Class Action against 7-Eleven and ANZ Bank in the Federal Court
Revised 16 March 2018
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 alleges:
- breach of contract, as Franchisees do not have an opportunity to make a profit and are forced to pay over the odds at wholesale for stock, and interest on their stock;
- misleading and deceptive conduct, as the average financial information provided to Franchisees, their advisors and the ANZ Bank did not state the true cost of payroll;
- misleading and deceptive conduct, for not making full disclosure under the Franchising Code and OilCode about rebates and discounts taken from Franchisees when they purchased wholesale stock;
- unconscionable conduct, in the pricing of wholesale stock;
- 7-Eleven Inc (a Texas corporation). the Master Franchisor, which calls the shots, is also being sued in the Class Action;
- 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 one of Mr Davaria’s first 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.
(2/3 of the year)
|Total Retail Sales||1,387,258||1,298,039||1,325,952||919,344||1,814,691||1,942,128||1,995,301|
|Net Income before tax and Bank repayments of interest and principal||102,823||56,821||94,281||34,754||57,935||84,360||59,470|
Before he took over, sales were around the $1.3 million mark. Mr Davaria increased sales by 50% to almost $2 million, and has steadily been increasing that number.
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.
This class action is unstoppable by 7-Eleven, other than by a settlement or judgment. We expect Franchisees around the country to sign up – and we already have significant numbers who signed. 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, defined as Franchisees:
- who entered into one or more franchise agreements with the Franchisor each in the form of a standard form of franchise agreement (Franchise Agreement) as issued by the Franchisor from time to time; and
- who entered into a Franchise Agreement prior to the date of the commencement of this proceeding, and who is not statute-barred;
- who has suffered loss and damage as a result of the conduct of either or both of the Franchisor and the ANZ Bank, alleged in the Statement of Claim; and
- who has not entered into a binding and enforceable release of all of their claims against both the Franchisor and the Bank, which are the subject of this proceeding.
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.
If we do not have 150 Franchisees signed up to the Funding Agreement by what is now the extended deadline of 31 March 2018, then the Funder can pull out and, if the Funder makes that call, you will no doubt be far worse off than you are now. The Funder will remain responsible to you for any commitments which he has incurred on your behalf by that time. Please email firstname.lastname@example.org if you wish to receive a Funding Agreement, to sign and return.
- Bulletin No 4 with media release of 15 February 2018
- Bulletin No 5 with Originating Application and Statement of Claim filed in the Federal Court on 20 February 2018
- Bulletin No 6
- Bulletin No 7
- Bulletin No 8 and correspondence enclosed
- Bulletin No 9
The class action is also seeking an order requiring 7-Eleven to get Court permission before attempting to terminate a franchise agreement. Levitt Robinson is concerned to see that the Franchisees realize that they have nothing to fear but fear itself. Your own lack of nerve has left many of you where you are today.
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), Daniel Meyerowitz-Katz (Senior Associate), Benjamin Brady (Senior Associate) and Jem Punthakey (Solicitor).
Mr Allan Myers AC QC (List A Barristers, Melbourne) has agreed to lead barristers Tim Castle (Six St James Hall Chambers, Sydney) and Guy Donnellan (Level 22 Chambers, Sydney) – for the Applicant and Group Members.
|Stewart A Levitt||Jem Punthakey|
|0407 323 737||(02) 9286 3133|
Stewart Levitt featured in Jan/Feb 2018 Business First Magazine