7-Eleven, Inc. History

Company Perspectives:

For 62 years, the Southland name united many diverse businesses while preserving our heritage. However, ten years ago Southland began divesting its other operations to focus on convenience retailing and has consequently decided to rename the company '7-Eleven, Inc.', better reflecting our business focus. The name is appropriate now because 7-Eleven's strategic initiatives have brought about such dramatic changes in performance and culture that the company truly is not the same. 7-Eleven is again raising customer expectations as new information systems enable store managers and franchisees to anticipate customers' needs and serve them better. Each day, a network of commissaries, bakeries and distribution centers provides 7-Eleven stores with an unmatched selection of the freshest products, yielding true differentiation. This unique, proprietary infrastructure creates a strategic advantage over competitors and will enable 7-Eleven to produce sustainable and profitable growth over the long term. 7-Eleven will enter the new millennium a transformed company with new business tools and a name that reflects its identity and focus.

Company History:

7-Eleven, Inc.--known as The Southland Corporation until April 1999--is the world's largest operator, franchisor, and licensor of convenience stores, with more than 18,200 stores in 18 countries, the vast majority of which carry the 7-Eleven banner. About 2,200 of the outlets offer self-service gasoline, almost all of which is sold under the Citgo brand through a long-term product purchase agreement with Citgo Petroleum Corporation. The company's operations include 5,560 7-Eleven convenience stores in 30 U.S. states and five Canadian provinces. 7-Eleven's largest area licensee is Seven-Eleven Japan Co., Ltd., which operates 7,605 7-Eleven stores in Japan and 48 in Hawaii. Other major foreign territories include Taiwan with 1,908 units, Thailand with 1,105, China with 398, Australia with 177, South Korea with 171, Malaysia with 151, and the Philippines with 149. The debt load from a 1987 leveraged buyout led the company into bankruptcy by 1990, which in turn led to a Japanese corporation securing a majority stake in it during 1991. 7-Eleven, Inc. is 65 percent owned by IYG Holding Company, which is in turn jointly owned by Ito-Yokado Co., Ltd. and Seven Eleven Japan. The latter is itself a 50.3 percent owned subsidiary of Ito-Yokado, which is a leading Japanese retailer.

Creation of the Convenience Store: 1927-45

The company began as a brainstorm of John Jefferson Green. In 1927 Green approached Joe C. 'Jodie' Thompson, one of five founding directors of the Dallas Southland Ice Company, with a new idea. He wanted to sell milk, eggs, and bread through his retail ice dock. 'You furnish the items,' he suggested, 'and I'll pay the power bills.' Thompson agreed, and together they established the first known convenience store.

The newly formed Southland Ice Company was composed of four separate ice companies and operated eight ice plants and 21 retail ice stations. An early attempt at advertising occurred after one Southland manager visited Alaska in 1928. Upon his return to Texas, he planted a souvenir totem pole in front of his store. The pole attracted so much attention that the employees suggested placing one at every Southland-owned retail ice dock and naming the stores 'Tote'm Stores,' since the consumers toted away their purchases.

Southland decided to go with the new name; it unified the company's diversified stores and provided a distinct identity, a key ingredient in the successful operation of numerous retail outlets. Joseph Thompson, secretary-treasurer of Southland Ice, unified the stores further by training staff with daily sales talks. He also chose a company uniform for ice station service men. Thompson recognized early on that consumers should receive the same quality and service at every store. During this time Southland also began to experiment with constructing and leasing gasoline stations at ten of its Dallas-area stores.

The Great Depression plunged Southland into bankruptcy in 1931. During a period of receivership and reorganization, Joseph Thompson was named president, a move that ensured continuity during the rocky period. The management team chosen during this time was especially strong and led Southland for a number of years. W.W. Overton, Jr., a Dallas banker, helped disentangle the young company's finances by organizing the purchase of all Southland bonds for seven cents on the dollar, which eventually put ownership of the company under the control of the board of directors. Despite the financial confusion, profits from the Tote'm Stores continued to climb, and with the repeal of Prohibition in 1933, ice and beer sales surged.

