Business

7-Eleven Franchisee Who Rebelled Against Company Loses in Court

OSAKA, Japan-Mitoshi Matsumoto, the man who has launched the David-and-Goliath campaign against Japanese convenience store giant 7-Eleven, stood in front of a room full of the company’s franchise on Thursday, bowing deeply and apologizing.

Mr. Matsumoto has spent the last two and a half years fighting in court to control a 7-Eleven store that the company was forced out of business after he refused to operate 24 hours a day, seven days a week. His struggle has been a meeting point for thousands of convenience store owners across the country who have struggled against the company’s tight control over their franchises, in the hope that the victory will help them win a measure of independence.

But on Thursday afternoon, a judge ordered Mr. Matsumoto to immediately hand over his shop in suburban Osaka, which he opened in 2012, to the company and pay about $ 845,000 in estimated damages for the lost business.

After the decision, Mr Matsumoto said that he regretted disappointing his supporters, but he intended to oppose and appeal the decision. “It’s better if we get good results, but the pressure to shorten the hours will continue to move forward,” he said.

In a statement, a 7-Eleven spokesman said that the decision was “appropriate,” adding that the company will “work harder to patronize customers in the region.”

The final outcome of the case is likely to have profound implications for the relationship between the Japanese convenience store company and the more than 50,000 branches they control. The 7-Eleven location accounts for more than 40 percent of the store, and for decades the company has been seen as the industry standard.

Mr. Matsumoto’s problems began in early 2019, when he decided to shorten his store hours, closing five hours per night for violating company policy. He was exhausted, the workforce became increasingly unaffordable, and he had decided that the proceeds from staying open until morning did not justify the cost.

It was an act of rebellion that seemed small. But standing with one of the most powerful and ubiquitous companies in Japan makes it a celebrity and reveals the industry’s long-celebrated internal workings as a model of efficiency.

Mr Matsumoto’s decision sparked years of battle – and sometimes surprisingly small – split with the company. In an effort to free itself from Mr. Matsumoto, 7-Eleven hired a private investigator to monitor its business. It eventually canceled its franchise, a decision said to have been made after numerous customer complaints and derogatory remarks posted by Mr Matsumoto on social media.

After he sued to maintain his store, the company built another, smaller one in the store’s parking lot and threatened to charge it for construction costs.

In 2020, the Japan Fair Trade Commission released a great report on the business practices of the convenience store industry. It warned companies not to abuse their power over franchisees and suggested that they may have violated state antitrust laws.

In addition to demands for stores to remain open, the commission cited other fundamental problems with the industry’s business model, including confusing hiring practices and forcing store owners to store more items than they can sell. The Commission directed the chain to develop plans to improve their treatment of store owners.

Earlier in 2020, the Covid-19 pandemic and the resulting emergency situation prompted the company that controls the 7-Eleven chain, Seven & I Holdings, to allow some convenience store franchises to temporarily close or limit their hours.

But it continues to present obstacles to those looking to keep it shorter, according to Reiji Kamakura, head of the Convenience Store Union, a small group of owners who have struggled to grow in the face of strong opposition from the industry.

“Headquarters hasn’t changed its stance that it wants owners to finish in a shorter time,” he said.

Other problems also persist.

In March, a franchisee in Kagoshima Prefecture filed a complaint against 7-Eleven with the Fair Trade Commission over allegations that a company representative had overstocked his store without his knowledge, causing him to lose money on unsold items. Part of the company’s profits is from selling its branded products to franchisees. The case is still pending.

Efforts by franchisees to seize greater control of 7-Eleven suffered a setback this month, when a judge ruled against a group of owners claiming the right to conduct collective bargaining against the company.

Mr. Matsumoto, by his own admission, is not a perfect representative for the purposes of his owner.

Private investigators have gathered evidence against him that was used in court, including rough video footage that the company said showed him headbutting a customer and sending flying kicks to the side panels of the car. His lawyer argued that the image could not be inferred.

However, the complaint against Mr. Matsumoto is irrelevant to the key issue of 7-Eleven’s relationship with its franchisees, said Shinro Okawa, a member of Mr. Matsumoto’s legal team. “Owners gather here because 24-7 operations are a problem.”

Mr Matsumoto said he was looking forward to the fight ahead.

But, he joked, “If I lose again, I will give up and move to America.”

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