Greater L.A. Franchisee Association Suing 7-Eleven

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Greater L.A. Franchisee Association Suing 7-Eleven

By Melissa Kress, Convenience Store News - 07/17/2014

LOS ANGELES – Several 7-Eleven retailers are joining with an area franchise association to fight 7-Eleven Inc. over claims of racial discrimination. However, 7-Eleven denies the claims, standing by its record of diversity.

According to Courthouse News Service, last week FOAGLA Inc., a franchise owners association, and five 7-Eleven operators filed a federal lawsuit against 7-Eleven Inc., alleging racial discrimination, invasion of privacy and illegal surveillance retaliation against franchisees, and misclassification of employment relationship with franchisees.

"The allegations made in this complaint are false. 7-Eleven is proud of its very diverse, independent franchisee population," the company wrote in an email to CSNews Online. "In fact, USA Today named 7-Eleven one of the Top 50 Franchises for Minorities in 2013, and has received recognition as one of the top franchisee opportunities by Professional Woman's Magazine, Hispanic Network Magazine and BLACK EOE Journal."
According to the company, 7-Eleven has a high retention rate for franchisees. In 2013, it had a nationwide franchisee turnover rate of less than 4 percent, and less than 3 percent in California. Dallas-based 7-Eleven operates, franchises or licenses more than 10,300 7-Eleven stores in North America.
The complaint states that the 7-Eleven chain's growth was fueled by franchise arrangements with small business owners, many of whom are South Asian immigrants from such countries as India and Pakistan, who paid upfront franchise fees and operated the 7-Eleven franchised stores in exchange for a percentage of store profits, the news service reported.

According to the complaint, things began to change when Tokyo-based Seven & I Holdings Co. bought the 7-Eleven chain in 2005, and new management began to exploit franchisees, which "transforms the goodwill [franchisees] had built in their local markets into corporate profit by expelling [them], paying them nothing and selling their franchises for enormous profit."

"7-Eleven 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 retailer stated.

"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," the company continued. "Honest, hardworking, independent franchisees are the backbone of the 7-Eleven brand."

The lawsuit alleges 7-Eleven controls the maintenance of the equipment in franchisees' stores, employees' payroll and paychecks, and even the volume on their stores' TVs, according to Courthouse News Service.

The retail giant told CSNews Online that 7-Eleven bears the costs of rent, utilities and equipment replacement.

The franchisees also allege the company employs illegal surveillance to spy on franchisees and has hired unlicensed private investigators to follow franchisee activities outside of the store, according to Courthouse News Service.

However, 7-Eleven told CSNews Online this claim is false and that safety is top of mind.

"Making sure that stores are safe for guests and employees is a top priority for 7-Eleven. From store-personnel training programs to responsible cash control and the legal installation of surveillance cameras, crime deterrence is foremost in our minds," the company said. "7-Eleven has invested over $40 million to upgrade the security of every 7-Eleven store in the United States so we can improve the safety of our guests, store employees, franchisees and aid law enforcement officials in their pursuit of wrongdoers. 7-Eleven has a policy of sharing security surveillance camera footage with law enforcement. That cooperation has led to the capture and successful prosecution of criminals."

The franchisees seek declaratory judgment that 7-Eleven's actions violate federal and state laws, including civil rights law and court costs, according to the news service. The FOAGLA Inc. and the operators are represented by Eric Schindler.