7-Eleven Inc. Sues Franchisee Associations Coalition after Tradeshow Protest

February 22nd, 2018

7 Eleven

Just when you thought things could not get any worse for the giant 7-Eleven convenience store chain in the United States, with thousands of franchisees and the franchisor battling out their disputes in courts and in the public media, another bombshell hit last week at the end of 7-Eleven's annual convention and trade show.

California franchisees, filing a major lawsuit last November with the support of their coalition of franchisee associations, allege that they are being treated as employees rather than independent business owners. This lawsuit comes amidst a series of highly publicized Homeland Security immigration raids on franchised stores across the country in January, where arrests were made. Most recently, thousands of franchisees boycotted their franchisor's annual convention last week. In response, 7-Eleven filed a lawsuit against the National Coalition of Associations of 7-Eleven Franchisees (NCASEF), on the day the company's convention ended.

The lawsuit, filed in U.S. District Court for the Northern District of Texas on February 16, 2018, alleges NCASEF, based in Universal, Texas, is using the 7-Eleven logo as part of its identity, mainly on its website, despite not being authorized to do so by the parties' license agreement. It further claims that the coalition uses 7-Eleven marks and its SLURPEE mark and others identifying 7-Eleven products, identified in the lawsuit as "the Infringing Marks," in violation of their agreement. The franchisor asserts the coalition uses the marks when making derogatory statements regarding 7-Eleven Inc. and its services and that its actions constitute a material breach of the license agreement between them.

7-Eleven states in its complaint that it has notified NCASEF in writing that the license agreement was terminated. It asks that NCASEF immediately destroy all materials bearing the infringing marks it is using.

In addition to trademark infringement, it lists "dilution, unfair competition and unjust enrichment under the [federal] Trademark Act and for unfair competition, dilution, unjust enrichment and breach of contract under the laws of the state of Texas."

CSP Daily News, a convenience store industry online publication, reported Tuesday that 7-Eleven issued a response to its request for comment stating, "For most of the past three decades, 7-Eleven Inc. has enjoyed a productive working relationship with the leadership of the National Coalition of Associations of 7-Eleven Franchisees. We are disappointed that some within the coalition leadership have chosen to abandon that relationship and to make derogatory and inaccurate statements about 7-Eleven Inc. in violation of the coalition's license agreements with the company."

CSP said that it had also obtained an email that 7-Eleven sent to all of its franchisees, stating: "These statements [made by franchisee leaders] not only tarnish the brand, but they can also impact sales and threaten both the goodwill associated with the brand and the equity franchisees work so hard to build in their businesses."

The NCASEF, representing 7,000 franchised locations, last week boycotted 7-Eleven's Las Vegas annual convention after all of the 44 presidents of the Franchise Owners Associations (FOAs) that make up NCASEF voted unanimously not to attend the event, according to the coalition.

Michael Jorgensen, executive vice president of the coalition was quoted saying, "Our FOA representatives spoke and the coalition listened, voting to urge members to stay away." He said, "The relationship between 7-Eleven, Inc. and its franchisees is no longer even handed, and that is hurting the livelihood of those we represent."

7-Eleven responded to the boycott, telling CSP Daily News that their company had "just completed another successful annual 7-Eleven Experience with thousands of 7-Eleven franchisees from around the country," adding that the excitement amongst the attendees at this year's convention suggests a positive outlook for 2018.

In its legal complaint, 7-Eleven is seeking to recover triple the amount of damages it has sustained as a result of NCSEF's infringement, dilution and unfair competition, as well as attorneys' fees and costs, and prejudgment and post-judgment interest.

Pirkey Barber PLLC in Austin, Texas is representing 7-Eleven Inc. in the lawsuit.

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Janet Sparks

Janet Sparks is a freelance reporter who writes about complex issues related to the franchise industry, including the litigation between franchisors and franchisees.She is the former publisher of Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years, and was an independent reporter/columnist for a leading franchise magazine for over 10 years. Sparks is also a Forbes.com contributor to its leadership/franchise section. She can be emailed at jsparks@bluemaumau.org.

Comments

February 22, 2018 - 20:15pm

7-11 is a Joint Employer Model Case

I'm baffled why the SEIU mopes and their satellite ROC office mopes are chasing after McDonalds when 7-11 is the actual joint employer.

7-11 abuses its franchisees and ACTUALLY treats then like employees, and they make less than minimum wage after 7-11 sucks their accounts automatically every week by ACH

Tone deaf for 7-11 to sue its employees /"franchisees"

February 23, 2018 - 13:19pm

False zee who is actually employee is NOT same as joint-employer

An employee who his employer mischaracterizes as a franchisee so that the employer does not have to put them on the payroll is not the same legal issue as a joint employer, where both the franchise owner and the franchisor have joint say -- and thus joint liability when they do something wrong -- in the employment practices of the franchise owner's employees.

McDonald's has a joint-employer problem where McDonald's Corp may be liable for employees at a business owner's franchised restaurant because of the degree of control they have over that franchisee's employees; however, that problem is NOT what 7-Eleven franchisees are saying.

7-Eleven franchisees are saying that they are NOT business owners but rather that they should be recognized for what they legally are — i.e. employees of 7-Eleven Inc., which has miscategorized its employees as so-called franchised business owners so that it does not have to pay these individuals a salary and benefits. Under the law, employees should actually receive pay and benefits from an employer as opposed to business owners who control their business assets to try to eek out a return on their business investment.

If these so-called franchisees win, 7-Eleven Inc. either recognizes the franchisees for what they are, general manager employees in a company-owned store, and it gives them a salary and back pay. OR, 7-Eleven Inc going forward decides to back away from control of store-level cash flow and assets so that it does not have to multiply its payroll expenses by having the former franchisees now be paid a salary by it. It backs away enough so that the business owners truly own an independent business, where their owners have the ability to own and control those convenience stores, THEIR c-stores.

February 23, 2018 - 15:59pm

Unions won't help

Baffled visitor: "I'm baffled why the SEIU mopes"

That is a nice try to scare your franchisor that the boogeyman is coming so it should settle with franchisees. It won't work this time. The SEIU isn't interested in c-stores. Speaking of which, has the UFCW ever unionized a single c-store? They've been always focused on big supermarkets.

The SEIU's advocacy to look at joint-employer liability for QSR franchisors certainly won't happen now in this political environment. In case you haven't heard, any initial efforts by the NLRB to modernize the standard to allow franchisors less control of franchises have been essentially reversed.