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7-Eleven lawsuit targets former franchise owners

Rochester Business Journal
May 16, 2014

A Pittsford husband and wife allegedly ran a scheme to cheat 7-Eleven Inc. out of tens of thousands of dollars, the convenience store chain claims in a lawsuit filed last week in U.S. District Court in Rochester.

Aman and Sabeen Ansari each once had 7-Eleven franchises in the Rochester area but are no longer affiliated with the Texas-based chain. Sabeen Ansari owns a Brighton convenience store.

7-Eleven’s lawyers claim the Ansaris hatched a scheme to get 7-Eleven to foot much of the bill for goods they secretly sold in a non-7-Eleven store where the couple reaped 100 percent of the profits.

Contacted this week, Sabeen Ansari said the couple had reached an out-of-court settlement and 7-Eleven had withdrawn the action. Neither she nor her husband would comment further, she added.

A day after she spoke to the Rochester Business Journal, court records showed the case was still active and awaiting scheduling for mediation sessions, a standard requirement for civil filings in the Western District of New York.

Attorneys with the Manhattan law firm representing 7-Eleven in the case, Duane Morris LLP, did not respond to requests to confirm or deny the settlement claim.

By taking goods out of his former 7-Eleven franchise at 3345 Lake Ave. and putting them on the shelves of his wife’s 24-Seven Convenience Inc. store at 2360 West Henrietta Road, 7-Eleven claims, “Aman (Ansari) was able to use 7-Eleven financing to purchase the inventory (and) charge half the cost of the goods to 7-Eleven, while avoiding payment to 7-Eleven of its contractually required percentage of the gross profit.”

According to 7-Eleven’s court papers, Ansari signed a 7-Eleven franchise agreement in mid-2002. The filing describes him as still running the Lake Avenue store in April but states that 7-Eleven terminated the agreement at an unspecified later date.

Sabeen Ansari ran a West Henrietta Road 7-Eleven from 2001 to 2007. In 2007, she dropped the 7-Eleven affiliation and started running the store under her own company, 24-7 Convenience Inc. Aman Ansari’s payroll records listed his wife as an employee of the Lake Avenue 7-Eleven as well, the 7-Eleven complaint states.

Among civil and criminal violations the convenience store chain claims the Ansaris committed is trademark infringement for selling 7-Eleven branded items out of the 24-Seven store.

Items alleged to be on the Brighton 24-Seven store’s shelves included Slurpees and Big Bites along with 7-Eleven brand deli sandwiches the couple took out of the Lake Avenue store’s display cases after the sandwiches’ sell-by dates had passed, the complaint states. Even the 24-Seven name itself is an infringement, 7-Eleven claims.

As a matter of course, 7-Eleven keeps daily tabs on franchisees’ sales and closely monitors inventory fluctuations, hiring third-party auditors to do regular audits of each location, the franchisor’s court papers state.

Slated for a quarterly audit of his Lake Avenue 7-Eleven on Feb. 14, Aman Ansari called off the session and 10 days later refused to let an auditor into the store, the court filing states. Ansari gave no reason for the rebuff but let an auditor review the store’s books some three weeks later. That audit set off alarm bells, the filing states.

On Feb. 24, Ansari allegedly began turning in fake records showing inventory transfers from his store to other 7-Eleven locations. Stores where those goods were supposed to have been sent had no record of receiving them. The audit showed an inventory shortage of more than $31,000 with fake transfers accounting for some $28,000 of the total.

That shortfall reflected only discrepancies of 7-Eleven branded merchandise, the franchisor’s court papers state. An investigation of the Lake Avenue store’s records over the prior 24 months showed the location to have stocked beer worth $245,000 more than it sold and non-alcoholic non-carbonated beverages, tobacco products other than cigarettes, candy and health and beauty products worth $213,000 more than items actually sold.

“Inasmuch as merchandise does not grow by itself on the shelves,” the 7-Eleven complaint maintains, “the most viable explanation is that the store temporarily brought in merchandise that was not reported to 7-Eleven … in order to mask shortages created by (Aman Ansari’s) fraudulent conduct in failing to record all sales.”

Detailed in the complaint are results of surveillance that allegedly caught Aman Ansari on videotape loading merchandise from the Lake Avenue store into his car and unloading at his wife’s 24-Seven market.

Also detailed are alleged videos of undercover secret shoppers buying 7-Eleven branded items from Sabeen Ansari’s Brighton store. Such items included nachos, coffee in 7-Eleven cups, Slurpees and Big Bites, the court filing claims.

Alleging that the Ansaris are guilty of criminal violations that run afoul of the federal Racketeer Influenced and Corrupt Organizations Act, 7-Eleven’s lawsuit seeks triple damages in an unstated amount and asks that the Ansaris be compelled to pay its legal costs.

The franchisor asks for compensation for the couple’s alleged infringements and wrongly earned profits, as well as punitive damages. It also wants the couple to turn over any 7-Eleven branded merchandise and seeks an order banishing Aman Ansari from the Lake Avenue store.

5/16/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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