Coffee Bean Singapore pulls plug on local franchisee

Coffee Bean & Tea Leaf Singapore Pte Ltd has confirmed it pulled the plug on its local franchisee after it breached a licensing agreement, an executive of the company told the Taipei Times yesterday.

"The local company had financial difficulties and was not able to fulfill the franchise obligations -- they didn't even pay royalties -- they also had problems in servicing the local debt," said Vincent Chang, group controller of Coffee Bean & Tea Leaf's regional office in Singapore. "It all came down to capital funding."

The local licensee, Act 2 C (Taiwan) Ltd (新華啡葉), signed an Area Development Agreement in April last year to operate five Coffee Bean & Tea Leaf stores in Taiwan. Act 2 C (Taiwan) is foreign-owned and its two main shareholders reside in Hong Kong and Singapore. No Taiwanese investors were involved in the venture, according to Chang.

Prior to the deal, Coffee Bean & Tea Leaf Singapore fully owned and controlled its own branches in Taiwan.

Setting up its first outlet in Taiwan in 2000, Coffee Bean & Tea Leaf went on to operate five stores in the greater Taipei area, including shops on Chunghsiao East Road's fourth section, Hsimenting, Tienmu, Core Pacific City Mall (京華城) and Yung He Pacific Department Store (太平洋百貨).

Chang added that, based on the franchise agreement, Act 2 C (Taiwan) was obligated to give Coffee Bean & Tea Leaf Singapore uan undisclosed percentage of sales every month, but Act 2 C defaulted on the payments for several months.

According to Chang, a notice of default was issued on Oct 21 last year but discussions were ongoing as Act 2 C was trying to secure additional funding. When new financing fell through, remaining the local licensee closed the stores on Dec. 16 last year.

"We didn't receive any formal notification of the stores' closure," Chang stressed.

Coffee Bean & Tea Leaf Singapore subsequently cancelled the franchise contract.

Chang refused to comment on Act 2 C's financial obligations in Taiwan, saying "we are, however, a creditor ourselves and will take legal recourse for the recovery of money owed."

He estimated that less than 100 employees were affected by the shutdown.

The closure doesn't mean local coffee lovers will not see Coffee Bean shops in Taiwan in the future. The company is currently looking for potential new franchisees.

"We are in discussions with potential investors who can manage our area agreement for the Taiwan market," Chang said.

The ideal partner would be a Taiwanese conglomerate interested in running coffee-shop chains, Chang added.

According to Chang, Coffee Bean & Tea Leaf plans to concentrate its self-owned shops in its core markets in the US, Singapore and Malaysia -- and to franchise to its secondary markets.