WICKER PARK — Discord between the nation's largest convenience store chain and its franchisees has hit Chicago, with 7-Eleven taking over a number of stores from the owners, in some cases for allegedly selling non-approved items.
One local operator said he was forced to relinquish ownership of four 7-Elevens in Wicker Park, Lincoln Park, Boystown and Lincoln Square. Another franchisee said the Dallas-based company took over his stores in Lakeview, Lincoln Park, Jefferson Park and Portage Park.
Franchisee Jay Rawal said 7-Eleven officials cleared his store's shelves on Friday of "the stuff they didn't want me to be selling," and security guards emptied his files into black trash bags, which they gave back to him.
Rawal said he was ousted by 7-Eleven because officials alleged he "wasn't running operation according to standards."
"They said I can come back to 7-Eleven as a customer but not as an owner-operator," the 46-year-old Rawal said.
Margaret Chabris, a spokeswoman for Dallas-based 7-Eleven issued a statement late Tuesday.
“7-Eleven, Inc. has terminated the franchises at those locations because the franchisees violated the terms of our franchise agreement. As a result, we assumed control these Chicago-area stores, and they are now open and operating under the management of 7-Eleven, Inc," Chabris said.
Owner-operators, or franchisees, buy licenses from a corporation in order to operate chain stores. The majority of the 7-Elevens in the United States are franchisee-owned, with start-up costs for a single 7-Eleven reportedly ranging from $30,000 to $1.5 million.
Hashim Syed, a franchisee who publishes a newsletter for 7-Eleven's local franchise community, said the company's crackdown also has snared other Chicago franchisees.
"[7-Eleven is] saying these franchisees were buying merchandise from outside vendors and not reporting to 7-Eleven and keeping profits themselves," Syed said.
Syed called 7-Eleven's allegations "serious, but not proof. All we have is allegations, accusations."
Rawal admitted that he was selling certain non-corporate-approved items, such as certain soft drink brands, like Sunkist. But Rawal said he stocked the items at the request of customers.
Rawal also confirmed that pen-sized hookahs, which appeared for sale on the counter of the Wicker Park 7-Eleven last week, were removed in the inventory sweep and given back to him.
Rawal opened his first 7-Eleven in 1999 and said franchising licensing fees cost him $2 million yearly. Rawal's 7-Eleven locations include 1508 N. Damen Ave. in Wicker Park, 1349 W. Fullerton Ave. in Lincoln Park, 2323 W. Lawrence Ave in Lincoln Square and 3101 N. Broadway in Boystown.
By late Friday, the 7-Eleven at 1508 N. Damen Ave. in Wicker Park had reopened with all new staff, though lottery tickets were unavailable for purchase because the license had been taken out in Rawal's name, according to Mark Kwasigroch, 28, the store's new manager.
Kwasigroch confirmed that all of Rawal's employees had been removed from Rawal's stores Friday. Kwasigroch said he and other employees were transferred to the Wicker Park store from other corporate-owned stores.
In addition to 27 employees dismissed at Rawal's four stores, an additional 31 employees were laid off at four stores owned and operated by Frank Fatehali in August, Fatehali said.
A 7-Eleven franchise owner for more than 15 years, he said the corporation took over his stores at the beginning of last month, forcing out workers at shops at 3700 N. Broadway in Lakeview, 2004 N. Halsted St. in Lincoln Park, 5316 N. Milwaukee Ave. in Jefferson Park and 5600 W. Irving Park Road in Portage Park.
Fatehali declined to say why 7-Eleven took over his stores. He has a lawyer and has been negotiating with the company to get his stores back, he said.
"That's something I've built up all my life," he said. "I'm 41 years old. It's a nightmare for me."
In recent weeks, takeovers also have occurred at three stores in Jefferson Park, Avondale and Park Ridge, Syed said.
Rawal said he was seeking compensation for his investment from 7-Eleven. Syed said he has heard that other franchisees who have lost their shops received settlements.
Ken Patel, vice president of the Chicago franchise association for 7-Eleven operators, said the takeovers came abruptly, without "any kind of warning" for the targeted franchisees.
Syed said the recent takeover was "the tip of the iceberg," and he thinks other stores are "on a hit list," including the store in Rogers Park he's owned since 1989.
At a trade show in May, franchisees received a lot of harsh talk about a 13 percent decline in sales and about how competition was "more intense than ever before," according to reports.
"The corporation is trying to create a fireball between themselves and franchisees, said Syed. "It's happening all over the country."
In August, a group of five 7-Eleven franchise owners in New Jersey filed a class-action lawsuit against the corporation, saying it was exploiting them and micromanaging their operations.
The suit claims the franchisees are treated like corporate employees without the benefits: They are required to work long hours, though their status as independent business owners relieves 7-Eleven from having to pay overtime, pension and health insurance.
Syed said he warned people interested in purchasing a 7-Eleven franchise that they were "opening the door to the coal mines not the gold mines."
There are 400 franchisee-owned 7-Eleven stores in the Chicago area, and 70 to 80 corporate-owned stores, Syed said.