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NJ Lawsuit Claims 7-Eleven Franchise Program is an Employment Scam

July 30, 2013

by Sean Kelly  Individuals invest hundreds of thousands of dollars with the dream of owning their own businesses and being their own bosses as 7-Eleven franchisees.

A NJ lawsuit contends that all they’re really buying are low-paying jobs with no equity, no benefits, no overtime and a dishonest, abusive boss.

(UnhappyFranchisee.Com)  A lawsuit filed in NJ District Court by Red Bank, NJ-based Marks & Klein on behalf of 7-Eleven franchisees alleges that “7-Eleven intentionally misclassifies its store operators as franchisees in order to increase corporate profits and avoid paying overtime, medical and pension benefits, FICA and other state and federal employer taxes.”

The lawsuit, filed in NJ District Court on July 30, 2013 by Marks & Klein attorneys Jerry Marks, Louis Tambaro, and Evan Goldman, alleges that 7-Eleven, Inc. is running a fraudulent scam that abuses its store operators and violates the New Jersey Fair Labor Standards Act, the New Jersey Franchise Practices Act, and the New Jersey Law Against Discrimination.

The plaintiffs in the case are New Jersey 7-Eleven franchise owners Tamer G. Atalla, Neil Naik, Hemang Patel, Jayesh Patel, Kalpana B. Patel, and (as yet unnamed franchisees) John Does 1-200.

The defendants in the case are Dallas-based 7-Eleven, Inc., a wholly-owned subsidiary of Seven-Eleven Japan Co., Ltd.;  Tokyo-based Seven-Eleven Japan, a wholly-owned subsidiary of Seven and i Holdings Co. Ltd.; and Seven and i Holdings Co., Ltd, a Japanese corporation.

7-Eleven Franchise on UnhappyFranchisee.ComIn a nutshell, the lawsuit (which is posted as a download below) alleges that 7-Eleven, Inc. controls its franchisees to such an extreme degree that they are not true business owners, just unpaid, poorly treated employees.

As these individuals have been tricked into buying (really crappy) jobs, the suit alleges, 7-Eleven, Inc. should pay its NJ franchisees (among other things) compensatory damages, consequential damages, punitive damages, and attorney’s fees & costs.

Additionally, since they have been working 60-80 hours per week for years as uncompensated employees, 7-Eleven franchisees in New Jersey should be paid recoupment of overtime and other employment benefits withheld for the past three years, the suit alleges.

The potential cost to 7-Eleven, Inc. could be staggering. And that’s just New Jersey.

See all our 7-Eleven posts:  7-Eleven on UnhappyFranchisee.Com

Are 7-Eleven Franchisees REALLY Business Owners?

While 7-Eleven promotes its franchise opportunity as a way to own one’s own business, the lawsuit alleges that 7-Eleven, Inc. asserts such total domination over store operations that franchisees lack the decision-making control that is the hallmark of a true business owner.

Franchisees’ day-to-day activities are so aggressively micromanaged and controlled by 7-Eleven’s Market Managers and Zone Managers, the suit alleges, that franchisees (irrespective of their success or the number of 7-Eleven locations they “own’) have no actual discretion or independent decision- making authority in running their locations.

The suit states:

7-Eleven purposefully mischaracterizes its relationship with franchisees to avoid labor and employment laws. This employment relationship is evidenced by the high level of control that is exerted by 7-Eleven through:

(a) Regulation of vendors and product supply;

(b) Processing franchisees’ payroll through its own internal payroll system;

(c) Setting of pricing, advertising and promotional materials;

(d) Intense daily oversight by Market and Zone managers of all store operations;

(e) Requirement that store operators wear corporate uniforms;

(f) All store bookkeeping and accounting done by 7-Eleven corporate;

(g) Failure to pay overtime or other corporate benefits, such as pensions or medical, to store owners who routinely work 80+ hours per week;

(h) Franchisee/store managers cannot withdraw money without corporate approval.

