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As 7-Eleven franchisees begin their 38th National Convention in Las Vegas on Sunday, the buzz will not be on Slurpees, cigarettes and sodas. Members of the National Coalition of Associations of 7-Eleven Franchisees have bigger issues on their minds, that of criminal indictments and corporate litigation against their fellow members.
As previously reported by Blue MauMau and countless other national media, Homeland Security seized fourteen 7-Eleven stores in New York and Virginia on June 13, arresting nine owners and managers with harboring and hiring some fifty illegal immigrants from Pakistan. Although the franchisor is not named as a defendant, the grand jury indictment describes the role of the world’s largest convenience store chain “throughout the course of the conspiracy and the execution of the scheme.”
The U.S. Attorney for Eastern District, Brooklyn, New York said franchisees are accused of taking more than $180 million in revenue by running a “modern-day plantation system” built on unpaid laborers using sham Social Security numbers. Some numbers had been stolen from children and the dead. A New York Times report stated, “Prosecutors are seeking $30 million in forfeiture from the stores AND the corporate parent.”
Labeling their action as “one of the largest criminal immigrant employment investigations ever conducted by the Justice and Homeland Security Departments,” federal agents said they were going to investigate another forty 7-Eleven franchise stores in New York and elsewhere in the following week.
7-Eleven’s response or lack thereof
To get an update on any new actions taken by federal authorities, I called 7-Eleven Inc. last Tuesday. Margaret Chabris, 7-Eleven’s director of communications, told me the company had nothing more to tell. “Everything that we have had to say has already been reported,” she stated. She added that most of the information on the investigation was “fairly public.”
Ms. Chabris said she was not aware of any other stores than the previous fourteen being raided or closed down. When asked if Homeland Security had been in touch with 7-Eleven, she responded, “No, I’m not going to be discussing the specifics of a matter that is under federal investigation.”
The director of communications also rejected my request for an interview with CEO Joseph DePinto or other company officials. “Our company executives are traveling this week. They are out of town,” she stated. When I asked about the following week, she insisted, “That is not likely.”
Franchisee attorney Justin Klein of Marks & Klein stated in a previous interview that there are “huge potential problems for the franchisor where they are allegedly complicit, even by association, with the alleged misconduct.”
In light of that statement and in talking with franchisees, current and present, I outlined pertinent issues that seemed to surround, directly or indirectly, the criminal investigation. After emailing the issues to CEO DePinto and COO/executive VP Darren Rebelez, through Margaret Chabris, I received no response. Regardless, I feel the issues and questions asked are worth reporting.
Issue #1: Is the franchisee an independent contractor or actually a defacto employee?
News articles stated that 7-Eleven has a considerable amount of control over its franchisees providing payroll and other accounting services to them. Mentioned, was 7-Eleven’s procedure of allowing store owners to access the company’s automated payroll service, and input their employees’ personal identifying information. New York Times stated, “Working with the data provided by the defendants, 7-Eleven processed the payroll and, after subtracting certain expenses, issued wages in the form of checks, direct deposits or debit cards.” The U.S. Attorney said there was “little to no effort to insure the integrity of their payroll system.”
Issue #2: What is 7-Eleven’s policy on determining which franchisees qualify for additional stores?
The lead franchise owners in the indictments in Long Island, husband and wife Farrukh and Bushra Baig, owned twelve 7-Eleven stores in their region. In interviewing franchisees in your system, I have learned that the Baigs were awarded stores ahead of other franchisees, who had been with the system longer, and equally qualified or better.
Issue #3: How closely does 7-Eleven corporate monitor franchisees’ operations, when visiting their store every week?
7-Eleven takes pride in providing franchise owners with products, equipment, services, and a support structure they need in running their stores. Corporate field consultants make weekly visits to individual stores to monitor franchisee activity.
Issue #4: Are franchisees struggling to be profitable with their stores bringing in $800,000 or less in gross revenue?
Some franchise owners say that a typical franchisee doing $800,000 a year or less in gross sales has a hard time surviving financially in the 7-Eleven system.”
As a reporter, I have been covering franchisee issues in the 7-Eleven system for many years. From the $1 billion franchisee class-action lawsuit against 7-Eleven corporate in 1993, claiming fraud related to kickbacks and other issues, to NCASEF fighting to retain the rights of store owners under their current franchise agreements in, all while 7-Eleven fought to gain more control.
In keeping score, I think the world’s largest convenience store chain is continuing to win its ongoing battle against franchisees. When has 7-Eleven ever had so much control over franchisees operations? When has it ever treated their so-called “independent contractors” more like employees? And when has it ever chipped away more at franchisee profitability than in today’s current situation?
7-Eleven management is becoming more vindictive and retaliatory in their actions against franchise owners. The corporation knows exactly how to deal with strong-willed franchisees who dare to speak out against them alone.
How can 7-Eleven, Inc. claim to exercise “Servant Leadership,” meaning to serve, lead, and do what’s right? That philosophy of a servant-leader is one who “shares power, puts the needs of others first and helps people develop and perform as highly as possible.” I don’t think so.
It’s time for store owners to take back their businesses, and their National Coalition of Associations of 7-Eleven Franchisees. What better time than now for franchisees to come together and fight for their rights!