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CA Owners Blast 7-Eleven Alleging 'Unjust Mandates'


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"During a time in our history when staying in business is harder than ever, 7-Eleven Inc. is proving it does not really care about the financial health of its franchisees," said the letter, signed by Jaspreet Dhillon, president of the Franchisee Owners Association of Los Angeles.

A letter to California's attorney general criticizes SEI, the franchisor of 7-Eleven convenience stores, for "unfair actions" against franchisees during COVID-19 and calls for an investigation of "SEI's unjust business mandates."

"During a time in our history when staying in business is harder than ever, 7-Eleven Inc. is proving it does not really care about the financial health of its franchisees," said the letter, signed by Jaspreet Dhillon, president of the Franchisee Owners Association of Los Angeles. "This is just the latest example of how SEI exerts pervasive control over its franchisees, reducing our ability to act as independent operators."

Dated May 28, the letter was sent on behalf of more than 1,200 7-Eleven franchisees in California, who operate approximately 1,800 stores, Dhillon wrote.

The franchisor sent this response to the letter: "Mr. Dhillon is mistaken. So far, 7-Eleven Inc. has assisted over 62 franchisees who operate over 114 California stores to participate in the California Department of Tax and Fee Administration’s sales tax deferral program. In fact, we worked with Mr. Dhillon to help him defer remittance of sales taxes collected in his store in Reseda. Our plan is to continue supporting our franchisees' participation in this program until it expires later this year."

Dhillon, who owns one 7-Eleven in Reseda, has agitated on this issue before, most recently meeting in February with state senators Steven Glazer and Scott Wilk, asking for a hearing to look into whether business practices mandated in SEI's franchise agreement violate California law. 

"I've been fighting this since the beginning of April. They're putting one hurdle after another hurdle," Dhillon said, referring to the Dallas-based franchisor. "They're just scaring the franchisees."

California announced tax relief effective April 2, in which small-business owners with less than $5 million in taxable annual sales can use a 12-month, interest -free payment plan for up to $50,000 of sales and use tax liability, with the first payment not due until July 31. The state also offered deferrals of first and second quarter estimated tax payments. 

However, 7-Eleven owners turn over all daily receipts and cash to SEI every day, Dhillon says, and then the company pays franchisee expenses, including state tax payments. "But after the state approved the tax relief plan, SEI said franchisees would be in breach of our franchise agreements if we defer paying our taxes. Where other small businesses are able to capitalize on the state's relief program—and improve their cash flow—we are left out. SEI is still holding our tax payments, even though we don't owe the money until later this year," the letter said.

"The list is endless," Dhillon said in an interview, meaning what he calls unfair practices by SEI. "This tax thing, this is the latest. I've been writing for the last two years. I think this sales tax issue is a flagrant, flagrant thing they are doing. People are having cash flow issues, and people have to close their stores because of employee issues, and 7-Eleven is not helping them," he said.

"I'm knocking at every door that I can think of, because I'm the president of the association. That's why I've been fighting this, and saying look at what the practices are, and when you tell them, they say go pound sand."

In his case, he said, he's been trying to have his March tax payments returned to his account by SEI. "They finally gave me the March, deposited to my account on May 14, for $9,385.85." For April, they said "you have to make another request," and he received the April amount on May 28, for $9,920.13.

"For March, April, May, June, it would be $40,000," that he does not have to pay until later. "I can get breathing space. They told me, it's too much to manage. I said that's not my problem, that's your problem."

Dhillon said he's also arguing with SEI over which party is responsible for damage to the stores. 

"I just spoke to a franchisee yesterday whose store was looted," he said, referring to June 1. "They said they'd split it 50-50" between franchisor and franchisee, but Dhillon says their contract says differently. He told the franchisee, "theft is yours" to cover, "robbery is 7-Eleven's" to cover. Because of the curfew, the owners had to close the store and left, "and the robbers broke the windows and looted the store."

"The field consultant, he said we'll split it 50-50 with you, the loss. I said, what the hell are you talking about?" Dhillon said. 

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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