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7-ELEVEN Franchise: Franchisee Sues for Fraud, Labor Violations, Unfair Dealings

September 3, 2013

7-Eleven franchise owners are suing 7-Eleven, Inc. claiming that they were deceptively sold into a franchise scheme that turned them into unclassified, uncompensated employees rather than business owners, were promised training and support they never received, and were terminated after investing nearly half a million dollars.

(UnhappyFranchisee.Com)  August 29, 2013, attorney Jerry Marks, of Red Bank, NJ-based Marks & Klein, filed a lawsuit in the U.S. District Court, Southern District of New York (Foley Square) on behalf of plaintiffs Michael Governara and Stefanie Governara against defendant 7-Eleven, Inc., a wholly owned subsidiary of Seven-Eleven Japan Co., LTD., a wholly owned subsidiary of Seven and I Holdings Co. LTD. and defendant John Does 1-20 (fictitious persons).

The suit claims that 7-Eleven, Inc. is guilty of fraudulent inducement, breach of the implied covenant of good faith and fair dealing, and violation of New York State Labor Law for misclassifying 7-Eleven franchisees as independent contractors rather than employees.

In addition to seeking compensatory, consequential, punitive damages, and other costs for the first two counts, plaintiff Michael Governera also seeks:

a. An Order declaring and adjudging that Michael Governara and all New York franchisees similarly situated are de facto employees as defined under the New York Labor Statute and are afforded protections under the New York Labor Statute;

b. An Order pursuant to New York Business Corporations Law §630 that 7-Eleven’s 10 largest individual shareholders, once identified, are personally liable to Plaintiff and other New York franchisees similarly situated, for damages associated with the labor violations alleged herein;

c. Compensatory Damages;

d. Recoupment of overtime benefits for the three (3) years preceding the filing of the Complaint this matter;

e. Recoupment for all benefits previously withheld from Plaintiff for the three (3) years preceding the filing of the Complaint;

f. Punitive Damages, attorney’s fees and costs;

g. Any other relief this court deems equitable and just.

MICHAEL GOVERNARA, STEFANIE GOVERNARA vs. 7-ELEVEN, INC.

According to the Governera v. 7-Eleven, Inc. complaint :

1. The instant action involves the fraudulent inducement of Plaintiffs by Defendant 7-Eleven, Inc. (hereinafter “Defendant” or “7-Eleven”) and their agents through the making of material and patently false financial performance representations as to annual gross sales, which were designed to induce Plaintiffs’ substantial monetary investment in a New York, New York 7-Eleven location.

During the time period in which Plaintiff Michael Governara (“Michael” or “Michael Governara”) operated his franchise location, which consistently struggled and performed nowhere near the purported expectations of the franchisor, which were articulated to him numerous times before he signed his franchise agreement and began operating.

2. During this time period Michael was also not provided promised training and support, as his location floundered. Further, like all 7-Eleven “franchisees” Michael was, at all relevant times, an undisclosed employee, and was deprived of minimum wage, FICA and medical benefits and was not afforded benefits under New York law.

The complaint contends that Michael Governera left an $80,000 per year job based on the assurances by a 7-Eleven salesperson Martina Hagler that his location store “should do $2-3M annually but to be conservative use one million, seven hundred thousand dollar to one million, eight hundred thousand dollar ($1.7-1.8M) for purpose of the business plan and budget.”

7-Eleven Franchise: How to Lose Half a Million in 20 Months

7-Eleven logoBased on this representation, Governa wrote 7-Eleven, Inc. a check for $385,400.00 on August 11, 2011.

The 7-Eleven location subsequently had sales of only $1.1M, far less than the $2-3M in sales Martina Hagler allegedly had indicated.

According to the suit, “between January 2012 and December 2012, 7-Eleven representative Meghan Culligan cancelled more than twenty (20) scheduled meetings with Michael with respect to his store performance and the supplemental support from 7-Eleven was dismal…

“In or about August 2013, Michael’s franchise agreement was terminated by 7-Eleven, he was forced to close his location, and he has since lost his entire franchise investment.”

Not only had Michael Governera gone 20 months without a paycheck, investments by his mother Stefanie Governara ($200,000)  and Michael’s cousin, Phil D’Antoni ($140,000) were also lost.

Also read:

7-Eleven Franchise Complaints

7-ELEVEN: How the 7-Eleven Franchise Works

7-ELEVEN to Open up to 21,500 New U.S. Stores

7-ELEVEN Downplays Japanese Ownership

7-ELEVEN Franchise Lawsuits 2013

7-ELEVEN’s Japanese Parent Posts Record Profits… Again

7-ELEVEN Franchise Owner Claims Franchisees Are Being Bullied

7-ELEVEN: Is 7-Eleven a Good Franchise to Own?

7-ELEVEN Franchise Owners Complain, Allege Churning

7-ELEVEN Franchises Raided by DOJ, Homeland Security

7-ELEVEN Franchisee Tariq Khan: Villain or Victim?

