7-Eleven Discriminates Against Its Franchisees, Claims Lawsuit

7-Eleven Discriminates Against Its Franchisees, Claims Lawsuit

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Three weeks before Christmas last year, Dilip and Saroj Patel had an alarming meeting with two 7-Eleven corporate officers at their Riverside, Calif., 7-Eleven franchise, which the Indian American couple had owned and operated for nearly two decades.

The elderly couple had received a call from 7-Eleven corporate headquarters the night before. “They told my dad, ‘we need to meet with you immediately,’” Dev Patel, the couple’s son, told India-West. Most alarmingly, Dilip was told to bring his wife Saroj, who had not really been involved with the store for some years, according to Dev Patel.

Arriving at the store, Dilip and Saroj Patel found themselves confronted by Steve Kellison and Kevin New of 7-Eleven’s Assets Prevention Department. “Dilip, we’re going to take your store away today,” Kellison allegedly said, according to Patel.

Kellison and New accused the couple of committing fraud, including the crime of using free Slurpee coupons to double charge. They showed the Patels a hazy 10-second video clip, insinuating that they had evidence to corroborate the accusations.

“They used storm trooper intimidation tactics,” charged Dev Patel, adding that his mother started to cry during the meeting.

Dilip came out to talk to Dev, and told him that Kellison and New wanted them to sign papers so that the corporation could take over the store. The Patels, who had spent the past 19 years working 18-hour days to keep the store afloat, would receive no compensation from the takeover.

Kellison and New allegedly told the couple that, should they refuse to sign the papers, the 7-Eleven corporation would “gut them from the inside out,” by reducing their ability to purchase required products to stock the store.” Kellison and New also allegedly threatened the couple with reducing their ability to make payroll so that employees would quit.

“Eventually, we will gut your store,” they allegedly said, according to Dev Patel. The Patels signed the papers, losing a lifetime of hard work and all their assets, worth an estimated $600,000.

“Their whole point was to sell our store,” Dev Patel vehemently told India-West. “They are targeting our people — Indians and Pakistanis — in higher dollar real estate markets, taking over their stores and reselling them for higher profits,” he claimed.

More than 20 percent of 7-Eleven’s bottom line last year — an estimated $140 million to $200 million — came from flipping stores, estimated Patel. “We work long, we work hard, we have a respect for authority. We put everything into this business and then 7-Eleven comes along and just takes it away,” said Patel, adding that his mom and dad — both seniors — have no idea what they will do next.

The Asian-American Convenience Store Association, founded in Tampa, Fla., in 2005 by Satya Shaw and currently chaired by Chandra Patel, estimates there are 132,000 convenience stores across the nation; 80,000 are owned by Indian Americans, mostly originally from Gujarat. On the association’s Web site, Chandra Patel said Gujaratis are very enterprising people. But when they come to the U.S., they cannot find a job because of limited English skills. Buying a small convenience store — with a small investment, often provided by earlier immigrant members of the family — allows them to work and eventually provide seed capital for newer immigrant family members to start businesses.

On July 11 — as 7-Eleven (also known as 7-11) stores across the nation were giving away free Slurpees to celebrate the company’s birthday – the Franchise Owners Association of Greater Los Angeles filed a lawsuit against the giant, multinational corporation, alleging racism, ageism, and unscrupulous business practices. The suit said it represents 1,200 franchisees in the area, the majority of whom are South Asian American.

Jas Dhillon, vice president of FOAGLA, told India-West the Patels’ experience with the corporation involved a practice known as “churning,” in which long-time owners of 7-Eleven franchises in profitable, high-rent markets are forced out with allegations of stealing from their own business. 7-Eleven has filed RICO (Racketeer Influenced and Corrupt Organizations Act), or racketeering or participating in corruption, claims against many of its franchisees, in its attempt to buy out profitable stores.

“They are targeting people who are old — easy prey,” stated Dhillon, himself a 7-Eleven franchisee who grew up working in his parents’ store.

This year, the Dallas, Texas-based corporation, which was bought over by the Tokyo, Japan-based Seven & I Holdings, intends to take over 120 stores, alleged Dhillon, earning a profit of $60 million without expending $1 of capital.

Kurt McCord, a former corporate investigations supervisor with 7-Eleven, Inc., delivered evidence for the lawsuit, saying that the corporation was using “unfair, predatory practices” to flip its stores.

“Using an internal team, masquerading as Assets Protection (loss prevention), 7-Eleven set up an annual number of stores to take back, prioritizing locations in the highest retail areas or, in some cases, operated by respected franchisees who had spoken out against the giant corporation’s corrupt practices,” said McCord.

7-Eleven, Inc., used tactics such as prolonged interrogations of franchisees, “cultural shaming,” depriving them of food and water during interrogations, third-degree questioning, and false imprisonment, claimed McCord, who quit working for the corporation last year.

Franchisees were also threatened with immigration fraud, he alleged.

Dhillon released to India-West a 2014 internal memo which hinted to franchisees that their every move would be watched by the corporation.

“As part of our ongoing enhancement to the store's video system, we will be beginning the process of connecting (your) current DVR to the 7-Eleven network. This letter is to notify you that an agent of Powerhouse Retail Services has been authorized by 7-Eleven to perform this work in your store,” read a memo signed by Asset Program manager Alan Lott.

Dhillon claimed this would allow 7-Eleven to further intimidate their franchisees during the corporate takeover, by suggesting they had video evidence of owners committing crimes.

The 7-Eleven corporation declined to respond directly to India-West’s questions, but did provide a statement regarding the suit, saying: “The allegations made in this complaint are false. 7-Eleven is proud of its very diverse, independent franchisee population.”

USA Today named 7-Eleven one of the Top 50 Franchises for Minorities in 2013, said the corporation, adding that it has also received recognition as one of the top franchisee opportunities by Professional Woman’s Magazine, Hispanic Network Magazine and BLACK EOE Journal.

“7-Eleven is determined to protect our guests, employees and other franchisees by ending the relationship with franchisees that violate the law or the franchise agreement, where appropriate. The company is confident in the thorough and lawful system that it has in place to accomplish this.”

“The unfortunate fact is a few franchisees have been caught violating the law or the franchise agreement. This complaint is brought by a small number of individuals who are attempting to thwart 7-Eleven’s efforts to deal with these franchisees. The company has a solid record of prevailing in court on these matters because of its thorough investigations,” read the statement, adding: “Honest, hardworking, independent franchisees are the backbone of the 7-Eleven brand.”