(i) In many locations, store temperature is even set by 7-Eleven corporate in Dallas, Texas.

The suit contends that 7-Eleven operators perform the same basic functions and duties as their competing store operators at the 300-500 Wawa and Quick Chek convenience stores in the New Jersey/New York area. However, Wawa and Quick Chek operators “are properly classified as employees.”

The suit alleges that 7-Eleven’s neglect of the parties’ true business relationship  has deprived 7-Eleven franchisees of employment-related benefits, including, but not limited to:

  • Federal Insurance Contributions Act (“FICA”) tax;
  • Social Security Withholding;
  • Unemployment Withholding;
  • Health Insurance; and
  • Workers’ Compensation Insurance.

Other Ways 7-Eleven Allegedly Mistreats Franchisees

The lawsuit also contains allegations of other unfair and abusive franchise practices by the Japanese owned and controlled 7-Eleven, Inc., including:

  • 7-Eleven raised franchise fees so high that franchisees can’t sell their stores
  • 7-Eleven bullies and intimidates its franchise owners
  • 7-Eleven franchise owners “live and work in fear”
  • 7-Eleven targets and harasses certain franchisees based on race and country of origin
  • 7-Eleven has retaliated against franchisees who have spoken out against systemic racial discrimination
  • 7-Eleven forces franchisees to purchase inventory at inflated prices
  • 7-Eleven forces franchisees to purchase inventory they don’t want or need
  • 7-Eleven blames franchisees for I-9 non-compliance but doesn’t provide E-verify capabilities, as do other franchise chains
  • 7-Eleven unilaterally terminates franchises without notice or an opportunity to cure defaults
  • 7-Eleven enters franchisees’ locations and seizes necessary equipment including lottery machines & security systems
  • 7-Eleven cuts off food, supplies, and equipment from vendors, at its discretion
  • Franchisees work 60-80 hours per week, yet 7-Eleven neither shows them the respect due business owners, nor pays them overtime as they are required to do for employees

READ THE FULL COMPLAINT HERE:  Atalla, Naik, Patel, Patel et al v. 7-Eleven, Inc., Seven-Eleven Japan, Seven and I Holdings Co. Ltd.

Writers:  Please credit UnhappyFranchisee.Com as your information source.  We’re a blog, but we have feelings too.  ;) Thanks.

Be sure to check back daily for new developments, posts and comments.

Also read:

7-Eleven on UnhappyFranchisee.Com

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

WHAT DO YOU THINK OF THESE ALLEGATIONS?  ARE 7-ELEVEN FRANCHISE OWNERS ACTUALLY EMPLOYEES?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

TAGS: 7-Eleven, 7-Eleven franchise, 7-Eleven lawsuit, 7-Eleven lawsuits, 7-11 franchise, 7-11 lawsuits, 7-11 complaints, 7-Eleven New Jersey 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

DISCLOSURE: A law firm mentioned in this article advertises or has advertised in our Franchise Attorneys Directory.

Comments

10 Responses to “NJ Lawsuit Claims 7-Eleven Franchise Program is an Employment Scam”

  1. Ex says:

    I appreciate the fact that atleast nj FZ’S got united and are fighting for their rights as independent contractors.i also believe that other out of state FZ’S will show their. Unity and fights as one group atleast for your own self respect.i am also relived finally that some group decided to atleast try to earn their self respect back
    This management currently that thinks they are boss
    In reality they are like Mafias they torture and force their fellow franchisees as their employees.personally I think we are slaves of 7-11 mafia system who probably operates from japan

  2. Bangal Tiger says:

    Time have came & I am congratuating these Franchise’s for standing for thir rights & respect. I belive American is land of Right & American Justice system will be valued these Franchise’s right, that was removed by this 100% Japanse owned Foreign invostor 7-Eleven Japan Inc Co, that has just here in our land United States Of America only to make nomey by stealing & Cheating/mistreating, to triple its investment over night in America. 7-Eleven Japan Inc,co must stop its mufia business prictice, restore Franchise’s right before it is too late. Do not forget as of 07/30/2013 all Franchise’s are getting united in all 50 states to file massive sued againt this dectator 7-Eleven Janan Inc Co . We like to see equal business prictice with respect. No more cheating or bullshit in American. Go Back to Japan Joe & prictice your bullies to Japanise citizens. No more Asian Slavery Business prictice in The Unted States of America.

