Charges against Japanese-owned company of controlling through intimidation, ‘churning’ stores.
By The American Bazaar Staff
WASHINGTON, DC: Can the ‘American Dream’ turn into an ‘American Nightmare’? A class action suit brought by several franchisee owners of 7-Eleven chain stores – most of them of South Asian origin – against the company, seem to think so.
The suit filed earlier this month in federal court in Los Angeles against the Dallas-based 7-Eleven company, which is owned by Seven & I Holdings Co. in Tokyo, says that since 2005 when the Japanese company took over, it began several measures to disrupt businesses of mostly South-Asian origin franchisee holders: including, illegal surveillance of franchisees, turned business owners into low-level employees, and pushed out hard-working South Asian immigrant store-owners by re-selling high value stores in a practice known as ‘churning’, said a report by Courthouse News.
“Tragically, 7-Eleven has now become a cautionary tale of the dangers of corporate greed in the franchise context,” the complaint states. “7-Eleven has become an unfortunate example of the tragic results that occur when a franchisor ceases to consider its franchisees as valuable, independent contractors and business owners and to see them merely as disposable assets to be exploited for short-term profits, then discarded once their value has been extracted.”
The report said the suit was filed, amongst others by FOAGLA Inc., a franchise owners association, and five 7-Eleven operators.
“Throughout the 20th century, 7-Eleven pioneered and grew the ‘convenience store’ concept and helped make it a standard part of American life,” the complaint states. “What fueled 7-Eleven’s growth was its franchise arrangement with small business owners, many of them South Asian immigrants from such countries as India and Pakistan, who paid upfront franchise fees and operated he 7-Eleven franchised stores in exchange for a percentage of the store profits. 7-Eleven found that the South Asian cultural traits of hard work, family unity, respect for authority, and community-mindedness made South Asians ideal owner/operators for 7-Eleven stores.”
The suit claims that the franchise controls the day-to-day operations of its franchisees, exerting “a heightened and almost pathological level of control by 7-Eleven over franchisees.” It includes controlling the maintenance of the equipment in franchisees’ stores, the volume on their televisions, and employees’ payroll and paychecks, the lawsuit states
A 7-Eleven spokeswoman told Courthouse News: “The allegations made in this complaint are false. 7-Eleven is proud of its very diverse, independent franchisee population. 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. ”
The Los Angeles Times reported that the suit is also joined by The Franchise Owner’s Assn. of Greater Los Angeles, along with other franchisee organizations, and says it represents more than 1,200 members.
The group said it does not want any money from 7-eleven, but is asking for a court declaration affirming that 7-Eleven’s actions are in violation of both federal and California state laws.
One of the individuals who have filed the lawsuit is Adnan Khan, who started running his first 7-Eleven store in South El Monte 34 years ago, and now has five stores in areas such as Baldwin Park and West Covina, said the times report. He said the company used traumatizing intimidation tactics to try and get him to sell his stores, which he says are top-selling locations.
“Investigators were stalking me, taking personal information and trying to make me afraid enough to give in,” he was quoted as saying.
Another individual named in the story by the Times is Jas Dhillon, who is listed as a plaintiff in the lawsuit. He was born in India and raised in the San Fernando Valley. He started working in his parents’ 7-Eleven store as a child in 1976 and eventually took it over, it said.
Dhillon said he has worked with a host of exploited South Asian immigrants, many of whom are Indian and Pakistani, and said 7-Eleven “understands their cultural psychology” and thus knows how to intimidate them to give up their stores.
Founded in 1927, 7-Eleven has been wholly owned by Seven & I Holdings since 2005. The system includes more than 52,500 convenience stores in 16 countries. California, with 1,600 stores, has the most of any state, according to the Times.