Once it was on more stable footing, Southland began vertical integration with construction of Oak Farms Dairies in 1936, using public relations to market its new dairy products by offering a free movie for six of its milk bottle caps. A crowd of 1,600 attended the Dallas theater sponsoring the event. By 1939 Southland operated 60 Tote'm Stores in the Dallas-Fort Worth area, triple the number operating when the company was founded 12 years earlier.

With the onset of World War II, demands for ice peaked; Southland became the chief supplier of ice for the construction and operation of Camp Hood, the U.S. Army's largest training camp. The dramatic increase in business prompted reorganization of the company. Southland bought City Ice Delivery, Ltd.; the acquisition included two modern ice plants, 20 retail stations, and property on Haskell Avenue, where the new company headquarters was situated. Southland became the largest ice operator in Dallas.

Rapid Postwar Expansion: 1945-69

By 1945 Southland owned stores scattered over north-central Texas, operating from 7 in the morning to 11 at night, seven days a week. In 1946 the firm Tracey-Locke, commissioned to create a new name, chose '7-Eleven' to emphasize the firm's commitment to long operating hours to serve customers better. At this time Southland remodeled all 7-Eleven stores, doubling the amount of floor space at each retail outlet.

After the war, America's pent-up consumer appetite surged. Refrigerators, however, were not yet readily available to the public. To meet demands for block ice, Southland bought Texas Public Utilities, which owned 20 ice plants, in 1947, making Southland the largest ice operator in Texas. In 1948 Joseph Thompson's oldest son, John P. Thompson, was named to the board of directors.

At a management meeting in Washington, D.C., in 1956, a blizzard blanketed the city. John Thompson noticed that in densely populated areas, people could walk to the stores even when the weather made driving impossible, and that 7-Eleven's long operating hours and unusual stock could provide exactly what customers might need, from canned soup to tissues to aspirin. Southland began to focus on the traffic patterns around potential store sites, choosing high-volume corners whenever possible.

At the end of the 1950s, John Thompson, now vice-president, began to introduce 7-Eleven stores outside of Texas, in Virginia, Maryland, and eastern Pennsylvania. In reaction to mass migration to the suburbs, Southland opened more suburban stores. Southland also refined its marketing by studying customer traffic in its stores and eliminating products that moved slowly.

In 1961 Joseph Thompson named his son John as the second president of Southland. His son Jere W. Thompson was elected vice-president of sales. Upon the elder Thompson's death that year, the Dallas Morning News credited Thompson with transforming 'the ordinary corner ice house from an ice dispensary to a multimillion-dollar drive-in grocery enterprise.' John Thompson's first goal as president was to propel Southland from $100 million in annual sales to $1 billion within ten years.

Southland, incorporated in 1961, moved quickly to national prominence. The unprecedented expansion began with dairy acquisitions, notably Midwest Dairy Products in 1962, with production plants and branches in Illinois, Arkansas, Louisiana, and Alabama. Purchasing continued through the 1960s and 1970s, as Southland bought existing convenience market chains in Arizona, New Jersey, Colorado, Illinois, Georgia, and Tennessee. In addition, Southland experimented with its first 24-hour store, in Las Vegas, and expanded to the East Coast and into Canada in 1969.

With the acquisition of 100 SpeeDee Marts in California in 1963, Southland was introduced to the concept of franchising, a system already in operation at the very successful SpeeDee Mart stores. The company developed two-week training sessions for prospective franchisees, which allowed greater decentralization of stores. By 1965, Southland had climbed to 49th in Fortune magazine's top 50 merchandising firms. In January 1965, 1,519 7-Eleven stores were operating; by December 1969 the number had increased to 3,537. Meanwhile, the Slurpee slush drink made its debut in 7-Eleven stores in 1965.

Acquisitions and Foreign Expansion: 1970-86

Through a new computer inventory system, 7-Eleven was able to pinpoint its strengths and discover that single purchase items were its best sellers. But with such growth, problems began to surface: due in part to the operation of 24-hour stores, high employee turnover and insufficient security systems drew management attention. The company committed itself to the 24-hour store nonetheless, and the number of 24-hour 7-Eleven stores rose from 817 in 1972 to 3,703 by the end of 1975.

