An Inconvenient Ruling

  • Sumo

Franchise folly

Although it is based in Texas, 7-Eleven is a household name in several countries. The multinational company offers considerations for franchise opportunities, but also maintains the right to end the contract if certain standards or guidelines are not upheld. A 7-Eleven store owner located in Osaka, Japan, for example, is now ordered to pay $845,000 in damages to the company for failing to remain open 24 hours a day. Starting in 2019, a franchisee, Mitoshi Matsumoto, who opened the store in 2012, decided to close down operation for a few hours every night. The decision to close for five hours each night resulted in a loss of business and an infraction against company policy.

According to Matsumoto, however, remaining open for those additional five hours did not justify the associated costs. Labor grew increasingly unaffordable; Matsumoto developed increased feelings of exhaustion; and the revenue gained during those five critical hours was not considered substantial. In response to the defiance, as well as several customer complaints, the multinational convenience-store company revoked Matsumoto’s franchise. In an attempt to save his business, Matsumoto filed a lawsuit to regain the store, but has lost his battle in court.

This lawsuit, which lasted two and a half years in court, is presented as an example of franchisees attempting to establish stronger independence in business operation. Unfortunately, the ability to gain autonomy, or at least minor measures of deviation, is limited or restricted. Despite the court’s decision to force Matsumoto to hand over his business and pay monetary damages to compensate for lost business, he intends to appeal the ruling. He has vowed to continue the pursuit of operating the store on shortened hours. Japan’s Fair Trade Commission is also fighting the company, and is addressing issues pertaining to the requirement for franchise owners to stock shelves with more items then they are able to sell. The company is expected to develop improvements in how it treats franchisees.