August 26, 2025|Publications
August 26, 2025 | U.S. District Court for the Western District of Virginia | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Thomas T. Cullen of the Western District of Virginia granted 7-Eleven’s motion for default judgment against Sisara, LLC, a terminated franchisee that refused to surrender its store and continued to operate as though it were still part of the System. After repeated food safety violations, failure to maintain minimum net worth, and unlawful tobacco sales, 7-Eleven terminated the Franchise Agreement in July 2024. When Sisara continued using the 7-Eleven marks and operating as a franchise, the court found liability for breach of contract, trademark infringement, and unfair competition, awarding $183,672.82 in damages and issuing a permanent injunction.
Relevant Background
7-Eleven and Sisara entered into a Franchise Agreement in August 2021 for a convenience store in Roanoke, Virginia, supported by a personal guaranty and a promissory note of $105,202.50. By late 2023, 7-Eleven had identified persistent issues. Inspectors found unsanitary conditions, dirty equipment, and expired or uncoded products such as milk, meatballs, and pizzas. At the same time, Sisara’s financial position fell below the contractual $10,000 minimum net worth requirement, sinking to negative $32,096.92 by May 2024. 7-Eleven also issued breach notices for sales of tobacco products to minors.
Between September 2023 and June 2024, 7-Eleven delivered seven Notices of Material Breach. After Sisara failed to cure, the franchisor issued a Notice of Termination, effective July 9, 2024, demanding surrender of the premises, equipment, and inventory. Sisara ignored the demand and continued operating as if it were a licensed 7-Eleven.
7-Eleven filed suit on July 14, 2024, obtaining a preliminary injunction in September that ordered Sisara to cease using its trademarks and surrender possession. While Sisara eventually complied with that interim order, it never filed a response to the lawsuit. The clerk entered default, and the court proceeded solely against Sisara after the individual guarantors filed for bankruptcy.
Decision
Judge Cullen held that 7-Eleven had established breach of contract under Texas law, which requires proof of a valid contract, performance, breach, and damages. Sisara’s refusal to surrender the store and equipment and its failure to pay the open account balance satisfied those elements. As the court explained, “upon termination of the Franchise Agreement, the parties agreed that any unpaid balance on the Open Account will be immediately due and payable upon demand by 7-Eleven”.
On the Lanham Act claims, the court emphasized the risk of consumer confusion from holdover franchisees. Citing Choice Hotels Int’l, Inc. v. A Royal Touch Hospitality, LLC, 409 F. Supp. 3d 559, 566 (W.D. Va. 2019), and Allegra Network, LLC v. Reeder, 2009 WL 3734288, at *2 (E.D. Va. Nov. 4, 2009), Judge Cullen noted that “there is a high risk of consumer confusion when a former franchisee continues to operate under the franchisor’s trademarks because customers will continue to associate the former franchisee with the franchisor.” The court explained that “on July 8, the Store was licensed and consumers were purchasing 7-Eleven goods. But as of July 9, the Store was no longer licensed, yet it continued to operate (by all appearances) as a normal 7-Eleven store just as it did the day before”.
On damages, the court relied on detailed declarations from 7-Eleven’s franchise accounting manager and supporting business records. Sisara owed $54,157.40 on the promissory note and $129,515.42 on the open account, for a total of $183,672.82. The court also granted a permanent injunction, citing Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 156–57 (2010), and observing that “the public interest is served by protecting the integrity of [an owner’s] marks and preventing potential consumer confusion in the marketplace” (Choice Hotels, 409 F. Supp. 3d at 569).
Looking Forward
The decision illustrates the importance of decisive franchisor action when faced with a defaulting franchisee. By documenting breaches, issuing multiple notices, and substantiating its damages with financial records, 7-Eleven positioned itself to secure both monetary recovery and permanent injunctive relief. The case reinforces that courts will treat continued use of a franchisor’s marks after termination as presumptive infringement, ensuring that franchisors can regain control of their brand.
For franchisors, this ruling highlights the value of rigorous compliance oversight, prompt enforcement of contractual rights, and thorough documentation. When a franchisee defaults, acting decisively and building a complete evidentiary record can mean the difference between prolonged uncertainty and a clear, favorable judgment.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.
