Franchisee group claims racial discrimination, among other allegations.
On July 11 as 7-Eleven celebrated its birthday, the Franchise Owners Association of Greater Los Angeles (FOAGLA) filed a lawsuit against 7-Eleven, alleging racism, ageism, invasion of privacy and illegal surveillance and mistreatment.
The lawsuit represents 1,200 franchisees in the area, the majority of whom are South Asian American, and claims a number of franchisees were stripped of their stores illegally, without evidence of wrongdoing or any compensation, the Los Angeles Times reported.
Some plaintiffs allege that 7-Eleven is making a practice of targeting successful stores in high-traffic areas, then in a process called “churning,” flips the stores to new franchisees who are willing to pay the company higher fees.
The lawsuit is not the first of its kind, as more than a dozen franchisees nationwide have sued 7-Eleven in the last two years with similar allegations.
Reportedly, the problems began after Tokyo-based Seven and I Holdings Co., took over the 7-Eleven chain in 2005.
“Tragically, 7-Eleven has now become a cautionary tale of the dangers of corporate greed in the franchise context,” the complaint stated, as reported by the Court House News Service. “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.”
According to the franchisees, 7-Eleven changed the role of the franchisee from independent contractor and small business owner to that of a low-level employee with no voice in the operations of their store, according to the complaint.
Ethnic South Asian franchisees across California further allege that they were specific targets of these practices because of their cultural background, a key point that sets this case apart from past lawsuits, Louis Tambaro, a partner with New Jersey law firm Marks & Klein, the franchise owners group’s lead counsel told the Los Angeles Times.
FOAGLA said it is not seeking monetary compensation from 7-Eleven, but wants a court ruling to declare that 7-Eleven’s actions violate both federal and California state laws.
7-Eleven told the Los Angeles Times that the allegations are false and it will “vigorously defend itself.” “This is a frivolous lawsuit filed by a very small number of franchisees and a local franchisee group,” the company said in a statement. Previously, 7-Eleven has said its takeovers were a result of some franchisees stealing or falsifying sales records.