  3. Mr. 2004 says:

    F O A’s unite for this cause, fight for our rights.
    They probably feel no one can touch them because they crafted a agreement that feels is immune from any legal action, but they are not above the law.
    Do you feel like a partner with 711?
    Do you feel threatened by your FC or Market Manager?
    Do your feel bullied?
    It’s time to get together and pass a message to Joe and Japan, we bought business not just a job.

  4. Viet Franchisee says:

    Dear attorney and plaintiffs:
    I am a Vietnamese, Asian franchisee. I owned the 7-Eleven store in [redacted], for more than twenty one years. Because I am Vietnamese. They didn’t like my accent, they didn’t like my look. They sent field consultant coming to my store, cultivated out of code dated products, took pictures and breached. Plus gas violation because I didn’t change the price on time. I had violated ABC. They made up another one so that they can force me to sell my store that I own almost 22 years. I will stand witness with all evidences that they discriminate against me. Please contact me so that I can provide pictures that prove they did it to me

    [redacted]

  5. Falcon says:

    It looks like same situation all FZ stores. The FC cannot do it without the company’s direction. If the contract is unfair, we must go to Washington DC to speak up. Right now SEI can do everything what they want. We are living America not China or Japan.

  6. arham says:

    i am from pakistan i own a store since 10 years when i got the store its was in very bad position i work very hard and bring the sale back up i did make a very good money but last 3 years my gp going down all fc was telling me to sell more food even i sell more food my gp was still suck
    even 10.31 .2013 end of my report my gp was 34.01 and when i check today its went down to 33.76%i realy think they cheat on us .

  7. raza says:

    @Arham
    They do not “cheat on us”. I am franchisee of 7 eleven for 3 years now and my current avg GP is 45%. Ask your field consultant to do his job and analyze data reports to see where your store is bleeding from. If you want, i can help you identify the problem. Respond back on this site, leave your email. For starters, look at write offs , look at inventory levels, look at cost of goods, look at your pricing, see if you can tweak the prices slightly on most items 10 cents or so. Your coffee GP should be at at least 65 percent below signs of theft, same for your fountain and Slurpee. There are so many things, but email me and ill tell you what report to email me back, then it is easy to isolate the issue.

  8. SINGH says:

    Yes, they do cheat us every day, they collect thousands of dollars from vendors to make them recommended. Franchisee agreement was 15 years not too long ago, new agreement is for 10 years long and we have to pay 100s of thousand dollars to renew it. Economy did not hit 7- only, it also hit franchisees. 7 – eleven keep cutting the corners and adding more on our shoulders. Couple years ago they start charging credit card processing fee to us, change the split up to 52%. They allways sing the power of one(plus selling).What for? So they can take 52% instead of 50.

  9. SINGH says:

    7- eleven is one way entery now ,One should must think twice before getting into it. They(7-11) show you a different picture of 7-eleven, big numbers, you are your own bose etc. Actully you pay them your life saving to become their slave. Your goodwill is ZERO the minute after you pay it, Their is no rule for franchisee fee.100 thousand or 500 thousand or even more? You will find out when you want to sell it.

  10. SupportSingh says:

    Singh is so right. This is like buying slavery with your own money under the pretense of fraud. America was pro slave and still is. The new name of slavery is franchising. Please let Indian communities and Indian newspapers know about this US systematic corruption. US government actually likes this because it propagates employment and money comes to the US. So many good Indians have been destroyed by this system.

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