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Comment by geofft | Hacker News Reader

> He said that 7-Eleven had offered to pay for his remaining inventory — owners are responsible for buying their own products from the company at wholesale prices

This feels like an American MLM scam, just tuned to be actually profitable for the "owner" under normal conditions and therefore sustainable.

(Is this normal for legitimate American etc. franchises too, or is this specific to Japan's setup?)

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MLM has a specific definition which this doesn't meet. MLMs are businesses where the majority of your earnings come from the recruitment of new members into your downline rather than sale of a product. 7-Eleven doesn't offer referral bonuses for bringing a new member that are based on a percentage of that person's sales.

Yes, I know that, I'm not claiming 7-Eleven is an MLM. I said it's like an MLM in this one way: many of them require that you buy a huge chunk of inventory up front whether or not you sell it, which is one of many abusive tactics of current American MLMs. (So is the actual multi-level bit.) See e.g. question 7 about "inventory loading" at https://www.ftc.gov/tips-advice/business-center/guidance/bus...

Mostly, this guy doesn't seem like an "owner" in the traditional sense to me - he seems to be unable to stock his shelves with inventory from other sources, and he certainly seems unable to set his own hours. He sounds like his work is directed by 7-Eleven. Another common scammy aspect of MLMs is convincing you that you're a small business owner on the path to future profits when you're one of many pawns of the actual business.

It's a franchise. It's a very common model and while you may not like it, it is not a scam.

But at no point did OP claim it was a scam? They even ask if this is normal for American franchises, instead of accusing 7-11 of predatory behavior.

> This feels like an American MLM scam

OP pretty directly implied it.

Is one no longer allowed to say "I wonder why thing A has properties that resemble thing B" without pretty directly implying "Thing A is exactly thing B"?

My hope was to have a conversation about whether the franchise model is bad in ways that have overtones of scams, or whether MLMs are only scams by virtue of the MLM bit and not because of any of the other behavior that is often called scammy, or any such thing, but apparently that was too much to ask.

> many of them require that you buy a huge chunk of inventory up front whether or not you sell it, which is one of many abusive tactics of current American MLMs

Purchasing unrefundable stock is not inventory loading. It does not “resemble an MLM” in a meaningful way - you might as well say that any company that offers a recruiting bonus to employees resembles an MLM.

If you want to talk about predatory business practices, there’s plenty of it around in the franchise model. When you keep saying “like an MLM” you sound like you think these attributes are specific to MLMs.

Not really the same thing, but I used to work for a small food business that sold bottled/canned drinks from a fridge via a contract with Frucor (New Zealand), and the prices they charged wholesale to this small business were often higher than what you could buy the drinks for retail at nearby supermarkets.

Would it have been illegal to buy and resell stock from the supermarkets?

No, but it's usually against the agreement you have with the supplier, which will, like this story, probably end with a terminated agreement.

Depending on your local laws, the nearby supermarket might have been selling below cost, so it might not be as huge a pricing discrepancy as you imagine.

Not that uncommon, that is why during some sales you see people buying up as much as they can, to stock their own stores.

This is what happens when the franchisee's are in what I will refer to as a "predatory" relationship. I've been involved with several Quick Service(Fast Food) Franchisee's in the USA and there's predatory relationships and then there's those where the franchisee's have some type of union or owners organization.

In McDonald's the Franchisee's have several different organizations they can join to represent themselves and bring grievances to to corporation. Cost of product is almost always a focus and you'd never be in a situation where you could buy product for cheaper anywhere else due to their scale. It's all about who has the leverage in the situation. I will say that reading that 7-11 offered to buy back all product is a very gracious move on their part. They had no incentive to help him out of the situation he no longer wanted to be in.

In the US— It’s a lot cheaper for the franchisee to start than financing his own store. They also pay 50% of gross revenue and the store owners sometimes steal or manipulate the numbers/inventory. Internal theft and CC skimmers on outside gas pumps seems like a huge problem but I don’t know the exact numbers. Sometimes stores get shut down by corporate.

Like McDonald's franchises?

I don’t know about convenience store franchises but this is the model for every major fast food franchise in the US.

I saw the movie "The Founder" (Michael Keaton is Ray Croc of McDonalds fame).

They had trouble with francisees offering their own menus, having dirty restaurants and more...

Their trick was to become a real estate company who owned the land, and then lease to the franchisee. If there was any problem, they had complete control over the franchise.

That said, as a customer the whole POINT of 7-11 is to be always open. (although I wonder what stores are still open 7am-11pm instead of 24 x 7)

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