Bubble tea chain Chatime Australia has rebutted claims made in an SMH article, in which some franchisees alleged that the franchisor is profiting from struggling franchisees.

“The claims about profiting from supply margins, issuing fines, and lacking support are factually incorrect or mischaracterise standard franchising practices,” Chatime Australia managing director Charlley Zhao told Franchise Executives, the sister title to Inside Retail, in a statement.

“The complaints raised in the media article relate to a small number of operators. In several of these cases, the stores in question are now performing considerably better under new ownership with improved sales and full compliance, demonstrating that when franchisees actively engage with the system and maintain operational standards, the business model works effectively.”

The article claims the five franchisees who spoke to the masthead on the condition of anonymity did so out of fear of retribution from the company.

“They have also signed contracts binding them to confidentiality. They are speaking out now to warn prospective franchisees against joining the bubble tea chain, which one described as “like a trap”,” the article reads.

The franchisor told Franchise Executives it acknowledged some stores face trading challenges, in line with trends across the wider hospitality and retail sectors. However, the majority of stores continue to perform well, the franchisor insisted.

Chatime investment in innovation and franchise support

The bubble tea chain said feedback from franchisees showed concern that the article, which refers to “trapped, traumatised franchisees” in its headline, was one-sided and did not reflect their experiences nor the “positive progress” in the network.

The franchisor said it has put significant investment in product innovation, marketing campaigns, store design, and franchisee support systems over the last 12 to 18 months.

“Stores that have undergone our new global store design (launched at the end of 2024) have experienced an average double-digit sales improvement compared to the rest of the network,” Zhao said.

Other initiatives include a $400,000 investment in the marketing fund over the past 18 months to drive sales growth across the franchise network.

“These initiatives demonstrate our proactive commitment to driving franchisee profitability through innovation and investment, not reacting to recent complaints,” the franchisor said.

Chatime response to franchisee claims

The bubble tea chain responded to questions from Franchise Executives about franchisee claims made in the SMH article.

Support for underperforming franchisees

Chatime refuted the claim that it charges franchisees for failing to meet agreed minimum performance benchmarks.

“Importantly, this provision has never been used in Chatime’s history to terminate a franchise agreement,  and franchisees are not charged fees for underperformance,” the franchisor said. “The purpose is to help franchisees succeed, not to generate revenue from struggling operators.

“We take franchisee performance very seriously and have extensive support structures in place.”

Chatime said these include fee-relief programs, business coaching and performance analytics, marketing and promotional assistance, operational training and store reviews, and retail performance coaching.

“While we provide extensive support infrastructure, we cannot address business challenges if operators don’t actively manage their operations, refuse to follow food safety or employment law requirements, won’t engage with support programs, or fail to implement recommended operational improvements,” Zhao said. 

Franchisees need to engage with the programs

The company said it had assessed its business model in the wake of the complaints and met with its Franchisee Advisory Council and a number of franchisees.

As a result, Chatime has refocused support towards operational assistance rather than purely compliance-based oversight. It has boosted communications protocols and responsiveness and increased its engagement with franchisees.

“We’re committed to continuous improvement and listen to franchisee feedback to adapt our systems. However, we won’t compromise on standards that protect customers,  employees, and compliant franchisees.”

Financial penalties for franchisees

Asked whether it penalised franchisees for failing to attend conferences, the franchisor said a participation fee was charged to all franchisees to help cover event costs when the chain last held a conference, in 2022.

“Chatime did not impose a fine on franchisees that chose not to, or were unable to attend.”

More recently, the business has shifted to fee-free, smaller, state-based and online sessions for greater accessibility, engagement and improved training outcomes, it said.

The bubble tea chain also denied that it issues fines or penalties to franchisees. The brand’s compliance process focuses on support and improvement, not punishment, it said. However, when stores require follow-up compliance inspections, the franchisor does apply a re-audit fee.

“This approach is aligned with standard industry practice and simply recovers the cost of the additional inspection; it is not a fine or penalty for the breach itself,” the franchisor said.

Cost of approved supplier goods

Some franchisees speaking to SMH said the costs of goods provided through approved suppliers was higher than supermarket products.

In response, Chatime said while some general supplies may be available “at competitive retail prices”, its approved supplies focused primarily on specialty bubble tea ingredients essential to the product and customer experience, and not available through retail channels.

The franchisor claims to regularly review approved supplier pricing and, in the case of music licensing and payroll compliance software, does not add a markup.

SMH article’s broad sweep

The SMH article touched on other aspects of the Chatime business, separate from the franchisee claims, including the cost of a franchise.

“It’s not cheap to open a bubble tea store or run any franchising outlet. To set up a Chatime, you’d have to stump up more than $300,000 before a single dollar is made,” the article reads.

It also referenced an underpayment fine for the business and MD Charlley Zhao, as well as the departure of former CEO Carlos Antonius, who was promoted in June 2024 to global CEO of Chatime (LaKaffa Group, Taiwan) and subsequently moved on from his international role in October 2025.

• This story was originally published on Franchise Executives.