7-Eleven Denies Franchisee Group's Allegations

L.A.-area association suing c-store corporation, alleges intimidation, "churning," more

Greg Lindenberg, Editor, CSP

7-Eleven Franchise Owner's Association of Greater Los Angeles FOAGLA (CSP Daily News / Convenience Stores)

RIVERSIDE, Calif. -- 7-Eleven Inc. is denying allegations of racial discrimination, invasion of privacy and illegal surveillance, retaliation against franchisees and misclassification of employment relationship with franchisees leveled against the convenience store company by the 7-Eleven Franchise Owner's Association of Greater Los Angeles (FOAGLA) and several franchisees.

"The allegations made in this complaint are false," 7-Eleven said in a statement provided to CSP Daily News, responding to the lawsuit, filed in the U.S. District Court for the Central District of California, Eastern Division.

In the court documents, the plaintiffs attempt to paint the corporation as greedy, corrupt, controlling and exploitative. They claim that 7-Eleven is targeting South Asian immigrant franchisees, allegedly taking advantage of their cultural trait of "respect for authority and fear of being shamed in their communities."

The company said that it is "proud of its diverse, independent franchisee population," citing  a USA Today report naming it one of the "Top 50 Franchises for Minorities in 2013," The chain has also received recognition as one of the top franchisee opportunities by Professional Woman's Magazine, Hispanic Network Magazine and BLACK EOE Journal, among others, it said.

The plaintiffs also claim that 7-Eleven uses "unfounded false threats of wrongdoing as part of a larger corporate effort to terminate … successful franchise stores and take the stores back at no cost. 7-Eleven then 'churns' or re-sells the stores, realizing a windfall profit to new franchisees."

7-Eleven said, "The company has a very high retention rate for franchisees. In 2013, 7-Eleven Inc. had a less than 4% franchisee turnover rate nationwide, less than 3% in California."

And the plaintiffs claim that the company is "engaging in illegal and 'Orwellian' surveillance of FOAGLA franchisee member operations with audio-visual equipment that was originally utilized to protect franchisees from third-party crime and theft but is now, instead, being used to spy on franchisees."

Like many retailers, as standard operating procedure, 7-Eleven has installed a sophisticated network of security cameras in stores nationwide to deter and combat crime; the company said it frequently shares the footage with law enforcement to help solve crimes and apprehend robbery suspects, but it also could be used to identify franchisee or employee wrongdoing.

7-Eleven also said it is "determined to protect our guests, employees and other franchisees by ending the relationship with franchisees that violate the law or the franchise agreement, where appropriate. The company is confident in the thorough and lawful system that it has in place to accomplish this.

"The unfortunate fact is a few franchisees have been caught violating the law or the franchise agreement. This complaint is brought by a small number of individuals who are attempting to thwart 7-Eleven's efforts to deal with these franchisees. The company has a solid record of prevailing in court on these matters because of its thorough investigations.

"Honest, hardworking, independent franchisees are the backbone of the 7-Eleven brand. When the company ends the relationship with a franchisee, it is to protect the brand and its franchisees' investment."

The plaintiffs' claim is for declaratory relief only and does not involve any potentially differing claims for monetary compensation, according to the court documents, although monetary claims could follow.

FOAGLA represents more than 1,200 7-Eleven franchisees in the state of California.

Dallas-based 7-Eleven--owned by Tokyo-based Seven & i Holdings Co.--operates, franchises or licenses more than 10,300 7-Eleven c-stores in North America. Globally, more than 53,500 7-Eleven c-stores operate in 16 countries. During 2013, 7-Eleven stores generated total worldwide sales close to $84.5 billion.

Part of CSP's 2014 Convenience Top 101 retailers