1927:John Jefferson Green and Joe C. Thompson establish Southland Ice Company and the first known convenience store.

1928:Southland stores begin operating as 'Tote'm Stores.'

1931:Great Depression plunges Southland into bankruptcy.

1933:Following the repeal of Prohibition, ice and beer sales surge.

1936:Vertical integration begins with construction of Oak Farms Dairies.

1939:Company is operating 60 Tote'm Stores in the Dallas-Fort Worth area.

1946:The stores are rebranded '7-Eleven' to emphasize their long operations hours--7 a.m. to 11 p.m.

1947:Purchase of Texas Public Utilities makes the company the largest ice operator in Texas.

1961:The Southland Corporation is incorporated; Joseph Thompson names son John as the company's second president; son Jere is elected vice-president of sales.

1963:Company begins franchising after being introduced to the concept through its acquisition of 100 SpeeDee Marts in California this same year.

1965:The Slurpee makes its debut in 7-Eleven stores, which now number 1,159.

1969:Company expands to the East Coast and into Canada; store count reaches 3,537.

1971:Sales reach $1 billion.

1973:Area license for Japan is granted to Ito-Yokado Co., Ltd.

1974:The 5,000th 7-Eleven opens at site of the company's original ice dock.

1983:Citgo Petroleum Corporation is acquired for $780 million.

1986:Company sells 50 percent interest in Citgo to the Venezuelan state-owned oil company.

1987:The Thompson brothers complete an LBO of Southland.

1988:Company completes series of divestitures to streamline operations and reduce debt.

1990:After defaulting on $1.8 billion in publicly traded debt, Southland files for bankruptcy.

1991:Company emerges from bankruptcy with debt restructured and with IYG Holding Company of Japan owning 70 percent of its common stock.

1992:To focus on core 7-Eleven business, company exits from the distribution and food processing businesses.

1996:Most extensive store remodeling program in company history is completed.

1999:Company changes its name to 7-Eleven, Inc.

Southland reached $1 billion in sales by 1971 and became a member of the New York Stock Exchange the following year. The first regional distribution center was opened in Florida in 1971; by 1977 several such centers were fully functioning and serving more than 3,000 7-Eleven stores. Jere Thompson, named president of Southland in 1973, continued Southland's American retail store expansion.

Southland began to use microwaves for fast-food sales and introduced self-service gasoline through its newly acquired Pak-a-Sak stores. In 1974, the 5,000th 7-Eleven store opened in Dallas at the site of John Jefferson's original ice dock.

Penetration of the European market occurred with Southland's purchase of a 50 percent interest in Cavenham Ltd., a manufacturing corporation controlling 840 retail outlets in Great Britain. By early 1974, Southland's international operations included 50 percent interest in 1,096 United Kingdom outlets, 75 7-Eleven stores in Canada, and four Super-7 Stores in Mexico.

Negotiations for the introduction of 7-Eleven to Japan were completed in December 1973, when Southland granted Ito-Yokado Co., Ltd., one of Japan's largest retailers, an area license. Like the franchise concept in the United States, area licensing worked well in Japan because of its emphasis on the individual businessperson operating a store but able to take advantage of 7-Eleven's name and established systems of management and accounting. By late 1978, 188 7-Eleven stores were open for business in Japan.

Also in 1978, Southland bought Chief Auto Parts, a California chain of 119 retail automobile parts stores. By 1986 Chief Auto Parts was the largest convenience retailer of automobile parts in the nation, operating 465 stores. Another Southland acquisition was Tidel Systems, a manufacturer of cash-dispensing systems and underground gasoline-tank-monitoring systems.

