7-Eleven has filed a franchise lawsuit against franchisee Kapoor Brothers, Inc. and Pursharth Kapoor in the United States District Court, Middle District of Florida, Orlando Division.
Pursharth Kapoor signed an individual franchise agreement effective January 16, 2012 for the right to operate and share in the profits of the 7-Eleven store in Merritt Island, FL.
Kapoor was charged a franchise fee of $141,500.
In connection with the franchise fee and franchise agreement, franchisee Kapoor entered into a promissory note agreeing to pay 7-Eleven $79,950 in monthly payments. According to the complaint, the Note would be “immediately due and payable in full upon a breach of the Corporate Franchise Agreement.”
Less than a year into the relationship, 7-Eleven’s Asset Protection Group began investigating Kapoor’s store. They allege they observed Kapoor’s brother (and store manager) “improperly and fraudulently utilizing… voiding keys on the POS register system.”
7-Eleven alleges that an audit of the store revealed “inventory being delivered for which 7-Eleven never received invoices,” indicating that Kapoor’s store was selling merchandise off the books for which it would receive full profit (rather than the 48% it was due).
Additionally, the suit alleges “at least one regularly employed person was working either without the franchisee having properly verified employment eligibility.
On June 20, 2013, just 17 months into the agreement, 7-Eleven declared that Kapoor was guilty of a non-curable breach and terminated the franchise agreement.
7-Eleven demanded immediate payment in full of the $70,000 due on the Promissory Note.
7-Eleven demanded that the franchisee immediately turn over the Leased Premises and all Equipment, that he relinquish the final inventory, that he cease using anything trademarked 7-Eleven, and that he immediately cease doing business at the Merritt Island 7-Eleven.
The lawsuit contains no mention of any kind of a hearing or appeal for which Kapoor could argue on his behalf, and it seems that the termination, the demands for payment, and the filing for the failure to meet the demands were all filed on June 20, 2013.
The 32-page complaint, filed by 7-Eleven law firm Quarles & Brady LLP, includes 11 pages of explanation on how the 7-Eleven franchise business arrangement works (which we’ll explain in a separate post).
It also raises some troubling questions, such as:
7-Eleven certainly has the right to protect itself from franchisees who enter an agreement then violate it in order to cheat them.
However, there’s something about the icy precision and the speed of this process, as well as the lack of an appeal or opportunity to cure, that makes this lawsuit seem vaguely unsettling.
What do you think?
Read the entire 32-page complaint here: 7-Eleven, Inc. v. Kapoor Brothers Inc. et al
ARE YOU A 7-ELEVEN FRANCHISE OWNER, MANAGER OR EMPLOYEE? WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Tags: 7-Eleven, 7-Eleven lawsuit, 7-Eleven litigation,7-Eleven franchise, Pursharth Kapoor, Kapoor Brothers Inc., 7-Eleven complaints, 7-Eleven, SEI,7-Eleven franchise complaints, 7-11 franchise, 7-11 franchise complaints, Seven & I Holdings Co, Merritt Island 7-Eleven,
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Fluffy:
As you wrote that "These thefts also had to be booked as inventory shortage- I’m talking $275K in ONE MONTH!!!! for 2 stores!!!! ". I re-read on your statement but my interpretation is same. You said $275K in ONE MONTH!!. $275K means $275,000. Usually the K was used in IT area. One K means 1024 byte.
Anyway, you are lucky to quit 7-11. As you mentioned, there is no hope except Suzuki.