7-Eleven Franchisees Weigh In on Recent Legal Dramas

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7-Eleven Franchisees Weigh In on Recent Legal Dramas

By Samantha Negraval, Convenience Store News - 07/22/2013

DALLAS -- Over the past several weeks, the franchisee community of 7-Eleven Inc. has been shaken by two unfolding legal dramas -- the seizing of nine 7-Eleven stores by federal authorities in an illegal immigration investigation, and 7-Eleven’s decision to sue a franchisee for $1 million after he allegedly siphoned hundreds of thousands of dollars from the company.

Franchisees contacted by CSNews Online expressed a range of emotions, from shock to shame about the revelations, but overall they supported 7-Eleven Inc.’s reaction to the incidents and defended the reputation and honor of the mass majority of the 7-Eleven franchisee community. Franchisees interviewed for this story asked to remain anonymous.

“I felt ashamed of what happened," said one franchisee of the alleged actions of the indicted franchisees. "It seems inconceivable when you hear about it. You think, ‘Why would someone even do that?’”

On June 17, federal authorities seized 14 7-Eleven stores in New York State and Virginia, charging nine owners and managers with harboring and hiring illegal immigrants and paying them using fake Social Security numbers. Federal authorities claim the undocumented workers were forced to work 100 hours a week for a small percentage of their wages.

The federal probe into alleged illegal immigration-related activities at 7-Eleven locations has since expanded to an additional 26 convenience stores in seven states, according to media reports.

“It created a lot of damage to the reputation of the franchisees, the company and the brand,” said another franchisee, who also requested anonymity. “The majority of franchisees are hard-working businessmen.”

The sweeping federal raid came as a surprise to many franchisees, but one retired store operator said he saw it coming. “It’s about time,” he said, noting that the alleged illegal conduct had been going for years since the early 2000s -- a point that federal authorities also claim.

Since the indictments, 7-Eleven Inc. has assumed control of the stores involved and taken aggressive steps to audit the employment status of all its franchisees. Operators were given until the end of June to conduct their own internal I-9 review, with on-site reviews by field consultants and market managers beginning July 1.

One of the franchisees interviewed by CSNews said he acted within 48 hours by reviewing and verifying his employees' I-9 forms, and he urged other franchisees to do the same.

“Internal reviews are a necessary part of complying with the law. Anyone with undocumented or under-the-table employees needs to take this seriously,” he said. “This is a reality check. Franchisees should not wait for 7-Eleven Inc. to review. They should act immediately.”

At the same time 7-Eleven is dealing with this immigration probe, the nation’s largest convenience store chain is also drawing public attention for its decision to sue a franchisee, Tariq Khan, for allegedly siphoning hundreds of thousands of dollars over the course of at least four years. The lawsuit, filed in Brooklyn federal court, alleges that Khan, his wife, son and others, diverted cash to buy merchandise inventory from suppliers and never reported the invoices to 7-Eleven. The company is seeking $1 million in damages.

7-Eleven launched an undercover operation after a routine review in 2010 turned up evidence of Khan's alleged wrongdoing. In some of the subsequent 246 "secret buys," Khan's employees bypassed the register and never reported the received cash. In others, they misidentified the product as a less-expensive item when entering it into the cash register to underreport the sale, according to media reports.

Although 7-Eleven ended its franchise agreement with Khan, the complaint states that the defendants "have declined to voluntarily vacate the stores."

Other franchisees appear to to support 7-Eleven’s decision to take legal action in this matter.

One franchisee called Khan, who formerly headed the National Coalition of Associations of 7-Eleven Franchisees, a "very smart man," but said possible illegal activity by Khan or any other franchisee, for that matter, cannot be condoned. “If we’ve got bad apples, let’s get rid of them,” he said.

Another store owner defended the overall 7-Eleven franchisee community. “The great majority of franchisees are reputable businessmen who are proud to operate under the 7-Eleven logo,” he said. “[The] franchisees who are allegedly hurting the brand are in the minority.”

Long-Term Consequences?

Despite the recent events, franchisees interviewed by CSNews do not expect these incidents to hurt the 7-Eleven brand long-term.

"We are the convenience store brand recognized not just in the United States, but worldwide. It will take more than this to knock us down," said one franchisee who spoke to CSNews from the Venetian Las Vegas Hotel & Casino where he was attending The National Coalition of Associations of 7-Eleven Franchisees 38th Annual Convention & Trade Show. He said there were 280 vendors at the show -- "the most substantial it has ever been."

Franchisees also spoke of the viability of the business and the dedication of hardworking 7-Eleven franchisees. "Any perspective franchisee who does their homework will realize that this is a very atypical situation, and this is the dominate brand in the convenience store industry," said another store owner. "We've been around for almost 100 years and we're not going away."

The retired franchisee, who brings both the perspective of a store owner and someone looking at the organization from the outside, said the strength of the 7-Eleven brand does not reside in the corporate headquarters in Dallas. "It's in the hardworking franchisees and their families doing what they do, in the neighborhood they do it and tailoring that store to that neighborhood," he stated.

As of press time, 7-Eleven Inc. did not return CSNews’ request for comment. The company operates, franchises or licenses more than 10,110 7-Eleven stores in North America.