But Southland's most significant acquisition by far was the Citgo Petroleum Corporation, purchased in August 1983. Southland hoped that the $780 million acquisition would provide a smooth supply of gasoline for its convenience stores. But because of a decrease in demand and a glut in capacity throughout the oil refining industry, the Citgo purchase resulted in a pretax loss of $50 million for Southland. Profits in 1985 exceeded the previous year's loss by $20 million, but nevertheless, Southland cut Citgo's petroleum production in half, expecting Citgo's Lake Charles, Louisiana refinery to be unprofitable. In September 1986 Southland decided to sell a 50 percent interest in Citgo to a subsidiary of Petroleos de Venezuela, S.A., the Venezuelan state-owned oil company; Southland also signed a 20-year product purchase agreement with Citgo through which Southland agreed to purchase a certain minimum amount of gasoline from Citgo at market prices.

From LBO to Bankruptcy: 1987-91

In mid-1987 the Thompson brothers, spurred in part by the threat of a hostile takeover bid by Canadian raider Samuel Belzburg, initiated a leveraged buyout. The buyout, which involved the formation of a temporary holding company called JT Acquisitions, was completed on July 6, 1987.

By the end of 1988 Southland had completed a series of divestitures to streamline operations. Southland sold Chief Auto Parts, the snack foods division, the dairies group, Reddy Ice, Chemical/Food Labs, Tidel Systems, 1,000 convenience stores, and related real estate properties. Proceeds from the divestitures, as well as the transfer of royalties from licensees in Japan, went to repay a portion of the $4 billion debt Southland had incurred through the leveraged buyout.

Southland may well have rebounded by the early 1990s were it not for competition from convenience stores operated by the major oil companies. Although these stores emphasized gasoline retailing rather than other merchandise, they did sell the primary products of convenience stores--soft drinks, cigarettes, and beer. Their sheer number and financial strength changed the nature of the convenience retailing industry. Their effort was exacerbated by the decline in the U.S. economy that began in the late 1980s. Southland, along with a number of other convenience store chains, had limited capital to invest in its store base due to heavy debt loads.

Under President and CEO Clark J. Matthews II, the company began to work on a plan to restructure its balance sheet. During 1990 Southland sold its remaining 50 percent stake in Citgo to Petroleos de Venezuela. In October 1990, after defaulting on $1.8 billion in publicly traded debt, Southland filed a bankruptcy plan of reorganization after securing preliminary approval from its bondholders. The company emerged from bankruptcy less than five months later. As part of the reorganization, Southland exchanged its old leveraged buyout bonds for approximately half of the principal amount of new bonds--which had substantially lower interest rates. In addition Southland sold 70 percent of its common stock to IYG Holding Company of Japan for $430 million. Ito-Yokado Co., Ltd., the most profitable retailer in Japan, owned 51 percent of IYG, and Seven-Eleven Japan Co., Ltd., the longtime 7-Eleven licensee in Japan, owned 49 percent.

Focusing on 7-Eleven: 1992 and Beyond

In 1992 Southland completed additional financing for a $400 million commercial paper facility backed by Ito-Yokado. Also in 1992, Southland decided to leave the distribution and food processing business to focus on its core business, 7-Eleven. The company sold certain distribution centers and food processing facilities to McLane Co., Inc., a subsidiary of Arkansas-based Wal-Mart stores. Southland also signed a service agreement with McLane, the country's largest convenience store distributor, to provide coast-to-coast distribution service to the company's 5,700 stores in the United States.

Matthews capitalized on the company's nationally recognized 7-Eleven name and enhanced the quality, appearance, and service of the famous convenience store. In late 1991, Southland remodeled and remerchandised its 50 stores in Austin, Texas, to test its new physical standards, commissary foodservice program, and new merchandising process.

The new process, which deleted slow-moving items and introduced new products, had been refined and introduced to 7-Eleven stores across the country by the end of 1992. Because of the initial capital infusion by its majority owners in 1991 as well as their backing of the commercial paper facility established in 1992, Southland was able to make long-term capital investment plans for the first time in many years.