7-ELEVEN: UnhappyFranchisee.Com Invites Views of 7-11 Franchisee Groups

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TAGS: 7-Eleven, 7-Eleven franchise, 7-Eleven lawsuit, 7-Eleven lawsuits, 7-11 franchise, 7-11 lawsuits, 7-11 complaints, 7-Eleven Michael Governa, Stefanie Governa, Governa v. 7-Eleven, 7-Eleven New York lawsuit, franchisees as employees, 7-Eleven litigation, 7-eleven franchise complaints, Marks & Klein law firm, attorney Jerry Marks, SEI, 7-Eleven Inc., Seven and i Holdings Co

Comments

22 Responses to “7-ELEVEN Franchise: Franchisee Sues for Fraud, Labor Violations, Unfair Dealings”

  1. fed up fred says:

    I don’t think this scenario is unusual. In fact it is quite common.

  2. Jane W says:

    Just heard the great news that the entire Japanese management of Kumon North America, Inc., was terminated by the parent company KIE Japan for financial irregularities. The fired team consisted of Akira Hamanaka (President), Atsushi (KUMA) Nose (EVP), Masaki Katsumata (COO) and Taka Yamauchi (VP – Corporate Communications). This is a great moment for all of us KNA franchisees who have seen our growth rates tumble and are struggling since the arrival of this management team from Kumon Asia in 2011. The team was unpopular among franchisees and staff. Poor communication of policies, shutting down Junior Kumon, new worst advertising agency Dentsu, cutbacks in subsidies and elimination of Cosmic Kumon were some of the wrong policies that hurt franchisees in the U.S. This news thus comes as a welcome surprise by all US, Canadian and Mexican franchisees.

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  3. H Kim says:

    Finally Japan has woken up to the reality of their Japanese minions in USA. The news of the firing of the termination of the top Japanese management in Kumon is welcome news for franchisees and staff together. Referred to as the “gang of four,” in the company grapevine, they were looked upon as disingenuous and incompetent. The “gang” consisting of Akira Hamanaka (President), Atsushi (Kuma) Nose (EVP), Laszlo Katsumata (COO) and Taka Yamaouchi (VP) were hated by staff and franchisees alike, and were being investigated by auditors from Japan for some time for their financial scandals involving award of contracts to third-parties in Philippines and Indonesia, and most recently the U.S. The gang also spearheaded the drive to eliminate IAKF the independently run franchise association headed by its able President, Nicole Smith, whom the “gang” termed as “rogue.”

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  4. KP says:

    The entire Japanese management Kumon Learning centers including President Akira Hamanaka and the notorious Atsushi (Kuma) Nose was fired last week for fraud and misuse of funds for personal gains.

  5. Ron P says:

    No one can imagine the horror and stress that we as staff had to endure under Atsushi (Kuma) Nose. He was the worst manager I’ve ever seen in a workplace. He violated all the principles, legally and ethically. The Akira Hamanaka was intellectually challenged and probably had an IQ of 70.
    There are good people in the company, but they are not in power positions. The board is unethical. The unethical business practices hurt the business and good people. The company is bleeding……

  6. NG says:

    Japanese management at Kumon North America exit – good news for everyone.

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  7. Guest says:

    The new President is also “Japanese”. Doesn’t the company trust the Americans to run the place despite the scam that just unfolded?

  8. Wendy B says:

    If you’re reading these reviews as somebody who is contemplating franchise at Kumon, let me try to talk you out of it. I was once in your position. I heard that the company was terrible and the job was stressful. And I thought to myself, the people complaining about that are probably just lazy. I’m smart and work hard, so this won’t be a problem for me.

    But you really don’t understand until you’ve been in the trenches yourself: becoming a Kumon franchisee is exactly like being in an abusive relationship. The whole time, the company will tell you that you are awful, that you can’t keep up because you’re not working hard enough or you’re too inefficient, and that if you want to leave, it’s because you aren’t a strong person. And just like in an abusive relationship, you slap yourself whenever you think about leaving, because leaving would be betrayal, would be a sign of ingratitude for everything the company has done for you.

    The firing of Akira Hamanaka and Atsushi (Kuma) Nose will surely bring change in a system that has been plagued by nonsense and hate.

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  9. Guest says:

    Japanese managed companies are all the same. Worse are non-Japanese thatact like them. I ddon’t know much about Kumon but I once worked for a Japanese company and was sick of it as hell. So if you guys think that things are going to change for you with the firing of this Akira Humming-bat or the At Sushi-nose, well God help you guys.

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  10. Sarah G says:

    It would be interesting to know much Kumon franchisee’s money was involved by Akira Hamanaka and Atsushi Nose? I am wondering what the CFO Mr. Joe Nativo was doing while all this was going on? While we franchisees suffer due to high costs, the company forever wastes our money on mega events. Doesn’t the company have auditors? Why were the auditors not diligent enough?

