Creditworthiness & Financial Strength
7-Eleven stands as a formidable player in the convenience store sector with strong financial backing from its parent company, Seven & i Holdings Co., Ltd. The company maintains impressive credit ratings that reflect its financial stability and market dominance. Standard & Poor’s rates 7-Eleven with an ‘A’ long-term credit rating, while Moody’s assigns it a ‘Baa2’ rating. The parent company, Seven & i Holdings, holds even stronger ratings with S&P: A and Moody’s: A2, providing additional financial security through its corporate guarantee.
As a privately owned entity, 7-Eleven benefits from the substantial resources of Seven & i Holdings, which has demonstrated commitment to the brand’s growth through significant investments. The company’s financial strength is evident in its ability to undertake major acquisitions, such as the $1 billion purchase of 204 Stripes convenience stores in early 2024, and its previous acquisition of 3,800 Speedway stores in 2021. These strategic moves have further solidified 7-Eleven’s market position and expanded its revenue streams.
• Credit Ratings: S&P: A (7-Eleven), Moody’s: Baa2 (7-Eleven); Parent company Seven & i Holdings: S&P: A, Moody’s: A2 • Corporate Structure: Privately owned by Seven & i Holdings Co., Ltd. • Financial Backing: Strong corporate guarantee from parent company • Acquisition Power: Demonstrated ability to execute billion-dollar acquisitions
Lease Terms & Structure
7-Eleven typically operates under triple net (NNN) lease structures, which place the responsibility for property taxes, insurance, and maintenance on the tenant. This arrangement creates a stable, low-management investment opportunity for landlords. The company’s lease terms are notably investor-friendly, with typical durations ranging from 15 to 20 years, providing long-term income security.
A hallmark of 7-Eleven leases is their predictable rent escalation schedule, typically featuring 10% increases every five years. Some premium locations may command escalations of up to 15% every five years. This structured growth in rental income helps investors hedge against inflation while ensuring steady revenue increases throughout the lease term. The average annual rent for a 7-Eleven property is approximately $300,000, with an average sale price of $4,872,364 according to recent market data.
• Lease Type: Triple Net (NNN) • Typical Lease Term: 15-20 years • Rent Escalations: 10% every 5 years (some locations up to 15%) • Average Annual Rent: $300,000 • Average Sale Price: $4,872,364 • NOI (Net Operating Income): $251,949 (average)
Store Footprint & Growth Trajectory
7-Eleven operates the world’s largest convenience store network with an impressive global footprint of over 83,000 stores across 19 countries and regions. In North America alone, the company maintains approximately 13,000 locations, with a significant presence in 47 of the top 50 U.S. markets. This extensive network places 7-Eleven stores within two miles of 51% of the U.S. population, creating an unmatched last-mile distribution advantage.
The company has announced ambitious expansion plans, with a strategy to open 500 new “New Standard” stores between 2025 and 2027. These new format stores are designed based on customer feedback from their “Evolution” store concept and are performing 13% better than existing locations in terms of same-store sales. At full maturity (four years), these new stores are projected to increase sales by 30% to $8,219 average per store day. The typical 7-Eleven building ranges from 2,500 to 3,500 square feet, with lot sizes varying between gas and non-gas locations.
• Total Global Locations: 83,000+ across 19 countries • North American Locations: 13,000+ • Market Coverage: Present in 47 of top 50 U.S. markets, within 2 miles of 51% of U.S. population • Expansion Plans: 500 new “New Standard” stores planned between 2025-2027 • Typical Building Size: 2,500-3,500 SF • Performance Metrics: New format stores showing 13% higher same-store sales
Ownership and Franchise Structure
7-Eleven operates under a mixed ownership model that includes both company-owned and franchised locations. The company is wholly owned by Seven & i Holdings Co., Ltd., a Japanese retail conglomerate that provides strong corporate backing. In the United States, 7-Eleven employs a franchise-heavy model, though it maintains a significant number of corporate-operated stores as well.
The franchise system allows 7-Eleven to expand rapidly while maintaining brand consistency through standardized operations. Franchisees benefit from the company’s established supply chain, proprietary products, and brand recognition, while investors in 7-Eleven properties gain from the corporate guarantee that typically backs the leases. This structure creates a layer of security for property owners, as the corporate entity stands behind the lease obligations regardless of the individual franchisee’s performance.