Southland's remodeling program continued throughout the mid-1990s. By 1996 the company had completed the most extensive store remodeling program in its history. The new 7-Eleven look included improved exterior and interior lighting, a store layout with wider aisles and better organization, improved signage, and upgraded gasoline pumps that included pay-at-the-pump systems. 7-Eleven stores also changed their pricing policies, most notably doing away with what Southland itself called 'insult pricing'--the huge markups that customers were forced to pay for convenience. The chain thereby lowered prices on much of its inventory, adopting an 'everyday fair pricing' policy. In addition, Southland closed additional underperforming stores in the mid-to-late 1990s, shuttering 202 units from 1996 through 1998.

As the next step in its slow recovery, Southland put growth back on the agenda in late 1996; beginning in 1997 store openings began outpacing closings. The following year, Southland decided to step up the pace of its U.S. expansion, aiming to open 300 to 400 units per year. During 1998 the company added 299 stores through acquisitions and new construction--the biggest jump since 1986. The acquisitions included two that closed in May 1998: the purchase of Massachusetts-based Christy's Markets, Inc., an operator of 135 convenience stores in New England; and that of 20 red D mart convenience stores in South Bend, Indiana, which were purchased from MDK Corporation of Goshen, Indiana.

Another key strategy that Southland adopted to revitalize the chain was to improve the quality and value of the convenience items and services offered by the stores. This included moving toward daily deliveries of fresh perishables and the introduction of new ready-to-eat fresh foods, such as sandwiches and pastries, and eventually dinner entrees. 7-Eleven stores also began an aggressive expansion of the financial services it offered. Having already gained the position as the U.S. retailer with the most ATM machines, Southland began offering prepaid phone cards in 1995 and quickly became a leading seller of money orders. In 1998 the company began selling pagers and pager services in all U.S. 7-Elevens. That year it also began testing 'financial service centers'--automated computer terminals that, in addition to standard ATM transactions, allowed customers to cash checks, wire money, pay bills electronically, and buy prepaid phone cards and postage stamps. After a successful trial at 36 Austin, Texas stores, Southland began planning for the expansion of the centers into more than 200 7-Elevens in the Dallas-Fort Worth area.

Perhaps the most important element of the 7-Eleven overhaul in the United States was the implementation of a chainwide proprietary retail information system, the development of which began in 1994. Such a system had already been installed by the highly successful Seven-Eleven Japan operation, which through its nearly 8,000-unit chain was one of the most profitable retailers in Japan. Installed in phases in the United States through the end of the 1990s, the system was designed to enable each store to improve its inventory management, reduce the incidence of out-of-stock items, and tailor its product mix to better match the needs of its customers.

In April 1999 the Southland Corporation changed its name to 7-Eleven, Inc. in a move reflecting the fact that the corporation was involved in only one business. It also seemed an appropriate time for such a change as the company was well on its way to a full recovery with revenues and sales on the increase and the once-heavy debt burden significantly reduced. By mid-1999 7-Eleven had recorded eight straight quarters of U.S. same-store sales growth, the longest such stretch in the 1990s. As it looked ahead, 7-Eleven was counting on the full implementation of its retail information system to be the engine driving its growth well into the 21st century.

Principal Subsidiaries: Bawco Corporation; Bev of Vermont, Inc.; Brazos Comercial E Empreendimentos Ltda. (Brazil); Christy's Market, Inc.; Cityplace Center East Corporation; Melin Enterprises, Inc.; Philippine Seven Properties Corporation (Philippines); Puerto Rico - 7, Inc. (59.07%); 7-Eleven Beverage Company, Inc.; 7-Eleven Comercial Ltda. (Brazil); 7-Eleven of Idaho, Inc.; 7-Eleven of Massachusetts, Inc.; 7-Eleven of Nevada, Inc.; 7-Eleven of Virginia, Inc.; 7-Eleven Sales Corporation; Southland Canada, Inc.; Southland International, Inc.; Southland International Investment Corporation N.V. (Netherlands Antilles); Southland Investment Canada Limited; Southland Sales Corporation; TSC Lending Group, Inc.; The Southland Corporation; Valso, S.A. (Mexico; 49%); 7-Eleven Mexico, S.A. de C.V. (99.96%).

