Alarming Allegations Against 7-Eleven Chain
SACRAMENTO (CN) - The Japanese owners of the 7-Eleven convenience store chain stalked and intimidated older franchise owners in a calculated campaign to take over their successful stores, a franchisee claims in court.
Adnan Khan sued 7-Eleven, a wholly owned subsidiary of Seven-Eleven Japan Co., which in turn is a wholly owned subsidiary of Seven and I Holding Co., in Federal Court.
Khan describes himself as the successful operator of five 7-Eleven franchised stores in Southern California.
During his almost 34 years in the business, he says, he spoke on behalf of 7-Eleven franchisees and was a founding member of the chain's political action committee, serving as its president and as its chairman.
But Khan says his career with the company took an unexpected and at times frightening turn after the Japanese company that rescued 7-Eleven from bankruptcy in the early 1990s, Ito-Yokado, began to focus more intently on the chain's American franchises in the mid-2000s.
In 2005, Ito-Yokado formed Seven & I Holdings Co., and folded the 7-Eleven chain under its banners. Two years later, Seven & I Holdings announced its intention to expand its operations in the United States.
In his complaint, Khan says, this desire led 7-Eleven to institute a nationwide scheme to intimidate and improperly terminate long-term franchisees, with its initial efforts focused on New York, New Jersey and California.
These efforts included coercive and unlawful interrogations and stalking as a means of striking fear in franchisees, Khan says in the lawsuit.
"The sole purpose of acquiring franchisees' stores, such as Andy's - albeit through illegal means - is to 'take back' the stores, at no cost, with the intent to ultimately re-sell the store, for a fee, to a third party purchaser," Khan says.
He claims that as part of this effort, 7-Eleven hired scores of "Asset Protection" employees and tasked them with carrying out the intimidation campaign.
Khan says most retailers rely on their asset protection departments to limit losses from theft and shrinkage. Even-Eleven does things differently, he says.
To the company's owners, the asset protection department is a quota-based profit center to realize a significant return on its investment.
As a result of the pressure to secure profits, he says, asset protect employees resort to bringing dubious and fabricated charges "based on unlawful and intimidating searches of franchisees."
"The purported reason for the secretive hirings was to provide 7-Eleven with a secretive opportunity to investigate franchisees, and preserve the 'element of surprise' when an increased quantity of stores began being taken back," he says.
These efforts did not begin or end at his stores, Khan says. He claims 7-Eleven used a mobile surveillance teams to stalk him.
Beginning in October 2013, he says, he noticed he was routinely being followed by a mysterious white vehicle, a suspicion borne out by the observation of one of his managers.
This surveillance was obvious whenever he or his manager went to the bank to make large cash deposits from his stores.
"Oddly," Kahn says, "... the white vehicle would not appear when their cell phones were turned off. ...
"After countless encounters with the white vehicle, and in an effort to unmask the driver, Andy ... began to follow the white vehicle."
Eventually, Khan and his manager were able to photograph the vehicle's license plate and chased it into a parking lot, where the driver jumped from the car and ran off.
Khan says he reported these incidents to a 7-Eleven field consultant, but his "cries for help fell on deaf ears."
He turned to the police, but the surveillance continued, the people following him merely switching from a white vehicle to a black one and then a brown one.
"The injury inflicted upon Andy includes, but is not limited to, severe emotional fear and suffering, as well as persistent paranoia," Khan says.
He seeks a protective injunction and compensatory and punitive damages for unfair business practices, stalking, and intentional infliction of emotional distress.
He is represented by Gerald Marks of Marks & Klein in Red Bank, N.J., and Erich Schindler of Newport Beach.