Japanese convenience store chain 7-Eleven's second attempt to crack India's retail market through a franchise model may have failed, but the company has no plans to write off its ambitions to build a presence in one of the world's most populous countries.

At the end of September, Reliance Retail, the master franchise operator of 7-Eleven stores, shut down all 31 outlets across India, a spokesperson for the Japanese company told CNBC in an email. Reliance Retail is owned by Indian billionaire Mukesh Ambani's Reliance Industries.

The 7-Eleven representative said that the company still aspires to serve customers in India and "looks forward to exploring several options to advance our presence in the market over the long term." The spokesperson declined to provide additional comments on Reliance's business decisions and the status of the agreement between the Japanese and Indian companies.

Reliance Retail did not immediately respond to CNBC's emailed request for comment.

The two firms had announced their partnership in 2021, after the Japanese company's pact with another Indian company, Future Retail, was terminated. At the time, Future Retail, in a regulatory disclosure, had said the termination was mutual as it was "not able to meet the target of opening stores and payment of franchisee fees." Analysts told CNBC that the 7-Eleven store closures point to a reset of its operations in India, not to an exit, especially at a time when its rival Japanese chain Lawsons has also made plans to enter India.

The closures do not mean that "7-Eleven is giving up on India," Sohrab Bararia, partner at consultancy firm Grant Thornton Bharat, told CNBC. "It seems more like a rethink of the current franchise arrangement, particularly given the losses under the existing model," he added.

7-India Convenience Retail, a wholly owned subsidiary of Reliance Retail that entered into a master franchise agreement with 7-Eleven in 2021, reported a net loss of nearly 900 million rupees ($9.3 million) in the year ended March 2026 on revenues of around 920 million rupees. The firm's losses have widened continuously from 52 million rupees in the financial year ended March 2022, as per data from Tracxn.

The Challenges Creating a compelling reason to visit a convenience store is a big challenge for small-format outlets in India, experts said. While larger stores offer lower prices and experiential shopping with a wide variety of products, smaller stores with limited inventory struggle to compete.

Meanwhile, 10-minute-delivery grocery apps are growing in popularity as they have a wider selection and offer convenience, which customers in big cities prefer, experts said.

"Small-format stores, meanwhile, bear high rents and full staffing costs but generate relatively low sales per outlet," Bharat Birla, executive director of Anand Rathi Investment Banking, told CNBC.

However, analysts said that even though India's convenience store market is crowded with 10-minute-delivery apps and small mom-and-pop shops, Japanese companies could still find a niche that diversifies away from a "traditional grocery-led model." Lawson's plans to establish a "local subsidiary and operate directly managed stores from 2027," Birla said, adding that 7-Eleven could also consider this route.

Earlier this year, multiple Japanese media reports said the convenience store chain plans to open its first five stores in Mumbai in 2027 and plans to have a total of 100 stores in India by 2030. These stores will be owned and managed through a local subsidiary that Lawson will set up in India before February 2027, the reports said.

A shift away from the twice-failed franchise model would provide 7-Eleven with room for "strategic involvement" while allowing for localization and a broader pathway to scale across India, Bararia said.