Class Action against 7-Eleven and ANZ Bank in the Federal Court

Revised 10 January 2020

Levitt Robinson, on behalf of Davaria Pty Limited, has commenced a Class Action in the Federal Court of Australia against 7-Eleven Stores Pty Ltd, 7-Eleven Inc (a Texas corporation) and the ANZ Bank.

The claim

The claim alleges that 7-Eleven:

1. misled franchisees before they entered into franchise agreements about:

a. the business opportunity afforded by operating a 7-Eleven store;

b. the profitability of the stores;

c. the accuracy of the labour costs in the financial records supplied to franchisees;

d. the average wages that a 7-Eleven Franchisee would have to pay to operate their store in compliance with employment awards;

e. the need for franchisees and their family members to work for nothing or at rates below employment awards for an unreasonable and unsociable number of hours per week;

f. the negotiation of rebates from vendors and their allocation to marketing; and

g. the choice available to franchisees of suppliers and merchandise from which they could choose product lines to offer at their stores;

2. breached its contract with franchisees, including by only letting franchisees purchase stock from C-Store. This occurred in circumstances where 7-Eleven had negotiated with C-Store prices higher than either the prices for which franchisees would have been able to buy stock in similar quantities from alternative suppliers, or the lowest prices reasonably obtainable by 7-Eleven had it used its best endeavours;

3. engaged in unconscionable conduct, including by enticing franchisees to enter into franchise agreements even though 7-Eleven knew that those franchises could only be profitable if franchisees underpaid staff or worked unreasonable hours;

The claim also involves 7-Eleven Inc (a Texas corporation), the Master Franchisor, which calls the shots, although no claims are actively pursued against it.

The claim alleges irresponsible lending and breaches of the Code of Banking Practice by ANZ Bank, in lending to 7-Eleven franchisees.

“It’s a trap”

The lead applicant in the class action is Davaria Pty Limited, the franchisee of two 7-Eleven stores in Sydney. According to its director, Paresh Davaria, “The whole 7-Eleven system is one-sided. It’s not feasible to run a store for 24 hours. It’s a trap. We can’t repay the money lent to us because we are not making a profit. So we have to work for free. When we raise these issues with 7-Eleven, they say ‘Read the contract, it’s your fault, your decision.’ But no franchisee understands the contract.”

“We are like puppets”

Paresh continued: “Bullying from 7-Eleven representatives is very common. If you approach them, they try to turn the blame back on you. If you speak up, they don’t renew your franchise and you keep your loan but lose your home. But even if you stay in the system, you can’t put food on the table. They charge money to us and don’t even tell us that they are doing it, or the reason.  We are basically working for free. I have a little 2-year-old daughter and my wife and I have to work 12 hours a day each, 7 days a week, and still care for our little one. But they won’t let me sell my business.  We are like puppets, and the masters pull the strings as it pleases them.”

The financials of Mr Davaria’s first store (Campbelltown convenience store) paints a tale of financial woe. Mr Davaria took on his first store in September 2013, which is why we only have two-thirds of the financial year ending on 30 June 2014.

 Financial Year 2011 2012 2013 2014
(2/3 of the year)
Total Retail Sales 1,387,258 1,298,039 1,325,952 919,344
7-Eleven Charges 252,503 242,197 240,333 181,278
Net Income before tax and Bank repayments of interest and principal 102,823 56,821 94,281 34,754
 Financial Year 2015 2016 2017 2018 2019
Total Retail Sales 1,814,691 1,942,128 1,995,301 2,002,462 1,858,704
7-Eleven Charges 295,992 171,856 214,688 243,818 208,964
Net Income before tax and Bank repayments of interest and principal 57,935 84,360 59,470 45,551 76,898

Before he took over, sales were around the $1.3 million mark. Mr Davaria increased sales by 50% to almost $2 million.

Why is the top line up and the bottom line down?

Since late 2015, full award wages and add-ons have been paid (inclusive of overtime and penalty rates) to 7-Eleven workers by Franchisees, following the Four Corners Exposé, “The Price of Convenience” screened on 30 August 2015.  This demonstrates how the 7-Eleven System, like the US South, before it, has been built on slavery.

“Unstoppable”

This class action is unstoppable by 7-Eleven, other than by a settlement or judgment. Franchisees around the country have signed up – and we expect more will come. We have a US litigation funder, from the Galactic Group, which is a syndicate of New York bankers and investors.

It is an “opt out” class action, which means that if you are a Group Member who:

  1. at any time between 20 February 2012 and 19 February 2018 were or commenced to be franchisee parties (Franchisees) to a standard-form franchise agreement (Franchise Agreement) with the first respondent, 7-Eleven Stores Pty Ltd (7-Eleven); and
  2. have not entered into a release of all of their claims against both 7-Eleven and the Bank arising out of the conduct of 7-Eleven and the Bank described in this statement of claim.

then you are “in”. However, you will be provided with an opportunity to opt out of the proceedings by a date to be nominated by the Court which will be notified to you in due course.

The Group Member definition changed on 3 August 2018; read more here: Group Member Definition Notice.

Please email 711@levittrobinson.com if you wish to receive a Funding Agreement, to sign and return.

Correction Notice

Please also read the Conflicts Management Policy, the Disclosure Statement, and our recent bulletins and media releases:

The legal team

The team at Levitt Robinson Solicitors running the class action is led by Senior Partner, Stewart Levitt, and includes Chrystalla Georgiou (Partner), Brett Imlay (Special Counsel), Atanaan Ilango (Senior Associate) and Jem Punthakey (Associate).

Ms Kristine Hanscombe QC (Castan Chambers, Melbourne) has agreed to lead barristers Philip Tucker (Northbank Chambers, Sydney), Gerald Ng (7 Wentworth Selborne Chambers, Sydney) and Thomas Bagley (9 Selborne Chambers, Sydney) – for the Applicants and Group Members.

Contact us

 

Stewart A Levitt Levitt Robinson 
0407 323 737 (02) 9286 3133
711@levittrobinson.com

Stewart Levitt featured in Jan/Feb 2018 Business First Magazine

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