Malaysia master franchisee of bubble tea brand Xing Fu Tang, Collab Working Lifestyle, has spoken out against allegations made by CEO International, the founding company of the bubble tea brand in Taiwan about breaching the master franchise agreement. In a Facebook post, Collab Working Lifestyle said that together with its 34 sub-franchisees, they have "invested tens of millions of ringgit in the Xing Fu Tang brand" and since March, have spent "RM500,000 in advertising and promotions".
The clarification came after CEO International threatened to terminate the 10-year master franchise agreement with Collab Working Lifestyle, as a result of Collab Working Lifestyle and its sub-franchisees refusing to buy pearl-moulding machines that allegedly cost RM4.5 million. According to Collab Working Lifestyle, the pearl-moulding machine creates strawberry heart-shaped boba and the machines will only be delivered sometime between end-2020 and 2021 even though they were asked to make the payment in full.
"CEO International also invited the master franchisee and all sub-franchisees to Taiwan to undergo training and to sit for a test without any guidelines. If they failed the test, they would no longer be allowed to operate their Xing Fu Tang outlets. It is unfair to impose this test after they have invested in the equipment and shoplots and started operations," Collab Working Lifestyle said.
"As Malaysian SMEs, we have invested a lot of resources into the Xing Fu Tang brand, and we will not be bullied," the Facebook post added. Collab Working Lifestyle also said in the post that following the disagreement over the machines, CEO International has made several "wild accusations" against it on 21 October.
Among the accusations included Collab Working Lifestyle planning to start a new brand, to which?the latter explained that it had developed plans to protect both the company and its sub-franchisees should CEO International "forcefully terminate" the master franchise agreement.
Collab Working Lifestyle was also allegedly accused of forming "illegal stores", as well as opening more than two stores in the same area. The company said in the Facebook post that if the Xing Fu Tang outlets were not approved by the headquarters in Taiwan and are considered illegal, CEO international should not continue to accept revenue generated.
"If the Xing Fu Tang outlets are not approved by Taiwan, why did they sell equipment and raw materials to these stores and continue to collect royalty? The Point-of-Sales system is linked to Taiwan," it said.
"We do all the work, and our royalty is 3% compared to CEO International collecting 5%. They sell us the machines, but they often break down and we get little after sales support," Collab Working Lifestyle added. It also clarified that the accusation of opening more than two stores in the same area is false, adding that each area only has one store.
Collab Working Lifestyle also alleged that CEO International did not provide it with an interior design guide or template when it came to the corporate image of the shop. As a result, it had to develop a guidebook for its sub-franchisees. CEO International's guidance came in the form of retrospective feedback, where it advised on the changes to light fixtures, Collab Working Lifestyle said.
"Master franchisee and all sub franchisees have disagreed and denied the public accusations towards Collab Working Lifestyle posted by CEO International as this would harm the brand image and interest of all parties," it added.?Malaysia's first Xing Fu Tang outlet opened in March this year.
In 2017, Malaysia also witnessed another dispute between bubble tea franchisor?La Kaffa International and Loob Holding over the Chatime franchise. The dispute over business and operational matters led to Loob Holding relinquishing its management duties of the 165 Chatime stores in Malaysia, and resulted in Loob Holding forming the bubble tea brand Tealive.
(Photo courtesy: Xing Fu Tang Malaysia's Facebook page)