Not Made in the USA: 7-Eleven

By Mike Schuster  SEP 25, 2009 7:15 AM

Offering Big Gulps of international flavor.


On practically every suburban corner, ready with a tasty Slurpee and some innovative way to eat a hot dog, 7-Eleven convenience stores appear to be as American as a microwaved, cellophane-wrapped apple pie.

But while the chain's down-home origins lie deep in the heart of Texas, its parent company is nestled among the flashing neon streets of Tokyo, Japan. In fact, Japan is home to more 7-Eleven locations than anywhere in the world -- yes, even the United States.

It all began in 1927 when founder John Jefferson Green proposed a retail shop of foodstuff staples like milk, bread, and eggs to the Dallas Southland Ice Company. Establishing itself as the first convenience store, Southland outlets were dubbed "Tote'm Stores" for their distinct storefront placement of totem poles. It doesn't get much more natively American than that.

Weary from a bankruptcy during the Great Depression, Southland rebounded with the repeal of Prohibition and the onset of World War II, both of which instigated a high -- though not equal -- demand for ice and liquor. Through acquisitions and its involvement as a supplier for an army training camp, Southland business skyrocketed.

The company sprouted many store locations throughout Northern Texas, boasting unusually long hours of operation for markets at the time. In 1946, the stores' retail space expanded and a new name was adopted to reflect their convenient hours: 7-Eleven.

The 1950s and 1960s saw exponential growth for 7-Eleven and its parent company. Southland began strategically placing shops in high-traffic suburban corners, and more acquisitions added more locations throughout the country and Canada. By the early 1970s, it reached $1 billion in sales, appeared on the New York Stock Exchange, and 7-Eleven locations began popping up in England and Mexico -- and later Japan.

Its immense growth, however, was hamstrung following its buyout of Citgo Petroleum Corporation in 1983. Plummeting demand for oil and a surging supply eventually led to significant losses, a flurry of subsidiary fat-cutting, and defaulted debt. In 1991, Southland was forced to sell off a controlling share of the company to Japanese franchisee Ito-Yokado Co. Ltd. and Seven Eleven Japan for over $400 million.

In 2005, Seven & I Holdings Co. -- the joint holding company of Ito-Yokado, Seven Eleven Japan, and Denny's (DENN) Japan -- purchased the remaining 27% of 7-Eleven for $1 billion. At that point, 7-Eleven was entirely under control of the Land of the Rising Sun.

Back in the states, however, there was no perceptible change -- 7-Eleven stores maintained an American image. The chain became a sponsor for the Dallas Mavericks and formed a partnership with the Chicago White Sox to promote 7:11 PM night games at US Cellular Field (USM). Most notable was their promotion for Fox's (NWSA) The Simpsons Movie by turning several locations into full-fledged Kwik-E-Marts.

The Japanese ownership turned out to be quite a boon for the franchise. Profits are up and locations are approaching 30,000 worldwide.

Nevertheless, it's unlikely 7-Eleven Hibachi will ever take off domestically.

Click Here For Next Article   Click Here For More
No positions in stocks mentioned.