Expanding the

brand through

acquisition
One of the most effective tools that can be used as part of a change
management process is a SWOT diagram. A SWOT diagram allows an
organisation to analyse its internal strengths and weaknesses and major
external opportunities and threats that it might face. As an example,
7Eleven Australia could be said to have been facing the following strengths,
weaknesses, opportunities and threats leading up to the acquisition.

In its simplest form a change management process can assist an

organisation to move from a current state to a desired state. There are
many different change management processes with slightly different steps;
however these processes usually include three main phases.

1 Introduction
7Eleven is Australias leading convenience
retailer operating more than 650 stores
along the eastern seaboard of Australia.
As a privately-owned Australian company,
7Eleven Stores Pty Ltd develops and
franchises stores under license
from 7Eleven Inc, USA. All of its
stores are owned by franchisees
and governed by a franchise
model. Franchisees are
responsible for store operations,
merchandising, employees,
inventory management and
other controls, whereas head
office is responsible for real
estate sites, accounting,
equipment, utilities, branding
and promotion and, of course,
managing the supply chain.
7Eleven Australia, home of the iconic
Slurpee, has been embarking on an
ongoing strategic process of modernisation and change in order to
remain competitive in the constantly evolving convenience retailing
market segment. One of the key commercial pressures facing the
company has been the move of the retail giants Woolworths and Coles
(Wesfarmers) into the petrol retailing market segment.
In 2010, 7Eleven Australia undertook a major strategic change by
acquiring 295 outlets from Strasburger Enterprises (Properties), the
retail subsidiary of Mobil Oil Australia which operated stores using
Mobil and Quix branding. This horizontal integration involved 7Eleven
Australia taking over not only all of the stores (and their operators) but
also all employees of Strasburger Enterprises (Properties).
Corporate mergers and acquisitions are subject to approval by the
Australian Competition and Consumer Commission (ACCC) as part of

Preparing for change

Managing change

Reinforcing change

Strengths
Weaknesses
Lack of outlets selling both
Global brand with more stores
fuel and merchandise
worldwide than any other global group
Well-developed franchise model with
high franchisee satisfaction and
ongoing demand for franchises
Well-established and
evolving business model

A change management process allows an organisation to develop a

consistent planning and implementation framework that sets down clear
objectives for relevant stakeholders. The development of this action
plan unites stakeholders in the pursuit of common goals and supports
communication and transparency.
regulations to limit unfair market power. The acquisition was approved;
however the company had to divest three outlets. 7Eleven Australia
also on-sold 30 South Australian stores to another corporation as they
did not have an operational base in that state.
One of the key objectives of this acquisition was for 7Eleven Australia
to become the market leader in convenience retailing throughout the
eastern states of Australia. The acquisition increased the number of
7Eleven outlets by 62 percent. As a result the company expects the
number of transactions to grow by 75 percent and sales growth in
excess of 50 percent.
The acquisition sees 7Eleven Australia grow to be Australias third
largest privately-owned company (excluding superannuation funds). The
challenges presented by this acquisition are complex and ongoing, and as
such, they needed to establish an effective change management process
to properly manage this major strategic change in a timely fashion.

2 What is change management?

The commercial world is a dynamic and evolving environment. Structural
change refers to longer-term change that fundamentally alters the major
structures and activities of an organisation thereby impacting on all internal
and external stakeholders.
One of the key challenges associated with large-scale corporate
acquisitions is dealing with resistance to change. Its natural for
stakeholders to experience a sense of shock and to be unsure of the
motives of the new owners. Employees can feel threatened by change and
might fear for their job security.
Under the deal 7Eleven Australia were to take over the retail outlets as well
as the 105 above store staff (i.e. corporate and management) and 1750
store employees. 7Eleven Australia also had to anticipate the impact of the
changes on its operations including finance, HR, marketing, merchandising
and supply chain and other management, administration and operational
functions. Essentially it had to manage the merger of two similar but
separate corporate entities, without alienating key stakeholders, whilst still
operating within the highly competitive retail convenience market.

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Opportunities
Expand into new
market and territories
Develop the number of fuel outlets

Change-in-control, effectively post-announcement from late May

2010 to October 4th, 2010

First 100 days, effectively post-integration from October

2010 to early January 2011

100 days+, effectively a period of ongoing conversion and

reinforcement from 2011 onwards.

It is vital that organisations anticipate the effect that change will have on
stakeholders and work processes so they can plan appropriately to manage
problems and reinforce positive outcomes brought about by change.
Transition was overseen by a 7Eleven Australia Steering Committee featuring
senior executives. This strategic planning committee fed directly into a
Joint Steering Committee featuring key senior staff from both businesses.
The ongoing management of the integration was conducted by a Program
Management Office (PMO) which was given responsibility for developing the
master plan and other tactical applications of the integration process.
7Eleven Australia identified 16 workstreams representing its key divisions
and operations such as fuel, merchandise management, store conversions as
well as finance, IT, HR and others. These workstreams were charged with the
responsibility for integrating the equivalent function in the acquired business.

Possible expansion by
competitors.

