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Control at Heart of 7-Eleven Franchisee Lawsuit

Store owners allege retailer has not fulfilled promise of treating them as independent contractors

SANTA CRUZ, Calif. -- Members of the National Coalition of Associations of 7-Eleven Franchisees (NCASEF) are alleging that franchisor 7-Eleven Inc. has been “chipping away at their profits, increasing their costs and exercising more control over what is supposed to be an independent operation.”

In a lawsuit filed on Oct. 12, the plaintiffs claim that the franchisor has not fulfilled its promise of treating franchisees as independent contractors and business owners.

7-Eleven did not respond to a CSP Daily News request for comment by posting time.

A 2004 franchise agreement calls a 7-Eleven franchisee an “independent contractor” who can “control the manner and means of the operation of the store.” But according to court documents, the franchisees say that the agreement “impose[s] absolute actual or virtual control over all store operations.”

The lawsuit, filed in the U.S. District Court for the Central District of California, challenges certain provisions of the 7-Eleven franchise agreement. It cites increasing management control by 7-Eleven Inc., including:

  • Taking away the opportunity of franchisees to possess or control monies generated from franchised stores.
  • Directing franchisees to sell any good or service for less than the cost of acquiring and selling it.
  • Requiring franchisees to use equipment 7-Eleven specifies to operate franchise stores.
  • Imposing a regressive royalty structure that penalizes franchisees for increasing sales.
  • Transferring responsibility for paying credit-card processing fees directly to franchisees.

Other points of contention include 7-Eleven’s operational control over products and services the franchisees sell; sources and suppliers for those product and services; how they sell the products and services; advertising; foodservice standards; data, information and ideas generated from store operations; and management of store employees.

7-Eleven’s “failure to treat plaintiffs as employees under federal and California laws has caused them significant damage,” the franchisees allege in the court document, and that the franchise agreement “impose[s] more pervasive control over franchisee activity than any other in the United States.”

The plaintiffs said that 7-Eleven has “the harshest, most overreaching rights of a commercial lender, landlord and personal property lessor. At the core of [the] defendant’s control is its total dominion over every dollar received into or paid out of proceeds generated from every franchise store. … [7-Eleven’s] absolute control over the money also is used to impose its will over virtually every aspect of a franchisee operation.”

NCASEF Executive Vice Chairman Jay Singh said conditions imposed by the franchisor are threatening these c-store businesses, many of which are family operations. “Many of our members have operated 7-Eleven franchises for decades and are gravely concerned not only for their future, but the future of the brand they love and have invested so much in,” he said. “We need to hold 7-Eleven accountable. We love this brand and are saddened by the way they have been treating the people who are the very heart and soul of the company.”

The lawsuit seeks monetary damages, attorney’s fees and costs and other relief for claims relating to unpaid overtime wages and unreimbursed expenses.

The lead plaintiff is Serge Haitayan. He has been a 7-Eleven franchisee for 27 years and operates a 7-Eleven c-store in Fresno, Calif. He is also president of the Sierra Franchise Owners Association.

The other plaintiffs are:

  • Jaspreet Dhillon, who operates a 7-Eleven store in Reseda, Calif., and is vice president of business affairs for the Franchise Owners Association of Greater Los Angeles
  • Robert Elkins, who operates two 7-Eleven stores in El Cajon and Lakeside, Calif., and is president of the Franchise Owners Association of San Diego
  • Manjit Purewal, who operates a 7-Eleven store in Vacaville, Calif., and is president of the Greater Bay Franchise Owners Association
  • Maninder “Paul” Lobana, who operates two 7-Eleven stores in Simi Valley and Oxnard, Calif., is a shareholder in a corporation that operates another 7-Eleven store in Alhambra, Calif., and is president of the Franchise Owners Association of Southern California

Irving, Texas-based 7-Eleven Inc. operates, franchises or licenses 10,900 c-stores in North America, nearly 9,000 in the United States.

NCASEF includes 46 franchise association members that represent more than 4,700 7-Eleven owners of nearly 7,000 franchised c-stores in 33 states. Its national office is in Santa Cruz, Calif.

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