The next time you need that critical Slurpee fix, or that mid-afternoon taquito, there's likely a 7-Eleven right around the corner. The convenience store chain's real estate portfolio, comprised of more than 10,000 properties in the United States and Canada, grew by more than ten percent in a single January 2018 acquisition. Maintaining and growing that portfolio represented an enormous workload for the two real estate attorneys in the legal department at corporate headquarters in Irving, Texas, so they had come to rely heavily on outside counsel. As the company began looking for greater efficiency in the legal department in late 2016, the real estate portfolio seemed ripe for transformation.
That thought was soon confirmed by data. The second real estate attorney hired by the company, Senior Counsel Kristen Cook, began looking at data from Serengeti Tracker, implemented in 2015, to analyze outside legal spend, and discovered that real estate matters represented one-third of the total.
"While we didn't historically view ourselves as a real estate company or property management company, that was a huge aspect of the work," she says. "I wasn't surprised by the total spend, primarily because of the volume and not having resources to deal with it."
Setting her sights on making substantive changes to processes and workstreams in that space, Cook issued RFPs to five firms in the United States and Canada. She subsequently partnered with relationship partners Eric Greenberg, Andrew Pearlstein and Andrew Shure of Seyfarth Shaw and Heather Eskra in the SeyfarthLean Consulting arm of Seyfarth Shaw. Together, they implemented value-based sourcing and staffing by realigning workflow based on type of matter to create a hybrid insourced/outsourced model. The in-house team handles transactional issues for existing stores, including SNDAs and lease renegotiations; disputes and Notice of Violation judgements.
Outside counsel are responsible for:
- new store development, with its transactional, leasing, acquisition, zoning, and land use issues
- existing store transactional issues in Canada
- litigation and land use matters
This work is performed under various flat fee models, which 7-Eleven implemented in 2015. The resulting budget predictability is not the only benefit to having a single firm handling new store development, Cook says. "We get consistency in processes for negotiation and lease provisions and pay one fee from letter of intent to new store opening."
For its part, Seyfarth Shaw took value-based sourcing a step further, implementing an innovative staffing model that moves such low-cost work as title and survey review to its Real Estate Hub in Atlanta. They leveraged their proprietary technology, SeyfarthLink, to create a dedicated 7-Eleven website that streamlines communications among the legal department and more than 100 real estate professionals. It features daily deal tracking, real-time budget tracking, and other features.
Once the responsibilities were divided up, the team turned its attention to process improvement. "We sat in a room with the legal department and members of the real estate group, and mapped out the processes for negotiating a lease or a purchase contract. We created a detailed, 15-page process map that enabled us to see where we could improve on efficiency, find the right people to do the right job, cut down on unnecessary tasks. We came up with a process where we could negotiate deals much more quickly and efficiently, resulting in lower legal costs at the end of the day," Greenberg says.
As a value-add, Seyfarth provides annual, in-person training sessions for the real estate field teams on a regional basis, at least six per year. Covering such topics as leasing, acquisitions and technology, the sessions have helped to maintain consistency across the country, resulting in better-negotiated deals and fewer disputes, Greenberg says. In February, the entire 7-Eleven/Seyfarth team participated in a joint, day-long training session.
In only eight months, 7-Eleven had reduced total outside counsel spend by 19 percent in real estate legal spend. Outside counsel fees for new store development were decreased by 13 percent year over year. In addition, new store deal fall-through rates declined from 25 percent to near 1 percent.
Once matters related to existing stores in the U.S. were in-sourced, a new real estate transactional attorney and a new real estate dispute attorney were hired, and four contract specialists were transferred from another department to work as paralegals. As a result, outside counsel spend for the real estate transactional part of the work decreased by 68 percent year over year. Further, 80 percent of all real estate disputes are now resolved in-house.
Cook's best advice for getting started with a similar initiative? "Take a step back to think about what your problem is, then decide the best way to arrive at a solution that will be cost-effective with the resources you have. ACC provides a great platform to learn the fundamentals," she says.