EARTHQUAKE: THE LONG ROAD BACK : 7-Eleven Cutting Franchises Over Price Gouging : Parent Company Cites Overcharging at Eight Locations in the Valley

The parent of 7-Eleven Stores said Friday that it is terminating franchise agreements with operators of eight San Fernando Valley stores for overcharging victims of Monday’s devastating quake.

Dallas-based Southland Corp. said employees, which the chain sent out as undercover shoppers, were charged inflated prices for food, water, batteries and cigarettes at the stores. The company dispatched the undercover shoppers to its nearly 100 stores in the Valley--all franchise operations--in response to mounting consumer complaints about post-quake price gouging at the convenience store chain.

“7-Eleven does not condone or tolerate this kind of behavior,” said Terry Blocher, general manager of 7-Eleven Stores for the Los Angeles region. “We are working quickly to resolve the situation and deal firmly with the individuals involved.”

Blocher said the company has turned over the results of its investigation to the Los Angeles city attorney’s office, which is conducting its own investigation.

Blocher declined to identify the stores where alleged price gouging occurred or to name the franchisees. “Emotions are running high with people losing homes,” Blocher said. “We have a concern for their safety.”

The unusually severe step by 7-Eleven came as more than 20 city and county law enforcement officials on Friday delivered hearing notices to more than 100 San Fernando Valley merchants accused of jacking up prices after the quake in violation of a year-old city ordinance.

If the city attorney finds evidence of gouging at the hearing, the matter may be referred for criminal prosecution.

City officials said complaints about gouging continued to pour into its earthquake fraud hot line Friday. Since its inception late Tuesday, the hot line has taken more than 400 calls about alleged overcharging. The incidents have occurred mostly at neighborhood liquor stores, convenience stores and gas stations, officials said.

“We think most of the complaints have some basis in fact,” said Ted Goldstein, a spokesman for the city attorney’s office.

But at least some of the complaints seemed to result more from sticker shock over higher convenience store prices than from actual gouging. A reporter’s survey of more than two dozen convenience stores in Reseda, Van Nuys and North Hollywood found wide variances in prices among stores, but no clear cases of gouging.

“Quite frankly, people used to shopping at a mass merchandiser may not be familiar with convenience store retail prices,” said Margaret Chabris, a 7-Eleven spokeswoman.

At the intersection of Tampa Avenue and Saticoy Street in Reseda, for example, a Lucky supermarket charged $1.05 for a gallon of water, while a 7-Eleven charged $1.29 for a gallon and $1.39 for a designer 1.5-liter bottle, or less than a half-gallon. Those were the chain’s everyday prices.

7-Eleven is not the only company to guard against price gouging. Arco, also the target of such allegations, this week sent letters to its dealers warning that overcharging could result in cancellation of a dealer’s franchise agreement. An Arco spokeswoman said supervisors are monitoring prices at its more than 170 gas stations in the Valley but have found no cases of overcharging.

Police in San Fernando have accused an Arco dealer in that city of doubling gasoline prices after the quake, but the company is disputing the allegation.

7-Eleven’s Blocher said employees were sent to stores with specific shopping lists that included water, juice, batteries and cigarettes. In one case, an undercover shopper was charged $3.99 for a box of Lucky Charms cereal that usually retails for $2.99. In another case, an undercover shopper paid $2.50 for a bottle of water that cost $1.35 before the quake.

Blocher said franchisees accused of overcharging have been with the company between six and 12 years. He said they have 30 days to leave the stores.

“I expect that some will fight it and others won’t,” he said.