What triggered the dispute between Xing Fu Tang Malaysia and Taiwan headquarters?

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The Dispute Was Triggered by a Demand for Expensive Equipment and Subsequent Threats of Contract Termination

The disagreement between Xing Fu Tang Malaysia and its Taiwan headquarters, CEO International, began on October 15, 2020, when the Taiwanese entity demanded that Malaysian outlets purchase expensive machinery to produce heart-shaped boba. This demand, which included an invoice for RM4.5 million for 34 machines at RM120,000 each, was met with refusal by the Malaysian franchisees. The subsequent threat by CEO International to terminate the franchise agreements is believed by Xing Fu Tang Malaysia to be a direct response to this refusal.
Demand for Specialized Pearl-Molding Machines

The core of the dispute arose when Xing Fu Tang Taiwan requested that Malaysia's master franchisee and all 34 sub-franchisees procure specialized machines designed to mold "pearls" for bubble tea. These machines were intended to produce strawberry heart-shaped boba, a specific product innovation. CEO International subsequently issued an invoice totaling RM4.5 million for 34 such machines, stipulating immediate payment.
Refusal and Counter-Claims

On October 19, 2020, the Malaysian sub-franchisees collectively communicated their refusal to purchase the expensive equipment. Xing Fu Tang Malaysia also contested the assertion by the Taiwan headquarters that the pearl-molding machine was a novel invention, stating that similar technology had been in use in Japan for some time. This counterclaim suggests a disagreement over the necessity and originality of the demanded equipment.
Threat of Franchise Agreement Termination

Following the Malaysian franchisees' decision not to purchase the machines, CEO International threatened to terminate the master franchise and individual franchisee agreements. Xing Fu Tang Malaysia views this threat as a retaliatory measure, specifically linked to their rejection of the RM4.5 million equipment purchase. The timing of the threat, shortly after the collective refusal, supports this interpretation.
Allegations of Unfair Business Practices

Beyond the immediate trigger, Xing Fu Tang Malaysia has raised other grievances concerning the business relationship. These include claims of costly equipment purchases with poor after-sales support, such as pearl cookers that frequently break down, and the acquisition of unused egg cake machines. The Malaysian entity also alleges that the Taiwan headquarters imposed costly lighting fixtures and introduced a potentially unfair training test without prior guidelines, further straining the relationship.

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What triggered the dispute between Xing Fu Tang Malaysia and Taiwan headquarters?

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