7-ELEVEN Targets Portland, OR Franchise for Seizure
The number of 7-Eleven franchise store seizures by 7-Eleven, Inc. continues to grow.
(UnhappyFranchisee.Com) One of the latest targets is the 7-Eleven franchise of Danny Wong, (7- Eleven Store No. 19909D) which is located at 1931 North Lombard, Portland, Oregon.
According to Wong’s franchise agreement, he paid a franchise fee of $126,600 and a down payment of $22,000 on corporate financed inventory and other fees and expenses. He entered into an agreement to split profits with 7-Eleven, Inc. approximately 50/50, depending on volume.
January 27, 2014, attorneys for 7-Eleven, Inc. filed a complaint against Danny Wong in the United States District Court of Oregon, Portland Division.
In 7-Eleven, Inc. v. Danny Wong, 7-Eleven, Inc. is requesting a declaratory judgement forcing Danny Wong to surrender his store on February 10, 2014, and pay 7-Eleven, Inc. attorney fees, costs and expenses and interest.
Interestingly, a 2012 story in the Oregonian (As 7-Eleven expands across Portland, even a North Portland franchise joins neighborhood opposition) stated that 7-Eleven franchisees were joining with community groups in opposing 7-Eleven’s Portland expansion.
The story quotes the brother of a franchise owner who was opposed to the opening of another store on Lombard Street, ten blocks away from their store.
Notable is the brother’s contention that 7-Eleven, Inc. is indifferent to its franchisees’ welfare:
Saleh said the company claimed it wouldn’t build another store within a half-mile of theirs. Now he and his brother fear they could lose up to 50 percent of their customers.
“(Corporate officials) don’t care,” said Saleh, who said franchises split profits 50-50 with the parent company. “They will make money either way.”
Read the entire complaint here: 7-Eleven, Inc. v. Danny Wong (PDF)
Here’s an excerpt (with first section and paragraph numbers deleted):
UNITED STATES DISTRICT COURT DISTRICT OF OREGON
7-ELEVEN, INC., a Texas corporation, Plaintiff, v. DANNY WONG, an individual, Defendant.
COMPLAINT (Declaratory Judgment – 28 U.S.C. § 2201(a))
…On March 9, 2007, Franchisee and 7-Eleven entered a franchise agreement, ancillary agreements and addenda (collectively the “Franchise Agreement”) for 7- Eleven Store No. 19909D, located at 1931 North Lombard, Portland, Oregon, 97217-5641 (“Store 19909D”). A copy of the Franchise Agreement is attached as Exhibit 1.
Generally, the Franchise Agreement licenses Franchisee’s use of 7- Eleven’s system and marks and also leases to the Franchisee the store property and equipment, which are owned by 7-Eleven. In exchange for these benefits, Franchisee agrees to pay to 7- Eleven a percentage of its gross income.
The Franchise Agreement regulates the relationship between Franchisor and Franchisee and provides for, among other things, certain minimum merchandising obligations, store appearance and image standards and financial net worth requirements.
If Franchisee fails to comply with the Franchise Agreement, under paragraph 26, 7-Eleven may notify Franchisee of its violation and, as the case may be, permit Franchisee a period of time to cure that violation.
Between September 15, 2011, and January 16, 2013, 7-Eleven notified Franchisee of at least five separate instances of material breach of the franchise agreement.
Subsequently, Franchisee continued to violate the Franchise Agreement by not maintaining the store premises to minimum standards, failing to timely deposit cash receipts and failing to carry a reasonable and representative quantity of required merchandise categories.
Under Paragraph 26(b) of the Franchise Agreement, if Franchisee has received more than three notices of material breach in the preceding two years, 7-Eleven may terminate the franchise agreement immediately.
In recognition of 7-Eleven’s right to immediately terminate the Franchise Agreement and to secure its forbearance of that right, on June 7, 2013, Franchisee and 7-Eleven entered into the Compromise and Settlement Agreement (the “Settlement Agreement”) attached as Exhibit 2. This Settlement Agreement was the result of an arms-length negotiation between 7- Eleven and Franchisee, both of whom received the advice of counsel.
Generally, the Settlement Agreement permits Franchisee’s continued operation of Store 19909D for a period of 180 days during which time Franchisee has the opportunity to sell its interest in Store 19909. Provided there were no further breaches of the Franchise Agreement and Store 19909D was unsold at the end of six months, 7-Eleven could, in its discretion, extend the sales period by 60 days.
Upon the expiration of six months from entry into the Settlement Agreement, in or around December of 2013, 7-Eleven agreed to extend the sales period to February 10, 2014.
Under the Settlement Agreement, Franchisee promised to surrender Store 19909D to 7-Eleven upon the earlier of (1) a default under the Settlement Agreement; (2) the end of the sale period, with no pending sale; or (3) the effective date of either an agreement between 7-Eleven and the Prospective Franchisee or a disqualification of the Prospective Franchisee by 7- Eleven.
On or around January 16, 2014, Franchisee stated to 7-Eleven that (1) he would violate the Settlement Agreement by refusing to surrender it upon expiration of the sales period; (2) his attorneys would assist him to this end.
All conditions precedent to this action have occurred, have been performed or have been otherwise met.