• Corporate Ownership: Seven & i Holdings Co., Ltd. (Japanese retail conglomerate) • Operating Model: Mix of company-owned and franchised locations • Franchise Ranking: Ranked #2 on Franchise Times Top 400 Largest Brands in Franchising (2023) • Lease Security: Corporate guarantee typically backs lease obligations
Cap Rates & Market Pricing
7-Eleven properties command premium valuations in the net lease market due to their strong credit profile, essential retail status, and typically prime corner locations. The trailing 12-month average cap rate for 7-Eleven properties stands at 5.28%, reflecting investor confidence in the tenant’s stability and the quality of their real estate.
Cap rates vary based on lease term length, with shorter remaining terms generally commanding higher cap rates. According to data from the Boulder Group, 5-year term properties typically trade at 6.15%-6.45%, 10-year terms at 5.80%-6.10%, and 15-year terms at 5.10%-5.40%. This pricing structure reflects the premium investors place on longer-term income security with this credit-worthy tenant.
The average price per square foot for 7-Eleven properties ranges from $1,392 to $1,949, with an average sale price of approximately $4.87 million. These metrics position 7-Eleven properties as premium investments within the convenience store sector, typically trading at lower cap rates than many competitors due to their strong credit profile and prime locations.
• Average Cap Rate: 5.28% (trailing 12-month average) • Cap Rate by Term: 5-year: 6.15%-6.45%; 10-year: 5.80%-6.10%; 15-year: 5.10%-5.40% • Price Per Square Foot: $1,392-$1,949 • Average Sale Price: $4,872,364 • Market Position: Premium pricing compared to industry averages
Financial Performance & Outlook
7-Eleven has experienced a mixed financial performance in recent years, navigating both opportunities and challenges. In 2024, the company faced economic headwinds from inflation that impacted consumer spending patterns, leading to some financial setbacks. However, the company has responded strategically by focusing on its food and beverage modernization program and launching value-oriented offerings to combat inflation’s effects on consumers.
The company’s parent, Seven & i Holdings, reported a 4.6% increase in total sales for the period ending August 31, 2024, despite declines in operating and net income. Looking forward, 7-Eleven is positioning itself for growth through four key strategic pillars: growing proprietary products, accelerating digital products and delivery, improving efficiencies and cost leadership, and growing and enhancing its store network.
The company’s focus on food-forward offerings represents a significant part of its growth strategy. 7-Eleven is investing in restaurants such as Laredo Taco Company and Raise the Roost Chicken and Biscuits, as well as expanding its proprietary food and beverage offerings including grab-and-go hot cases, self-serve roller grills, specialty beverages, and in-store bakery items.
• Recent Performance: Mixed results with 4.6% sales growth but pressure on operating income • Strategic Focus: Food-forward offerings and proprietary products • Growth Initiatives: Four pillars strategy focusing on products, digital, efficiency, and network expansion • Value Proposition: Introduced $5 meal bundles and other value offerings to combat inflation
Location/Real Estate Considerations
7-Eleven demonstrates sophisticated site selection criteria that prioritize high-visibility, high-traffic locations. The company typically seeks corner locations or shopping center outparcels with excellent access and visibility. Preferred sites for traditional stores with gas stations range from 0.8 to 1.0 acres in areas with approximately 25,000 vehicles passing daily, ensuring strong customer traffic.
The company has also developed non-gas convenience store concepts that can fit into smaller retail spaces, including strip centers and retail condos. These smaller format stores typically occupy buildings ranging from 1,000 to 2,500 square feet, allowing the company to penetrate high-barrier-to-entry markets where larger parcels may not be available.
7-Eleven’s real estate strategy emphasizes locations that maximize convenience for customers, often selecting sites near residential areas, office complexes, or along major commuter routes. This strategic positioning contributes significantly to the underlying real estate value, making these properties attractive not only for their tenant but also for their inherent location value.
• Preferred Locations: Corner sites with high visibility and access • Traffic Requirements: Approximately 25,000 vehicles daily • Typical Lot Size: 0.8-1.0 acres for gas locations; smaller for non-gas concepts • Format Flexibility: Traditional gas stations (2,500-3,500 SF) and smaller non-gas formats (1,000-2,500 SF) • Strategic Positioning: Near residential areas, office complexes, or major commuter routes
Pros and Cons for Investors
Pros:
7-Eleven properties offer numerous advantages for net lease investors. The tenant’s strong credit profile and corporate guarantee from Seven & i Holdings provide significant security for rental income. The essential retail nature of convenience stores ensures consistent customer traffic regardless of economic conditions, while the typical corner locations with high visibility contribute to strong underlying real estate value.
