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    7-Eleven Sees Growth Opportunity in New York Metro Area

    NYC franchisee calls c-store "recession-proof."

    NEW YORK -- 7-Eleven Inc. is leveraging the soft commercial real estate market to expand in the New York City market.

    The c-store operator, which franchises approximately 5,700 units in the United States, sees the New York metro area as one of two major growth areas according to a report by The New York Times.

    The chain, which in May announced plans to add more than 200 stores to its portfolio this year, is looking to California, which had nearly 1,300 stores as of last December, and the New York metro area, with approximately 430 stores, as its two primary growth targets. At least 44 stores will open this year in the New York area, which is more than twice the number of 7-Eleven stores that opened in the region in 2008, the newspaper reported.

    Dan Porter, vice president for real estate and new store development at 7-Eleven, told the newspaper 7-Eleven is considering adding 350 stores in New York’s metropolitan area in five to seven years.

    Officials told The New York Times the retailer has access to desirable retail space that was previously not offered or was too expensive.

    "While the business is not recession-proof, it’s recession-resistant, and doing well, given the marketplace," Mike Friedman, a senior vice president of CB Richard Ellis, a real estate services firm that is helping 7-Eleven identify potential store sites, told the newspaper.

    Kenneth Barnes, manager of real estate for 7-Eleven’s Northeast division, said there are 15 sites in the metropolitan area that "the company has had its eyes on for years that have become available for us to pursue in the last year." The leases it was currently negotiating carried rents more than 30 percent below prices found six months ago.

    Approximately 1,300 7-Eleven stores in the United States are owned and operated by the company, and 4,400 are franchised. Under its franchise system, 7-Eleven owns or leases a store’s space and provides equipment, accounting and other services, while the franchisee who runs the store gives 7-Eleven an average of 50 percent of the sales of goods, minus their actual cost, the newspaper noted.

    Under 7-Eleven’s business conversion program, the owner of an existing convenience store retains the space and converts it into a 7-Eleven. Current 7-Eleven franchisees and prospective franchisees who are able to find suitable new locations may also participate in the program, the newspaper noted. The company in turn invests an average of $280,000 in the store for new equipment, furnishings and technology, and receives 25 percent of the sales of goods minus their actual cost.

    Twenty of the new stores in the New York metropolitan area this year will open under the business conversion program. In New Jersey, southern Connecticut and Long Island, new stores will be located mainly in strip malls. In New York City, stores will be walk-up locations, the newspaper reported.

    Paul Kandhari, a 7-Eleven franchisee who operates one store in the Bronx and two in Manhattan, told the newspaper 7-Eleven is a "recession-proof business."

    Sales at his 7-Eleven stores on the Upper East Side and in the Bronx were up 7 percent to 10 percent in the first five months of 2009, compared to the year prior.

    Steven Gillman, a vice president of Northwest Atlantic Real Estate Services, a real estate brokerage firm in White Plains, told the New York Times the business conversion program would help 7-Eleven grow. "This could be a chance for the owner of a deli or small grocery store to sell or get additional capital from 7-Eleven," he said.

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