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  11. Abandr Ato says:

    I had been looking to open a Kumon center but not any longer. The Kumon franchise system is mired with problems. I was asked to visit a few Kumon centers before applying. I visited a few and met with the owners too. All of them advised that I don’t open a Kumon learning center. Most franchisees told me that Kumon’s expectations are unrealistic and franchisees not understand what is expected of them. I met a few potential franchisees at Kumon seminar. I found that many were entering Kumon without doing their homework – almost half I met, said they were planning to get into Kumon based on their gut feeling. Many did not understand what was involved.

    Moreover the franchisees told me that other franchisees compete with them directly and Kumon center v. Kumon center battles are common. Older franchisees berate newer francisees at Kumon. The product is of poor quality, the company is Japanese run so everything takes forever to get done. More over, some of the franchisees I met did not even know how much they were earning in a year. Some told me that there is a very high franchisee turnover and most of them were moving on to Eye Level.

    Based on all of these, I have decided to move on from a Kumon math and reading center.

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  12. Bala says:

    We hope the company recovers the millions embezzled from Kumon North America by Akira Hamanaka, Atsushi Nose.and Takatoshi Yamauchi. What was the finance department doing while the Japanese directors were scheming the company? This is Tyco all over again. While franchisees suffered KNA’s directors made millions? What were the auditors doing? What was the CFO, Joseph Nativo doing? Will all the money embezzled by Hamanaka and Nose be recovered?

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  13. Guest says:

    Interesting info on here about Kumon.. where is it coming from? I’ve been wondering what happened after hearing about their departure, but hadn’t heard any of this. How legitimate are these claims?

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  14. G. K. says:

    I was wondering why Kumon gripes appeared on the 7-Eleven page, then it hit me that both are Japanese owned franchise corporations. No surprises there.

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  15. Guest says:

    Good the President and Vice-Presidents were fired in September 2013. Whoever ratted on them did all of us instructors a favor. It’s time to investigate the rest of KNA’s directors too, including the new president and his favoritism to certain Chicago franchisees. We need our advertising money back or royalties cut in half

  16. Guest says:

    When Kumon first opened its doors in the U.s in 1980s, Asian women flocked to their “church basement operated” afterschool tutoring franchise. Since then, however, Kumon is dwindling and franchises have closed, due to several major complaints about the Japanese management of Kumon in the U.s. Kumon is too inflexible when it comes to tutoring, making what Sylvan and Huntington have to offer more appealing. Across the US instructors complain that Kumon employees know very little about the Kumon method, and sometimes seem to know nothing about children’s education. My field staff is a fresh college grad who is clueless. Any question I pose to my field staff is met with blank stares. Corporate staff in Teaneck are uknowledgeable to say the least. You ask them a question, they give you an incoherent answer. Yet, company keeps harping that they spend millions on training. Just another Kumon lie. New Kumon Instructors like me here in the U.S are just as disgruntled as some Kumon Instructors in other countries when it comes to an unwillingness to stray from the original Kumon model and try new things for kids. But, veteran Instructors are allowed to do anything that they please even cheat the company and bad-mouth newer instructors. There have also been some complaints that franchise owners have been cheated out of profits. The latest corporate scandal at Kumon North America by Akira Hamanaka, Atsushi Nose, Takatoshi Yamauchi etc., seems to indicate that the company is completely out of control. Just a short while ago I read an article titled “Kumon names new leader at North American HQ in Teaneck – Akira Hamanaka, who previously headed the Japan-based Kumon’s regional headquarters in Singapore, moved to New York City and took over the Teaneck office” and months later While franchsiees like me struggle to pay rent, directors seem to be having a merry time at our expense and are now fired. With royalties close to 40%, my advice to everyone thinking about a Kumon center, please don’t make the mistake that I made. There are better opportunities out there than Kumon. #math, #reading, #tutoring, #learning centers, #early childhood education, #individualized, #independent study, #gifted students, #homework

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  17. Anon says:

    It was shameful that the Kumon management decided to give the jerk president Akira Hamanaka a send off party after all the graft. We are doomed. Wondering where the other cons are hiding.
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  18. Guest says:

    Kumon is going broke, it’s no secret that it’s been that way from some years now.

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  19. JR says:

    Scams at Kumon happen when scoundrels run the company.

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  20. Vicky says:

    What is the reason that President Mino Tanabe and Joe Nativo have launched an investigation against up IAKF members and our beloved leader Nicole Smith and famous instructor from Sacramento? Why are staff asked to gather information on IAKF regional members and send them to Mr. Lupsha? They should instead have their investigators investigate themselves for defrauding the company. Will this targeting of us instructors every stop?

  21. newer says:

    Does everyone forget that the biggest mess was from Savio Rebelo? Most of instructors and staff were bullied and threatened by Savio.

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  22. NT says:

    I guess Kumon is not the small business I need to own. Reading the comments here it looks like there are too many problems with it.

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