Legal Storms In A Teacup

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Storms in a teacup are minor or trivial, but not the legal kind bubbling away in Malaysia over Taiwanese bubble tea franchises Chatime and Tealive.

The latest saga came on Tuesday 17 July 2018 with the Federal Court’s decision to allow a stay order to temporarily stop the injunction granted by the Court of Appeal on 27 June 2018 to Chatime’s owner La Kaffa International Co Ltd: See https://www.thestar.com.my/news/nation/2018/07/17/tealive-allowed-to-stay-in-business-federal-court-grants-loob-holding-stay-order-on-injunction-to-co/

https://www.digitalnewsasia.com/insights/bread-kaya-laypersons-guide-chatime-v-tealive-dispute?page=0%2C1

Malaysians are well aware of the adage “When elephants fight, the mousedeer gets trampled”. Forced closure of some 171 Tealive outlets would have affected the livelihoods of an estimated 161 Tealive franchisees, 1,372 employees and 171 landlords. That is a lot of economic damage in the Teacup fight over franchise rights. The latest reprieve allows the status quo to continue pending the outcome of arbitration proceedings.

While the legal rights of the protagonists – Tealive’s Loob Holdings (Loob) and Chatime’s La Kaffa International (LKI), are well protected by their respective counsels, what about the rights of subfranchisees?

It is unclear how the fractious dispute between Loob and LKI will eventually end.  All subfranchisees must address the fallout from the War of Teacups if Tealive loses their battle:

1. What happened to the rights of sub franchisees under the Chatime sub-franchise?

2. What about their rights under the Tealive franchise?

3. Have they waived any of their rights inadvertently?

4. In signing up with Tealive, are they exposed to liability in the event LKI wins their lawsuit against Loob?

5. What about their employees’ entitlement to retrenchment benefits? Are they obliged to accept a transfer of employment to other businesses belonging to the sub franchisees?

6. What about tenancies and landlords? Can landlords continue to claim rentals while the space is vacated pending new tenants? Are landlords obliged to allow another of the sub franchisee’s businesses to occupy the premises?

These are hard questions that sub franchisees must ask to protect their own interests. While it is all about a cup of tea, it is not “a piece of cake”.

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