La Kaffa Accuses Chatime Outlets In Malaysia Of Using "Unapproved Ingredients"
The Taiwanese company terminated their contract with Loob Holding Sdn. Bhd., the master franchisee of Chatime Malaysia, on 6 January.
By Nandini Balakrishnan — 03 Feb 2017, 03:00 PM — Updated over 7 years ago
Loob stresses that ingredients used in Chatime drinks are all halal certified
In the continuing dispute between Chatime franchise owner La Kaffa International Co. Ltd. and its former franchisee Loob Holding Sdn. Bhd., the Taiwanese company has alleged that certain ingredients used by Loob for local Chatime outlets may have not been halal-certified.
According to La Kaffa's international sales team head Hank Wang, the company is not sure on whether or not all ingredients used by Loob for Chatime Malaysia was halal-certified, especially since Loob stopped sourcing for key ingredients from La Kaffa sometime back.
"We don’t know because they have stopped purchasing some of the key ingredients, such as tea powders from us a year ago.
"All our products are halal. We supply the raw ingredients and we have a halal association to check on them," said Wang, during a press conference at Double Tree Hilton today, 7 February, as reported by Free Malaysia Today (FMT).
Refuting the allegations, Loob Holding CEO Bryan Loo, stressed that all the ingredients and products used at Chatime Malaysia were indeed halal certified.
"All the products we are selling in the last six years are certified by The Department of Islamic Development Malaysia (Jakim)," added Loo.
“We can categorically state that all ingredients used at all our outlets are halal-certified either by Jakim directly or through Jakim-recognised halal certification bodies and authorities,” Byran Loo said in a statement.
"We also have an outlet in a Petronas station at Lebuhraya Besraya, which is fully halal-certified," said Loo when speaking to FMT.
It was also reported that Loob has all the necessary halal certificates they've been issued with to prove the allegations wrong.
“Moving forward, even with our own brand, we will continue our policy of ensuring only safe and high quality products for all our consumers, especially halal-certified ingredients,” he added.
6 FEBRUARY: Loob vehemently denies La Kaffa's allegations that they used unapproved ingredients
In a press statement released yesterday, 5 February, former Chatime Malaysia franchisee, Loob Holding Sdn. Bhd. has refuted La Kaffa's claims that Loob has been using unapproved raw ingredients and has not settled royalty fees.
"We vehemently deny all the false and malicious allegations set out in La Kaffa's media statement issued on 3 February 2017.
"We continue to reserve our rights to take all action, and to explore all avenues, to protect our rights in this matter. We have no wish to engage in litigation through the media and are presently awaiting the legal process to take its course," said Loob CEO Bryan Loo in the statement.
Taiwanese company La Kaffa International Co. Ltd. also mentioned in their press release on 3 February that Loob owes La Kaffa a substantial amount of money.
Commenting on La Kaffa's claims about Chatime Malaysia allegedly using "unapproved raw materials", Loob stressed that it is "entirely untrue" and in no way compromised the quality of Chatime outlets here
Loob also took the opportunity to point out that the company has been accredited by five franchisors from four countries and that they have earned the reputation as a "master franchisee" and will continue to maintain it.
According to the press release, the Master Franchise Agreement between La Kaffa and Loob says that disputes will be dealt with at arbitration in the Singapore International Arbitration Centre.
"The Company fully respects its obligations in this regard and will say no more than is necessary about the dispute between the parties. It hopes that La Kaffa will similarly respect its obligations in this connection."
"The Company has outstanding claims against La Kaffa. Any amounts alleged to be due from the Company to La Kaffa, if established, will be set off against the former sums," read the statement.
3 FEBRUARY: On 6 January, the franchisor of Chatime, La Kaffa International Ltd., informed that they will be terminating their contract with their current Malaysian franchisee owned by Loob Holding Sdn. Bhd.
The Taiwanese company has finally come forward today, 3 February, to provide an explanation as to what led to the sudden termination of contract.
In a press statement released today, 3 February, La Kaffa said that Loob Holding has breached the exclusive master franchisee agreement by using and supplying raw material that were not part of the approved recipe by La Kaffa.
The owner of the Chatime brand has also accused Loob Holding of not settling the royalty fees, saying that Loob owes La Kaffa a substantial amount of money.
"We would like to address first and foremost Loob Holding breaching of the exclusive master franchise agreement where a substantial amount of money is owed to La Kaffa for a considerable period of time, with some amounts outstanding for more than a year," read the press statement.
Calling the breach of contract a "serious violation within the agreement", La Kaffa said that the ingredients used by the Chatime Malaysia outlets under its franchisee, Loob Holding, could and might "jeopardise the brand's image" in the future.
It was noted that the Taiwanese company had indeed tried to get in touch with Loob Holding regarding the issue but it was to no avail.
"After trying to contact Loob Holding on various occasions with no response, the company decided to appoint a global legal team to handle the legal process."
"We are convinced that Malaysia is a country with a high degree of rule of law and a country that is absolutely committed to commercial integrity," said the statement.
The Edge Markets reported on 6 January that La Kaffa has made the move to terminate the contract due to disagreement on royalty and ingredient sources
"Food and beverage products can easily be substituted. Businesses must continue to reinvent themselves by introducing new brands and products based on market demand to attract customers," said La Kaffa chairman Henry Wong after announcing the termination.
It was reported that Malaysia is the second biggest market for Chatime after Taiwan, with its Malaysian outlets generating more than 50% of the beverage chain's global revenue, excluding Taiwan.
The contract was supposed to run until 2041.
On 25 January, Loob Holding's chief executive officer Bryan Loo, said that all the 165 Chatime outlets in Malaysia will close on 6 March, when the 45-day cooling-off period agreed on by both the companies end.
Following which, Loo said that the outlets will be rebranded with a new name but the concept of the beverage store will remain somewhat similar to the Chatime concept, retaining the official colour of the Chatime logo, purple but with a different colour scheme.
"We are no longer restricted to just bubble tea. We can also provide fresh juices and artisanal coffee," said Loo when speaking about experimenting with different types of beverages now that they are no longer tied to the Chatime concept, as reported by The Star.
Responding to the matter, Loo himself had apparently lodged a police report over the unexpected termination, saying that he intends to claim for any damage it may have caused his company
"If they open a Chatime here, we will open an outlet next to them," added Loo, during a press conference on 25 January.
According to The Star, he also mentioned that past disagreements and disputes regarding business and operational matters had been "dealt with in accordance with the terms of the franchise agreement."