Principal Competitors: Casey's General Stores, Inc.; Chevron Corporation; Cumberland Farms, Inc.; Dairy Mart Convenience Stores, Inc.; Exxon Corporation; FINA, Inc.; Holiday Companies; The Kroger Company; Mobil Corporation; The Pantry, Inc.; QuikTrip Corporation; RaceTrac Petroleum, Inc.; Sheetz, Inc.; Royal Dutch/Shell Group; Texaco Inc.; Tosco Corporation; Ultramar Diamond Shamrock Corporation; Uni-Marts, Inc.; Wawa Inc.; White Hen Pantry Inc.

Further Reading:

• 'Bondholders Withdraw All Objections to Southland Plan (Bankruptcy Organization Plan),' Los Angeles Times, January 24, 1991.
• 'Exciting Times at Southland,' Convenience Store News, March 22, 1999, p. 25.
• Fairclough, Gordon, and Udorn Thani, 'Shopping on the Fly: Thais Catch On to the Benefits of Convenience Stores,' Far Eastern Economic Review, December 9, 1993, p. 70.
• Francella, Barbara Grondin, 'Southland and New Jersey Franchisees Face Off in a Range of Disputes,' Convenience Store News, September 8, 1997, p. 16.
• Gubernick, Lisa, 'Thank Heaven for 7-Eleven,' Forbes, March 23, 1987, p. 52.
• Hackney, Holt, 'Southland: The Junk Also Rises,' Financial World, January 3, 1995, p. 24.
• Klinkerman, Steve, 'Why Southland Won't Unload Its Albatross,' Business Week, July 1, 1985, p. 71.
• Kotabe, Masaaki, 'The Return of 7-Eleven ... from Japan: The Vanguard Program,' Journal of World Business, Winter 1996, pp. 70+.
• Landers, Peter, 'In Japan, the Hub of E-commerce Is a 7-Eleven,' Wall Street Journal, November 1, 1999, pp. B1, B4.
• ------, 'Softbank, 7-Eleven Japan Go Online to Sell Books As E-commerce Expands,' Wall Street Journal, June 4, 1999, p. A12.
• Lee, Louise, 'Southland Plans to Accelerate Store Openings,' Wall Street Journal, April 6, 1998, p. A4.
• Liles, Allen, Oh Thank Heaven! The Story of the Southland Corporation, Dallas: The Southland Corporation, December 1977.
• McCarthy, Michael, 'Shake Up at 7-Eleven,' Brandweek, July 11, 1994, pp. 20-22, 24-27.
• Miller, Karen Lowry, 'A New Roll of the Dice at 7-Eleven,' Business Week, October 26, 1992.
• Nelson, Emily, 'Product Development Is Always Difficult; Consider the Frito Pie,' Wall Street Journal, October 25, 1999, pp. A1, A22.
• Opdyke, Jeff D., '7-Eleven Tests Check-Cashing in Texas Stores,' Wall Street Journal, April 29, 1998, p. T1.
• Rudnitsky, Howard, 'Billion-Dollar Fire Sale,' Forbes, November 17, 1986, p. 44.
• Shirouzu, Norihiko, and Jon Bigness, '7-Eleven Operators Resist System to Monitor Managers,' Wall Street Journal, June 16, 1997, p. B1.
• 'Southland Chief Fires Top Aides to Cut Costs,' Wall Street Journal, June 25, 1992.
• Tannenbaum, Jeffrey A., 'Franchisee Lawsuit Seeks $1 Billion from Southland,' Wall Street Journal, April 8, 1994, p. B2.
• Taylor, John H., 'The Texas Chain Store Massacre,' Forbes, February 6, 1989, p. 54.
• Weber, Joseph, '7-Eleven Wants Out of the Glare,' Business Week, July 20, 1987, p. 78.
• Weil, Jonathan, 'Taking Big Gulp, Southland Moves to Revamp Stale 7-Eleven Chain,' Wall Street Journal, September 9, 1998, p. T2.
• Zellner, Wendy, and Emily Thornton, 'How Classy Can 7-Eleven Get?,' Business Week, September 1, 1997, pp. 74-75.

Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.

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