Xing Fu Tang Taiwan now says that the expensive machines were just a “test”

Who would have thought brown sugar boba milk drama could read like a TV show, but it looks like the Xing Fu Tang saga continues with what Malay Mail calls a “lengthy and emotional” Facebook post by Xing Fu Tang (XFT) Taiwan on their own page. While I can’t personally confirm if it was very “emotional” because I can’t read Chinese, I can definitely confirm that it is lengthy. And, there’s quite a lot to unpack here.

XFT Taiwan took to their social media a few nights ago to share what is essentially a rebuttal to XFT Malaysia’s rebuttal of XFT Taiwan’s original allegations regarding the state of the brand and its franchisees here in Malaysia.

In their latest post, XFT Taiwan accused their Malaysian master franchisee for tarnishing the brand. XFT Taiwan continued to accuse XFT Malaysia for overcharging sub franchisees in terms of franchise fees and other costs, as well as violating their agreement. Because of this, XFT Taiwan says that they will “definitely” send legal letters to the Malaysian franchisee and pursue legal action against Collab Working Lifestyle (XFT Malaysia’s master franchisee).

For those who aren’t up to speed, this very public series of accusations started last week when XFT Taiwan posted a lengthy Facebook post on their page about the complaints they’ve received from their Malaysian sub franchisees regarding XFT Malaysia’s master franchisee. Complaints ranged from the high cost of materials and transportation, to competition among XFT outlets in the same area.

Following that, XFT Malaysia published their own Facebook post presenting their side of the story, which rebuts a lot of what XFT Taiwan shared, maintaining that they have a good relationship with their sub franchisees too. In that post, XFT Malaysia alleges that the entire kerfuffle started on the 15th of October 2019, when CEO International (principal of the Xing Fu Tang brand) asked the Malaysian franchisees to purchase RM4.5 million worth of a specialised pearl-making machine which would only be delivered to Malaysia by the end of 2020.

Interestingly, in this latest Facebook post by XFT Taiwan, the brand claims that the request to purchase the machines was to put franchisees and sub franchisees in various countries to the “test”. This test was allegedly to identify if these franchisees were in this to continue operations for a long time, or if they were just in this for “short-term gain” and quick profits. XFT Taiwan founder Edison Chen even said that they were willing to “give the machines for free to Malaysian sub franchisees”.

Now, I’m not a business person, but is this really how things play out with other franchises? I thought that the 10-year agreement XFT Malaysia signed with CEO International was binding enough to prove that XFT Malaysia was going to be here for at least the agreed-upon time span. Seems rather peculiar that the principal of the brand would conduct a “test” like this so their franchisees can prove their loyalty.

Also, if he was planning to give the machines for free to the Malaysian sub franchisees, why did it look like XFT Malaysia received an actual invoice for the machines? I don’t know about you, but that seems a little odd to me.

But, that’s not all they wrote

The post by XFT Taiwan also stated that they did not sell equipment and machines at an inflated price to the brand’s Malaysian stores. XFT Taiwan also claims that the egg-cake machines sold to XFT Malaysia for RM150,000 were sold at cost price. Sure, even if that was the case, the original complaint XFT Malaysia had with the purchase of those machines wasn’t so much about the price as it was about the fact that the machines were not being used.

XFT Taiwan continued with the issue about the inflated prices of the light fixtures, claiming that XFT Malaysia already agreed to the requirement that all Xing Fu Tang outlets would have a uniform look in Malaysia, including the use of the “best and brightest LED lighting”. The post continued that upon an on-site inspection, XFT Taiwan found that the lighting installed was too dim and did not meet specifications, adding that XFT Taiwan were even willing to help the Malaysian franchisee pay for new LED lighting after the latter agreed to refitments.

But, according to Edison, 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 XFT Taiwan’s LED equipment was cheaper.

That said, the part I found the most interesting about this lighting angle, was the fact that Chen claimed to have personally lugged suitcases with LED lighting and equipment on each trip to Malaysia to be given to the Malaysian sub franchisees. On top of that, he claimed to have helped to install such lighting as well as having taught them how to operate the handmade pearl moulding machines.

The post continues with several allegations related to the opening of more than one XFT outlet within close proximity which resulted in sales dropping from “more than a thousand cups to up to 200 cups”. In fact, he even claimed that the Malaysian sub franchisee that XFT Taiwan visited even had tears in their eyes when speaking of how they had poured in their savings to join the franchise.

To cap it all off, XFT Taiwan listed nine contract terms that the Malaysian franchisee has allegedly breached. This includes the requirement for the franchisee and sub franchisees to visit Taiwan to learn how to make new products; to receive headquarters’ signed approval on outlet interior design before renovations; as well as the requirement for the Malaysian franchisee to train and assess sub franchisees according to the headquarters’ standards before allowing them to start.

Besides that, XFT Taiwan claims that XFT Malaysia have also breached other terms like failure to receive approval from headquarters ten days before starting operations; failure to provide copies of agreements signed by sub franchisees 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.

To round out the list of contract breaches, XFT Taiwan claims that their franchisees and sub franchisees failed to provide CCTV footage to the headquarters for assessment of whether standard operating procedures are complied with, as well as failure to provide daily photographs of their outlets’ storefront to the headquarters.

According to XFT Taiwan, these alleged breaches of contract were already sufficient for “instant termination” of its agreement with the Malaysian franchisee.

If that’s the case, why haven’t they done so?

Xing Fu Tang is a very well-known brand, so one would think that it wouldn’t be difficult to find another master franchisee to take over if Collab Working Lifestyle has already breached so many of the contract terms. Why drag this out in the very public space that is Facebook? Is it for publicity? I hope not, because nobody looks good right now.

Yesterday, XFT Malaysia published yet another post on their Facebook page claiming that CEO International were trying to smear their reputation again, and that they have attended to this matter with their very own legal letter.

We’ll see where this goes from here, but I for one am still befuddled by this whole situation. OK, maybe not the situation, but with the fact that these two are slinging allegations at each other on Facebook of all places.