7-Eleven Franchisee who rebelled against the company loses in court

OSAKA, Japan – Mitoshi Matsumoto, the man who led a David-and-Goliath campaign against Japanese grocery giant 7-Eleven, stood in front of a room filled with the company’s franchisees on Thursday, bowing deeply and apologizing.

Mr. Matsumoto has spent the last two and a half years fighting in court to gain control of a 7-Eleven store, which the company forced out of operation after he refused to operate it 24 hours a day, seven days a week. His fight has become a rallying point for thousands of grocery store owners across the country, who have fought against the company’s rigid control of their franchise, hoping a victory would help them gain some degree of independence.

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

Following the ruling, Mr Matsumoto said he was sorry to have betrayed his supporters, but that he intended to fight on and appeal the ruling. “It would have been better if we had had a good result, but the pressure to shorten the hours will continue to move forward,” he said.

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

The final outcome of the case is likely to have profound consequences for the relationship between Japan’s grocery store and the more than 50,000 stores they control. 7-Eleven’s locations account for more than 40 percent of these stores, and for decades, the company has been seen as the industry standard.

Mr. Matsumoto’s problems began in early 2019 when he decided he wanted to shorten his store’s opening hours and close five hours each night in violation of company policy. He was exhausted, labor had become more and more unaffordable, and he had decided that the income from staying open until the wee hours did not justify the cost.

It was an apparently small act of rebellion. But standing up to one of the most powerful and ubiquitous companies in Japan made him a celebrity and revealed the inner workings of an industry that had long been hailed as a model of efficiency.

Mr. Matsumoto’s decision set in motion a years-long – and sometimes surprisingly petty – battle for exhaustion with the company. In his efforts to get rid of Mr. Matsumoto, 7-Eleven hired private investigators to keep track of his business. It eventually revoked his franchise, a decision it said it made after numerous customer complaints and derogatory remarks posted by Mr. Matsumoto on social media.

After he sued to keep his store, the company built another, smaller one in the store’s parking lot, threatening to charge him for the construction costs.

In 2020, Japan’s Fair Trade Commission released a dazzling report on the grocery store industry’s business practices. It warned companies not to abuse their power over franchisees and suggested that they might have violated the country’s antitrust laws.

In addition to the requirement that stores should always be open, the commission cited other fundamental problems with the industry’s business model, including misleading recruitment practices and forcing store owners to have more goods in stock than they could sell. The Commission instructed the chains to develop a plan to improve their treatment of shop owners.

Earlier in 2020, the Covid-19 pandemic and the consequent state of emergency had prompted the company that controls the 7-Eleven chain, Seven & I Holdings, to allow some grocery store franchisees to close temporarily or limit their opening hours.

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

“The head office has not changed its position that it wants the owners to finish shorter working hours,” he said.

Other problems have also persisted.

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

Franchisees’ efforts to wrest 7-Eleven a greater degree of control suffered a setback this month when a judge sentenced a group of owners who had claimed the right to conduct collective bargaining against the company.

Mr. According to Matsumoto, he has not been a perfect representative of the owners’ case.

Private investigators had collected evidence against him, which was used in court, including grain video footage that the company said showed him hitting a customer with his head and sending a flying kick into the side panel of a car. His lawyers claimed the photos were unsafe.

Either way, the complaints against Mr. Matsumoto were irrelevant to the central issue of 7-Student’s relationship with its franchisees, said Shinro Okawa, a member of Mr. Matsumoto’s legal team. “Owners are gathered here because 24-7 operation is an issue.”

Mr. Matsumoto said he was looking forward to the upcoming match.

But he joked, “If I lose again, I’m giving up and moving to America.”

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