6-TWELVE LOOKING AT 7-ELEVEN - The Washington Post

Six-Twelve Convenience Mart Inc., an upstart Gaithersburg-based chain of food stores modeled on 7-Eleven, is negotiating to purchase the 600 7-Eleven stores in the Washington area, according to sources familiar with the discussions. But 7-Eleven's owner denied it is considering selling the stores.

Such a deal would significantly expand the six-year-old 6-Twelve chain, which now has 20 stores, most of them in the Washington area, and plans to build 25 more. Seven-Eleven has 7,400 stores throughout the United States and in Canada and several hundred more overseas.

"There's an interest in expanding very dramatically -- not a small acquisition," a source said of 6-Twelve's interest in the 7-Eleven stores. "It would be a very major change in the industry." The 7-Eleven stores would be converted to the similar 6-Twelve format, the source said. Six-Twelve has survived legal challenges from 7-Eleven and other chains over its similar name and format.

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However, a spokeswoman for Dallas-based Southland Corp., which owns 7-Eleven, denied that the company was in negotiations for the sale of its local stores. "That's absolutely untrue," she said. "We are not negotiating with anyone to sell any of our stores in that area."

Aris Mardirossian, founder and chairman of 6-Twelve, said: "I can't comment on that," when asked about the reported negotiations.

"There have been many discussions," a source familiar with the talks said. "It's an ongoing process."

Analysts and industry officials said Southland might be interested in selling the local 7-Eleven stores to raise money to help its ailing finances, which have not recovered from the effects of a $4.9 billion management-led leveraged buyout three years ago.

Mardirossian, a 39-year-old Armenian immigrant, started 6-Twelve in 1984 in pique after 7-Eleven declined to open a store in a shopping center he owned. In the years since, he has battled the bigger company over copyright infringement complaints, generally successfully, and two years ago he won a copyright infringement suit brought by another large chain, Convenient Food Mart Inc. of Chicago, which objected to 6-Twelve's use of the word "convenient" in its corporate name.

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Recently, Mardirossian has become something of a political activist. Last month, he took out a quarter-page advertisement in The Washington Post urging Democrats to give the 1992 presidential nomination to Maryland Gov. William Donald Schaefer or Sen. Charles Robb (D-Va.) because they are more conservative than most recent Democratic presidential nominees.

A source familiar with the negotiations said 6-Twelve and 7-Eleven have been talking for some time about a deal for a large number of company-owned and franchised stores in the Washington area. The source would not be more specific and would not discuss possible terms of the deal.

It could not be determined where 6-Twelve would get the financing for the huge purchase, although a source said, "There's some money out there floating around."

Kerley LeBeouf, president of the National Association of Convenience Stores, an Alexandria-based trade group, said that while it is difficult to put values on convenience stores, even at a conservative estimate of $100,000 per store, the price tag on 7-Eleven's Washington operations would be at least $60 million.

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LeBeouf said there are fewer than a dozen convenience store chains in the nation larger than the 600-plus company-owned and franchised 7-Eleven stores in the Washington area. "Anyone who would look at 7-Eleven's Capital division would be buying significant market density," he said.

Ken Gassman, a retail industry analyst for Wheat First Inc., a Richmond brokerage, said the possibility of a sale of local 7-Elevens by Southland "doesn't surprise me, because they're selling assets." Since its buyout, Southland has sold 1,000 7-Elevens around the nation, given up a 50 percent stake in its Citgo Petroleum Corp. division and sold other assets. "I suspect the lenders are putting pressure on them and they're selling assets to raise cash," Gassman said.

In addition, Southland's operations in the Washington area have had a rocky time in recent years. The company has had a running dispute with many of its local franchisees over operating terms, and it has come under fire recently from the District government over the chain's closing of several stores on short notice.

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Tom Reid, a Waldorf 7-Eleven owner who is president of an association representing many of the chain's franchisees in the District and Southern Maryland, said he has heard rumors of a possible sale. He added that under new ownership, "Things couldn't be any worse than they are."

Southland has angered franchisees by enforcing covenants in the franchise agreements that require the stores' net worth and other figures to stay above certain levels. Some franchisees -- particularly those paying high rents in the District -- have said it is impossible to meet those terms. As a result, Southland has stripped several District franchisees of their stores on short notice. Last year, the D.C. Council passed emergency legislation to prevent Southland from terminating franchise agreements on as little as three days' notice.

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