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7-Eleven, National Franchisee Group Trade Lawsuits

Franchisor, NCASEF at odds over management control, license agreements, more

DALLAS -- 7-Eleven Inc. and the National Coalition of Associations of 7-Eleven Franchisees (NCASEF) have both filed lawsuits that signal friction between the major U.S. convenience-store franchisor and its franchisees.

7-Eleven Inc. filed a lawsuit Feb. 16 against NCASEF alleging “trademark infringement, dilution, unfair competition and unjust enrichment under the [federal] Trademark Act and for unfair competition, dilution, unjust enrichment and breach of contract under the laws of the state of Texas,” according to court documents.

The lawsuit, filed in the U.S. District Court for the Northern District of Texas, follows Universal City, Texas-based NCASEF’s own lawsuit and protest against 7-Eleven Inc. over alleged mistreatment of franchisees.

Filed Oct. 12, 2017, in the U.S. District Court for the Central District of California, NCASEF’s lawsuit claims that the franchisor has not fulfilled its promise of treating franchisees as independent contractors and business owners, alleging increasing management control by 7-Eleven Inc.

In response to a CSP Daily News request for comment about the lawsuit, 7-Eleven Inc. provided the following statement:

“For most of the past three decades, 7-Eleven Inc. has enjoyed a productive working relationship with the leadership of the National Coalition of Associations of 7-Eleven Franchisees. We are disappointed that some within the coalition leadership have chosen to abandon that relationship and to make derogatory and inaccurate statements about 7-Eleven Inc. in violation of the coalition’s license agreements with the company.”

According to an email sent to all 7-Eleven franchisees and obtained by CSP Daily News, the company also said, “These statements not only tarnish the brand, but they can also impact sales and threaten both the goodwill associated with the brand and the equity franchisees work so hard to build in their businesses.”

The NCASEF protest included a boycott of the “7-Eleven Experience,” the chain’s annual convention and trade show, which was held Feb. 14-15, 2018, in Las Vegas. The presidents of all 44 Franchise Owners Associations (FOAs) that make up NCASEF voted unanimously not to attend the event, the group said. The FOAs represent the interests of nearly 7,000 franchised locations.

“Our FOA representatives spoke and the coalition listened, voting to urge members to stay away from the 7-Eleven Experience,” said Michael Jorgensen, executive vice chairman of the NCASEF. “The relationship between [7-Eleven Inc.] and its franchisees is no longer even handed, and that is hurting the livelihood of those we represent.”

In response to the boycott, 7-Eleven Inc. told CSP Daily News, “We're extremely proud to have just completed another successful annual 7-Eleven Experience with thousands of 7-Eleven franchisees from around the country. We know that we succeed when franchisees succeed, and the 7-Eleven Experience is all about celebrating that relationship. As a company, we are committed to providing franchisees with tools and resources to help increase their gross profits. In fact, last year 7-Eleven franchise owners collectively earned the most money ever in a single year. The excitement amongst the attendees at this year's 7-Eleven Experience suggests a positive outlook for 2018.”

In its just-filed lawsuit, 7-Eleven Inc. alleges that NCASEF is guilty of trademark infringement and has violated a 2005 agreement granting the group a nonexclusive limited license to use several composite designs and logos, including the 7-Eleven logo and the Slurpee logo.

The license includes “numerous restrictions on the manner in which the defendant could use the licensed marks and limits its use to the limited list of activities and printed materials specifically identified in the agreement,” according to the court documents. “The license agreement prohibits the use of the licensed marks on any promotional or print items that feature a third-party name, mark or trade identity. The license agreement also specifically prohibits the defendant from using any trademark owned by 7-Eleven without 7-Eleven’s prior written approval other than the licensed marks for the limited purposes authorized in the agreement.”

7-Eleven Inc. alleges that NCASEF “is currently using the licensed marks in connection with goods, services and activities not authorized by the license agreement,” including on the group’s website, “despite not being authorized to do so by the agreement. The infringing marks are prominently displayed on the defendant’s website, event signage, business cards, advertisements and promotional materials, magazine and elsewhere.”

NCASEF’s actions “constitute a material breach of the license agreement between 7-Eleven and defendant. Pursuant to 7-Eleven’s right to immediately terminate the license in the event of a breach, 7-Eleven has notified the defendant in writing that the license agreement was terminated,” the court documents said.

“7-Eleven Inc. filed a lawsuit demanding that the National Coalition of Associations of 7-Eleven Franchisees remove the 7-Eleven trademark from its logo,” the company said in its email to franchisees. “7-Eleven Inc. filed this lawsuit to protect our trademark from being used in a negative way. While the coalition may speak for itself, it may not use our trademark to harm our iconic brand. I know you will agree that we must protect the 7-Eleven brand and trademark in order to protect the profitability for all franchisees today and into the future.”

7-Eleven Inc.’s goal with the lawsuit is for NCASEF and its “agents, servants, employees, attorneys and all those persons in active concert or participation with them, be preliminarily and permanently enjoined from using the infringing marks, any element thereof, and any other name, mark or trade dress confusingly similar thereto.”

It asks that NCASEF destroy all materials bearing the infringing marks.

7-Eleven Inc. is also seeking to recover triple the amount of damages it has sustained as a result of NCSEF’s infringement, dilution and unfair competition; to determine the profits resulting from the group’s activities, and that those profits be paid to 7-Eleven; and to recover attorney’s fees and court costs.

Irving, Texas-based 7-Eleven Inc. operates, franchises or licenses in more than 63,000 stores in 18 countries, including 10,900 in North America.

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