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Pepsico 7-ups Gaza Arabs for an Israeli Franchise

The deteriorating situation in the Gaza Strip has prompted Pepsico Corp. to take a 7-Up soft drink franchise from a Gaza family that has held it for three decades and give it to an Israeli firm.

But in a move emblematic of the troubled strip, the family is not giving up without a fight. They are suing Pepsico in a New York court.

Franchise loser Mohammad al-Yazji, whose sales dropped by as much as 70 percent following the outbreak of the intifada five years ago, blames the loss of his franchise on the peace process. He told the Israeli daily Yediot Achronot that Pepsico is not renewing his franchise when it expires Dec. 31 because it no longer fears other Arab countries will respond with a boycott.

Pepsico claims Yazji “did not honor his contractual commitments.” However, it hopes to reach a solution that “would enable him to continue his present activity in Gaza.”

Yazji is suing Pepsico for $35 million for cutting off its ties with his firm.

New franchise-holder Tempo, a long-established Israeli soft drinks firm, said it did not rule out the possibility of purchasing equipment and services from the Gaza company to shift the 7-Up business to Israel “in an orderly manner.”

Family contacts in Lebanon helped the Yazjis win a franchise for manufacturing 7-Up in the Gaza Strip four years before the area came under Israeli military rule in the 1967 Six-Day War.

The franchise developed into a gold mine, and the market for 7-Up expanded after the Six-Day War into the administered territories and Israeli Arab villages.

Success had propelled Yasji to the post of chairman of the Gaza Manufacturers Association.

His father, Haj Tawfik, became a member of the Gaza Municipal Council and a founder of Bank of Palestine in the strip.

Tough competition from Israeli soft-drinks blocked its penetration of the national market in Israel.

The outbreak of the Palestinian uprising cut sharply into sales that had reached $6 million annually.

Despite the losses, the family believed business would come back in the long run and they invested $1 million in a new plant.

By this time, they had signed a contract with Pepsico which, in 1986, acquired the franchise for marketing 7-Up worldwide (except for the United States, where the two companies remain separate).

Yazji says loss of the franchise will mean the dismissal of 180 workers in an area which already suffers from high unemployment.

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