3 Ensuring effective engagement

A platform of seven key objectives were developed (below) and

communicated to all relevant stakeholders as integration priorities.

Achieving business as usual as quickly

as possible, minimising change for
the consumer.
Maintenance and
Driving quick wins and
eventual
synergies as soon as
enhancement of the
possible after completion.
7Eleven brand.

Rising fuel prices undermining

consumer confidence

Improve economies
of scale in fuel.

3 Time Lines
1

Threats
Ongoing competition from the
retail giants, Woolworths and
Coles
Fuel discounting and special
offers by competitors

Leverage strong supply-chain

management to boost
merchandise sales

Once the acquisition was announced on May 27th, 2010, the company
moved into its integration phase. Key planning decisions were delegated
and became shorter-term and more tactical so as to drive and support the
logistics of the integration. 7Eleven Australia established three discreet
timelines to manage the change:

Lack of economies of scale in

the retail fuel market
Unable to satisfy demand for
new franchises.

Leading proprietary
brands such as
Slurpee.

Throughout its preparation phase, 7Eleven Australia undertook extensive

planning and consultation. This included confidential legal, financial and
operational planning at executive and senior management level, as well
as planning related to the acquisition itself. Activities associated with this
planning phase included broader goal-setting, the development of key
timelines and the establishment of key working parties and committees to
drive the integration of the two entities.

Not having a branded fuel

card to offer fuel discounts

Best of both; leveraging the right team and taking the

best processes and systems across both businesses.

Creating one
culture and
avoiding an us
and them
attitude.

Managing the costs of

integration including operational
expenditure and capital
expenditure and ensuring
benefits are still achieved.

Communicating effectively, in a
timely manner with all stakeholders
and employees.

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The PMO also implemented a framework to map dependencies across

workstreams so as to ensure that physical, human and other resources
would be available when needed to enable timelines to be met.
A key to effective change management is to overcome resistance and
ensure stakeholder and employee engagement. One of the companys key
principles for the integration was Creating one culture and avoiding an us
and them attitude. The establishment of the Joint Steering Committee,
featuring representatives across both businesses, meant that the decisionmaking processes were transparent and open.
When a business is acquired employees naturally feel threatened. This
acquisition required 105 corporate and 1,750 store employees from Mobil
Oil Australia and Strasburger Enterprises to be absorbed into the 7Eleven
team. 7Eleven Australia itself had 450 employees with all stores owned by
franchisees. It developed and offered comparable or alternative positions to
new staff, conducted appropriate induction programs, converted employment
contracts and working arrangements and expanded its corporate
headquarters in Glen Waverley to house the new corporate employees.
A key change management objective of 7Eleven Australia was
clarity of decision-making processes. During the planning phase
the workstreams worked with the PMO to develop detailed integration
plans. After approval by the steering committee each workstream leader
had responsibility for delivering on the plans within timeframes and
cost guidelines. This consultative process engaged key employees and
franchisees, as well as potential franchisees from the Mobil/Quix stores
and supported two-way communication.
The workstreams were as closely aligned as possible across the two
businesses with key staff from each responsible for enacting the
integration. The workstreams met weekly and determined issues and
risks, reported on milestones and tasks and set down key objectives and
decisions to be made.
Demand for 7Eleven franchises had outstripped supply so the acquisition
provided hundreds of opportunities for both new and existing franchisees.
More than half of the converted stores were taken upby existing
franchisees and corporate staff and their family members. A small number
of Mobil/Quix operators who previously ran their stores as commission
agents, and some corporate Store Managers, took up the offer to become
7Eleven franchisees and underwent a franchisee training program.
7Eleven Australia had previous experience in managing acquisition-related
change when it took over a number of Burmah and BP outlets in the early
2000s. At first they operated a number of co-branded sites because it believed
maintaining the familiar fuel brand provided a more credible fuel offer for
customers. However, as a trial they converted a handful of these stores

more functional layout. They added that features of 7Eleven stores such as
the Slurpee zone and munch fresh food range were proving exceptionally
popular. Customer exit surveys also found an increase in satisfaction after
the conversion due to the new layout, brighter illumination, more spacious
aisles and, friendly service from staff.
completely to the 7Eleven brand. The company discovered that after these
sites were fully converted that although fuel volumes fell initially, merchandise
sales grew significantly and overall profitability was enhanced for franchisees.
The company applied these lessons to create synergies with this acquisition.

4 Getting the look

5 Managing processes and procedures

To reinforce the integration 7Eleven Australia had to train new franchisees
in the companys systems and processes. One of the advantages of having
existing franchisees take up another store was that they required less
training. The company also had to train some staff internally to act as
changeover specialists. It also had to modify its franchisee training program
and source and train new trainers.

A key part of the acquisition was the rebranding of the Mobil/Quix stores.
7Eleven has invested heavily in its brand, signage, promotional materials,
store layout and other identifying features and needed to convert its new
stores not only to its operational system, but also to the 7Eleven look.

7Eleven Australia has developed a number of internal support systems

such as the Franchisee Matrix used for store performance mapping, an
automated stock reordering system, their sophisticated and timely intranet
communications systems and more.