For fee-simple ownership structures, investors can benefit from accelerated depreciation, enhancing the after-tax returns. The long lease terms (15-20 years) with built-in rent escalations provide predictable income growth and inflation protection. Additionally, 7-Eleven’s continued expansion plans and focus on enhancing store offerings suggest a commitment to maintaining and growing their physical retail presence.
Cons:
Despite the many advantages, investors should consider several potential drawbacks. Properties with gas stations may face environmental concerns related to underground storage tanks and potential contamination issues. Ground lease structures, while common, do not allow for depreciation benefits, potentially reducing after-tax returns for some investors.
The company’s private ownership structure means less transparency compared to publicly traded companies. Additionally, the premium pricing of 7-Eleven properties (reflected in lower cap rates) may limit initial cash-on-cash returns compared to other net lease opportunities with higher cap rates but potentially more risk.
• Pros:
- Strong credit and brand recognition
- Corporate guarantee enhances lease security
- Essential retail status ensures consistent traffic
- Prime corner locations with strong real estate fundamentals
- Long lease terms with regular rent escalations
- Accelerated depreciation available with fee simple ownership
• Cons:
- Environmental concerns with gas station locations
- Ground leases do not allow for depreciation benefits
- Privately owned with less financial transparency
- Premium pricing (lower cap rates) may limit initial returns
- Potential market saturation in some areas
Comparable Tenants / Sector Benchmarking
Within the convenience store sector, 7-Eleven stands as a premium tenant compared to most competitors. Its credit rating (S&P: A) surpasses many competitors in the space, contributing to its lower average cap rates. For context, Circle K properties typically trade at cap rates 50-75 basis points higher than comparable 7-Eleven locations, reflecting the difference in credit quality and perceived tenant stability.
When compared to other essential retailers like dollar stores, 7-Eleven generally trades at similar or slightly lower cap rates than Dollar General (BBB rated) properties, which typically range from 5.50% to 6.25% for new 15-year leases. This positioning reflects investor confidence in 7-Eleven’s corporate backing and the prime nature of their real estate.
The convenience store sector as a whole has demonstrated resilience during economic downturns due to its essential retail status. Within this sector, 7-Eleven’s extensive network, strong corporate backing, and strategic focus on food offerings position it favorably against competitors like Casey’s, Wawa, and Sheetz, though each has its regional strengths and particular investment merits.
• Direct Competitors: Circle K, Wawa, Sheetz, Casey’s • Comparative Cap Rates: 7-Eleven (5.28%) trades at approximately 50-75 basis points lower than Circle K • Credit Comparison: Stronger credit profile than most convenience store competitors • Sector Position: Premium tenant within convenience store category • Essential Retail Comparison: Similar investment profile to dollar stores (Dollar General, Dollar Tree) but with different demographic targeting
Investment Grade Score: 87/100
Based on comprehensive analysis of 7-Eleven as a net lease tenant, the company earns an Investment Grade Score of 87 out of 100. This score reflects 7-Eleven’s strong credit profile, extensive store network, corporate-guaranteed lease structure, and prime real estate locations. The score also accounts for the company’s ambitious growth plans and strategic focus on enhancing food offerings, which should support continued relevance in the competitive convenience store landscape.
The score is moderated by considerations including environmental concerns associated with gas station properties, the premium pricing of 7-Eleven assets (reflected in lower cap rates), and some financial headwinds faced in recent periods. Nevertheless, 7-Eleven represents a high-quality net lease investment opportunity with strong fundamentals and reliable long-term income potential.
Score Breakdown:
- Creditworthiness & Financial Strength: 18/20
- Lease Terms & Structure: 18/20
- Store Footprint & Growth Trajectory: 17/20
- Ownership and Franchise Structure: 8/10
- Cap Rates & Market Pricing: 8/10
- Financial Performance & Outlook: 7/10
- Location/Real Estate Considerations: 9/10
- Pros and Cons Balance: 8/10
- Comparable Tenants Positioning: 9/10
Total Investment Grade Score: 87/100
