CHAPTER 1

7-ELEVEN HISTORICAL BACKGROUND

7-Eleven is the worlds largest operator, franchisor, and licensor of convenience

stores, with more than 21,000 stores in 18 countries. The largest licensee is Seven
Eleven Japan. 7-Eleven serve approximately six million customers each day. 7-Eleven
is known internationally for Big Gulp fountain soft drinks, Big Bite hot dogs, Slurpee
beverages, and Caf Select fresh brewed coffee.
The company started by John Jefferson Green 1927 as Southland Ice
Company in Dallas. In addition to selling blocks of ice to refrigerate food, an enterprising
ice dock employee began offering milk, bread and eggs on Sundays and evenings when
grocery stores were closed. This new business idea produced satisfied customers and
increased sales, and convenience retailing was born!
However the great depression in 1931 plunged Southland into bankruptcy.
Despite the financial confusion, profits from the Southland Stores continued to climb,
and with the repeal of Prohibition in 1933, ice and beer sales surged.
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 the end of the 1950s, John Thompson 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.

Through a new computer inventory system, 7-Eleven was able to pinpoint its
strengths and discover that single purchase items were its best sellers. In 1999,
company changes its name to 7-Eleven, Inc.
Philippine Seven Corporation (PSC) was registered with the Securities and
Exchange Commission (SEC) on November 1982. It acquired from Southland
Corporation (now Seven Eleven, Inc.) of Dallas, Texas the license to operate 7-Eleven
stores in the Philippines in December 13, 1982. Operations commenced with the
opening of its first store in February 29, 1984 at the corner of Kamias Road and EDSA
Quezon City, Metro Manila. Considering the countrys economic condition at that time,
the Company grew slowly in its first few years of existence.
In July 1988, PSC transferred the Philippine area license to operate 7-Eleven
stores to its affiliate, Phil-Seven Properties Corporation (PSPC), together with some of
its store properties. In exchange thereof, PSC received 47% of PSPC stock as
payment. Concurrent with the transfer, PSC entered into a sublicensing agreement with
PSPC to operate 7-Eleven stores in Metro Manila and suburbs. As part of PSPCs main
business, it acquired or leased commercial properties and constructed retail
store buildings, leasing the buildings to PSC on long term basis together with most of
the capital equipment used for store operations. In effect, PSC concentrated on
managing its stores and effectively took the role of a pure retailer.
In May 1996, the stockholders of both PSC and PSPC approved the merger of
the two companies to advance PSC groups expansion. In October 30, 1996, SEC
approved the merger and PSPC was then absorbed by PSC as the surviving

entity. With the consolidation of the respective lines of business of PSC and PSPC,
PSCs retailing strengths were complemented by PSPCs property and franchise
holdings. Their management as a single entity enhanced operational efficiency and
strengthened ability to raise capital for growth. PSC listed it shares (SEVN) in the
Philippine Stock Exchange and had its initial public offering in February 04, 1998. The
shares were offered at the price of P4.40 per share from its par value of P1.00 per
share. In September 17, 1998, PSC established Convenience Distribution Inc. (CDI), a
wholly owned subsidiary, to provide a centralized warehouse and distribution system to
service its 7-Eleven stores.
With the effectivity of the Retail Trade Liberalization Act (R.A. 8762) on March 25,
2000, foreign entities were allowed to invest in an existing retail company subject to the
requirements of the law. President Chain Store Corporation of Taiwan (PCSC), which is
also the 7-Eleven licensee in Taiwan operating about 2,700 stores, purchased
119,575,008 common shares of PSC or 50.4% of PSCs outstanding capital stock at the
price of P8.30 per share. The purchase was made under a tender offer during October 9
to November 7, 2000 by President Chain Store (Labuan) Holdings, Ltd., a Malaysian
investment holding company, wholly-owned by PCSC. The acquisition is meant to forge
a strategic alliance which aims to provide PSC with technical support from PCSC in
strengthening its organizational structure and operating systems. This shall enable PSC
to pursue store expansion plans on sound and profitable basis. A new affiliate, Store
Sites Holdings Inc., was also established on November 9, 2000, as the entity to own
land properties of the Company. These land properties are leased to PSC by
SSHI. The Corporations area license to operate 7-Eleven Stores in the Philippines was

renewed in August 2007 for another term of 20 years, renewable every 10 years. The
Renewal Area License Agreement has been approved by and registered with the
Intellectual Property Office as of September 25, 2007.
The Corporation initiated the establishment of PhilSeven Foundation Inc. (PFI) in
October 2007 to support its corporate social responsibility programs. PFI was granted
certificate of registration by DSWD last August 6, 2010.
The company had a manpower complement of 1,921 personnel, 655 of whom
are regular employees, 301 contractual/probationary and 965 cooperative members to
augment temporary needs during peak hours or season in the stores and the support
services units. There is no existing labor union in the company and collective bargaining
agreement. There is an Employees Council which communicates to management the
employee concerns. There has been no strike or threat to strike from the employees for
the past three years.

At year end, PSC is operating 551 stores, 211 of which are franchise stores, 130
stores are operated under a service agreement, and the remaining 210 are companyowned stores. The store franchise and service agreements have a minimum term of 5
years each, renewable for a similar term. The stores under franchise and service
agreement are indicated in the store list provided in the discussion of Leases herein.

Currently, PSC considers three major competitors in maintaining its leadership in

the Convenience Store (C-Store) Industry. There are a number of other small players

including gas marts, but their store count and sales volume as a group by itself is not
significant to be considered. PSC concluded in August 2009 a non-exclusive tie-up with
Chevron Philippines Inc. and opened 25 7-Eleven Stores in certain identified Caltex
gasoline stations. The Company continues to sustain its leadership by putting stores in
strategic locations, carrying product assortment fit for such market.