psychology” philosophy that once propelled 7‑Eleven to the top—and losing it has now dragged it into stagnation.
Seven & i Holdings President Steven DeCaires visits stores every weekend to speak directly with field consultants and franchise owners. He admits, “Whether we can truly listen to the voices from the front line determines the sustainable health of our franchise system.”
From a “rule‑maker” to a “humble learner,” 7‑Eleven’s change in attitude is commendable. But in the fast‑shifting battlefield of retail, whether that attitude can translate into speed of execution will determine the success or failure of this reform.
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.