COUNT I – DECLARATORY JUDGMENT
7-Eleven re-alleges paragraphs 1 through 21.
This is a claim for declaratory relief under 28 U.S.C. § 2201(a) and Rule 57, Federal Rules of Civil Procedure.
This action presents an actual and substantial controversy within this Court’s jurisdiction under 28 U.S.C. § 1332 as the parties are of diverse citizenship and Store 19909D’s real property, equipment and going concern value is far more than $75,000.00 in amount.
An actual, justiciable controversy exists concerning Franchisee’s obligation to surrender Store 19909D under the Settlement Agreement.
Both an actual injury and a substantial likelihood of future injury to 7- Eleven exist because Franchisee has repudiated the Settlement Agreement by stating that he would not honor its terms upon expiration.
WHEREFORE, 7-Eleven requests that this Court enter judgment against Franchisee as follows:
a. A judgment declaring Franchisee in breach of the Settlement Agreement and declaring that Franchisee must surrender Store 19909D upon the expiration of the sales period;
b. Injunctive relief enforcing the declaratory judgment and directing Franchisee to surrender Store 19909D and to comply with his other obligations under the Settlement Agreement;
c. Its reasonable attorney fees, costs and expenses incurred in this action;
d. An award of post-judgment interest; and
e. Such further relief as this Court deems just and reasonable. DATED this 27th day of January, 2014.
TONKON TORP LLP
By: s/Steven D. Olson Steven D. Olson, OSB No. 003410
Paul W. Conable, OSB No. 975368 Attorneys for Plaintiff 7-Eleven, Inc.
Some 7-Eleven franchise owners claim that 7-Eleven, Inc. is on a campaign to “clean house” and is targeting East Asian and Indian franchisees for expulsion from the system.
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7 thoughts on “7-ELEVEN Targets Portland, OR Franchise for Seizure”
We too were given LON’s for not having “reasonable and representative quantities” of SEI mandated products. We “categorically and specifically” denied their allegations and demanded they demonstrate for definition and operational purposes “exactly” what those numbers were and how they applied to store sales and our rights as independent contractors. SEI, our Market Manager, the Division Vice-President, and the Division Manager could not present us with such exact qualifying information/data and therefore did not again attempt to issue or enforce such ridiculous and arbitrary standards.
In our opinion: IT IS TIME FOR ALL 7-ELEVEN FRANCHISEES TO STAND UP TO THE EVIL DEMONS FROM THE EAST AS WELL AS THEIR AMERICAN GESTAPO ENFORCERS!!!!!!! ALL Franchisees need to support, in voice and through their wallets, every legal action currently being fought against SEI. I know times are tight and so are the profits SEI promised when you franchised your stores, but you can either lose that money when JOE and company single you out, or you can join forces and become a voice the courts can no longer ignore. Picture yourselves fighting SEI alone and you will quickly see the nightmare others are experiencing. Perhaps this alone will allow a sense of urgency to settle upon all Franchisees and they will work together to put a stop to all the abuses being meted out by SEI.
i have been trying to fight this case but it is getting expensive and hard to do alone. i dont think it is right for them to take my store the way they did since we are a partnership i do not work for them. i agree that the current franchisees should stand up againt SEI. i know there have been many store that has been seized in portland or and probably many more will be seized in the future. it is time to stand up against them as a group instead of individuals.
SEI also said they will give me time to sell the store. i found a buyer with a intent to buy notice signed by the buyer, provided the buyer with all the contact information to 7-Eleven and sent him to SEI to get approved for my store and they turned around and sold him a corporate store. So it was also a lie when they said they were giveing me time to sell because when i find buyers they took buyer away from me, making it imposible to sell the store as well. now i lost my store left with nothing and the hard earned money my family have saved up for the last 20 years because of this. especialy i do not agree with many of those breaches i received. as workingboy have noted what is a minimum standard for the store. for the last year all my store walks from the monthly inspection have been above 90% i beleive that is above the minimum standard. i also had 3 FC with in a year and they all had different standards for how the store should be and i get hit with something everytime i get a new FC because they dont think it was up to their starndard but it was what the previous FC told me to do.
My biggest mistake in life has been getting involved with 7-Eleven in the first place. When they want a raise they just come up with some lime excuse to increase my expenses and their profits. All of a sudden the franchisees ares stuck with half the swipe fees after decades of corporate picking up that cost. Now, when asked, 7-Eleven states they will not tell us what happens to the 1-1/2% charged for advertising nor do they feel they are obligate to divulge that information. I can tell you what every competitor’s specials are but 7-Eleven’s answer is to hang more posters in the window (that they get from the vendors for FREE). Count me in on any litigation against corporate. While I’ve never received an LON or breech, I can spot a turd on the floor as good as anyone else. I’m dead tired of working to keep Joe and and the Japanese in luxury and have put my store up for sale. I’m going independent! 7-Eleven blows!!!!
Hey Joe…don’t know what version of agreement you are on but be careful of a “post term non compete clause” SEI wants control even when you leave. They you will reveal “trade secrets.”
If this business is simplified and made user-friendly by automation, then it could be a great venture. Yes it is 24 hour operation which has its own pitfalls. Hard to find quality labor.
Problem with that is genius factory in Dallas only thinks their way is one and only way