As part of the ongoing integration phase many sites needed to be

significantly upgraded. A key objective was to change these sites from
being seen as service stations and instead be remodeled and rebranded
into sophisticated convenience retail outlets more associated with
7Elevens core branding strategy.

As part of the synergies achieved through the acquisition these systems are
now deployed in the new stores with operators given appropriate training
and ongoing coaching support. The company is now able to leverage its
proven system to assist its new stores to increase profitability.

The changeover extended well beyond simple tweaks such as getting new
signage and sticking in a Slurpee machine. Some stores required major
building and site infrastructure work, retail fit-out and equipment had to
be changed to match 7Eleven systems and all signage and promotional
material had to be changed.
7Eleven Australia started to convert the first 30 stores between October
and December 2011 as part of the first 100 days phase. Planning permits
were secured back in July 2010 so as to allow enough lead time for council
approval. At first they converted the larger Quix sites as these required
less external building work. Subsequent to this the company planned on
converting five stores a week, nationally, throughout 2011. By October
2011, it had converted in excess of 100 stores.
One of the key priorities for the integration was a focus on achieving,
business as usual as quickly as possible with minimal impact to the
customer. Therefore it was vital that the conversions were carried out
as expertly as possible. Each conversion averaged about six weeks and
conversions were spread across different states at the same time.
New franchisees reported that store customers felt the refurbished
7Eleven stores had an improved atmosphere, with brighter lighting and a

new store

old store

Stores can now take advantage of 7Elevens innovative B2B system which
automatically generates a stock replenishment order using scanned sales
data, but which still allows franchisees to modify the order based on local
conditions. The system can tailor stock levels, pricing, promotions and
optimal store layouts to maximise customer spending. Franchisees can
compare key performance indicators to benchmark against like stores.
This allows franchisees to implement success strategies used in more
profitable stores to improve their own performance.
The Franchisee Matrix allows real-time reporting of sales and profitability
data by measuring store performance and engagement against ten
financial and non-financial KPIs. This continuous improvement tool
analyses strengths and weaknesses, and training and support is offered to
franchisees through an Individual Store Development Plan.
The acquisition has also led to a strengthening of its supply chain. Fresh
offerings are delivered overnight by Swire Cold storage. Dry goods are
delivered on average twice a week by Metcash, who are now handling all
dry goods deliveries throughout the entire 7Eleven Australia store system,
thereby improving economies of scale. Another outcome of the acquisition
is that 7Eleven Australia have signed an agreement with Mobil to be its
sole fuel supplier.

6 Conclusion
7Eleven Australia has embarked upon an ambitious but well-managed
expansion through horizontal acquisition. This strategy has allowed the
company to be able to develop its network of stores in already established,
and therefore lower risk, locations. However, the company faces ongoing
pressures to manage the integration throughout the reinforcement stage of
the change management process. Challenges include continuing the store
conversion process, training and developing new staff and franchisees to
be satisfied members of the 7Eleven Australia team and ensuring that
converted stores meet established KPIs and profitability levels expected of
those in the 7Eleven Australia franchise system.

GLOSSARY
Acquisition When a company
actively seeks to purchase
another business, usually
through buying a controlling
interest in its shares, to facilitate
growth and expansion.
Australian Competition and
Consumer Commission (ACCC)
The ACCC promotes competition
and fair trade in the market
place to benefit consumers,
businesses and the community.
It also regulates national
infrastructure services. Its
primary responsibility is to ensure
that individuals and businesses
comply with the Commonwealth
competition, fair trading and
consumer protection laws.
Branding The public image of a
company ranging from its logo,
name and design to the image
that it projects to other parties.
Part of a companys branding
can also include the way it
deals with its customers, its
advertising or its involvement in
the community.
Change management process
The steps that have been
planned out to implement
change management within an
organisation.
Economies of scale The
economic advantages that
occur as a result of an increase
in the scale of production.
An organisation achieving
economies of scale is able
to spread its fixed costs over
a greater volume of goods

produced, thereby reducing its

average cost per unit.
Franchise A franchise is a
business relationship between
a franchisor (someone who
owns the business) and a
franchisee (an independent
person who pays a fee to use
their established business name,
expertise and knowledge). Goods
or services are standard across a
franchised business.
Horizontal integration
Expansion via acquisition of a
competitor or by adding outlets
to a chain.
Intranet A privately maintained
computer network that can be
accessed only by authorised
persons, especially members or
employees of the organisation
that owns it.
Key performance indicators
(KPIs) Specific quantitative
and qualitative criteria used
to measure how efficient and
effective a business has been in
achieving strategic goals.
Stakeholders A person or group
who has an interest in how a
business operates or functions.
Examples include management,
owners, employees, customers,
shareholders, the local
community and government.
SWOT diagram A diagram
showing an analysis of an
organisations strengths,
weaknesses, opportunities and
threats.

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The PMO developed and provided the tools and support needed to
help these workstreams manage their responsibilities and activities as
part of the integration process. Tools included planning templates, risk
management models, communication processes and others. The PMO
also handled all communication, liaising with both the senior steering
committees and the action-oriented workstreams. This model allowed
for maximum consultation, feedback and support with all communication
channeled through one working group.