Boba brand Xing Fu Tang's Taiwan HQ says will take legal action against Malaysian franchisee

Ida Lim
On Xing Fu Tang Taiwan's official Facebook page, founder Edison Chen spoke of his grief at having his Taiwan-based company's reputation allegedly tarnished and demeaned by the Malaysian franchisee. — Picture via Facebook/Xing Fu Tang Taiwan

KUALA LUMPUR, Oct 31 — Popular brown sugar boba brand Xing Fu Tang's Taiwan founder Edison Chen will take legal action against the brand's Malaysian master franchisee Collab Working Lifestyle Sdn Bhd, escalating their recent public dispute.

In a lengthy and emotional post last night on Xing Fu Tang Taiwan's official Facebook page, Chen spoke of his grief at having his Taiwan-based company's reputation allegedly tarnished and demeaned by the Malaysian franchisee.

Xing Fu Tang Taiwan also accused the Malaysian franchisee of violating their agreement and overcharging sub-franchisees in terms of franchise fees and other costs.

“The Malaysian franchisee has also already committed severe breaches of the contract that was signed with Xing Fu Tang Taiwan headquarters. Therefore Xing Fu Tang Taiwan headquarters will definitely assist the Malaysian sub-franchisees to fight to recover the excessively high franchise fees that did not go through Xing Fu Tang Taiwan headquarters' signed approval and consent and that did not follow the contract requirements and also the fees that did not go through Xing Fu Tang Taiwan headquarters' signed approval.

“At the same time, Xing Fu Tang Taiwan headquarters will also be sending out legal litigation to the Malaysian franchisee, and protect all sub-franchisees who stand united together,” the brown sugar bubble tea chain said in its Facebook post that was written in Mandarin.

The RM4.5 million machines and other equipment

On Monday, Xing Fu Tang Malaysia traced the dispute as likely originating from the 34 Malaysian outlets’ refusal to buy 34 heart-shaped pearl moulding machines at RM120,000 each or worth a total RM4.5 million.

It also made other claims about equipment they were allegedly made to buy from the Taiwan headquarters.

In the Facebook post last night, Chen purported that his company had used the heart-shaped boba moulding machines to put franchisees and sub-franchisees in various countries to the “test” and to identify if they wanted to continue operations for long or were merely in for short-term gain and quick profits.

He further claimed to be willing to give the machines for free to Malaysian sub-franchisees.

Chen sought to rebut suggestions that Xing Fu Tang Taiwan sold equipment and machines at inflated prices to the brand's Malaysian stores, asserting that the Taiwan company was transparent when it said it would take part of the funds to develop the pearl moulding machines and provided sub-franchisees with the quotation and contact details for them to independently verify.

As for the egg cake machines that Xing Fu Tang Malaysia said was sold at RM150,000 each by Taiwan headquarters, Chen claimed these were sold at cost to the Malaysian franchisee along with a clear price list.

Responding to Xing Fu Tang Malaysia's claim of having purchased 2,000 lighting fixtures at an alleged “drastically inflated” price of RM280,000 from Taiwan headquarters, Chen said that the agreement with the Malaysian franchisee already stipulated requirements to adopt a uniform look in Malaysian outlets as well as the use of the best and brightest LED lighting.

Chen claimed that Xing Fu Tang Taiwan's on-site inspection of Malaysian outlets found that the lighting installed was too dim and did not meet specifications, further claiming to have helped the Malaysian franchisee pay for new LED lighting after the latter agreed to refitments.

He claimed that the Malaysian franchisee then abruptly asked them to cancel the order as the price for purchasing such lighting in Malaysia would be similar to the price in Taiwan; he asserted that Xing Fu Tang Taiwan's LED equipment was cheaper.

Chen asserted that Xing Fu Tang Taiwan practises transparent pricing by selling equipment at cost to the Malaysian franchisee, and allowed the Malaysian franchisee to source for materials and ingredients locally instead of making it mandatory for them to import from Taiwan.

Chen also claimed to have personally lugged suitcases with LED lighting and equipment on each trip to Malaysia to be given to Malaysian sub-franchisees, and had helped to install such lighting as well as having taught them how to operate the handmade pearl moulding machines.

Chen claimed that Malaysian sub-franchisees had alleged that the Malaysian franchisee did not teach them to operate the machines, also asserting that Malaysian sub-franchisees had complained about how the Malaysian franchisee had allegedly gone back on promises to not allow the opening of a second outlet near the existing outlet.

Chen claimed that the Malaysian franchisee had however allowed the opening of two outlets and above which resulted in sales dropping from more than a thousand cups to up to 200 cups, adding that Malaysian sub-franchisees who were visited had tears in their eyes when speaking of how they had poured in their savings to join the franchise.

Alleged contract breaches

Xing Fu Tang Taiwan listed nine contract terms the Malaysian franchisee allegedly breached, including the requirement for franchisee and sub-franchisees to visit Taiwan to learn how to make new products; to receive headquarters' signed approval on sub-franchisees' interior design before renovations; and the requirement for the Malaysian franchisee to train and assess sub-franchisees according to the headquarters' standards before allowing them to start.

The other terms allegedly breached are the failure to receive approval from headquarters 10 days before starting operations, failure to provide copies of agreements signed by sub-franchisees to headquarters three days after signing and also alleged unilateral changes to the agreements, failure to provide full information and contact details on sub-franchisees, and failure to notify the headquarters three days before carrying out sales and promotions.

Xing Fu Tang Taiwan also claimed that the franchisee and sub-franchisees had failed to provide CCTV footage to the headquarters for assessment of whether standard operating procedures are complied with, and that they had also failed to provide daily photographs of their outlets' storefront to the headquarters.

Xing Fu Tang Taiwan said such alleged breaches of contract were already sufficient for instant termination of its agreement with the Malaysian franchisee.

“We have already discussed with lawyers and will definitely send legal letters to the Malaysian franchisee, in order to safeguard Xing Fu Tang Taiwan headquarters' reputation, not allowing our brand to be affected by this dispute, revealing the whole truth and to clear our name and obtain justice for our company,” it said in the same Facebook post which had also featured screengrabs and photographs to back Xing Fu Tang Taiwan’s claims.

Malay Mail has contacted Xing Fu Tang's Malaysian sub-franchisee, which said it will be providing a response to the Facebook post by Xing Fu Tang Taiwan.

Xing Fu Tang Taiwan had on October 21 posted a Facebook post that listed complaints against the Malaysian franchisee, while Xing Fu Tang Malaysia had in turn taken to Facebook on October 28 to hit back at the allegations and declared that it would not be bullied.

Part of the current bubble tea craze locally, Xing Fu Tang Malaysia had started out with just one outlet on March 3 and had yesterday announced it would have a soft opening for its 40th outlet in the country early next month.

Malaysia had previously seen a dispute involving the Taiwanese bubble tea brand Chatime's owner and the Malaysian master franchisee, which was later resolved and which had also resulted in the creation of the Tealive brand.

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