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Understanding the Tealive Franchise Agreement: Key Terms and Considerations

If you are interested in starting a tea business and have considered the option of franchising, you may have heard of Tealive, a well-known brand of bubble tea founded in Malaysia in 2014. Tealive has expanded rapidly across Asia and the Middle East, and now offers franchise opportunities in various countries, including the Philippines, Vietnam, and Australia. However, before you sign any contract with Tealive or any other franchisor, it is important to understand the franchise agreement and its implications. In this article, we will review some of the key terms and considerations of the Tealive franchise agreement, based on public sources and general principles of franchise law and practice.

Franchise Fee and Royalty

One of the most significant financial obligations for a Tealive franchisee is the franchise fee, which is a one-time payment that gives the franchisee the right to use the Tealive trademarks, system, and support for a specific period of time. According to the Tealive website, the franchise fee varies depending on the location and size of the store, ranging from RM150,000 (about USD36,000) to RM400,000 (about USD97,000) for a standard kiosk or shop. The franchise fee covers the initial training, site selection, design, and equipment setup, as well as the ongoing support and marketing efforts provided by Tealive.

In addition to the franchise fee, a Tealive franchisee must pay a monthly royalty fee, which is a percentage of the gross sales generated by the store. The current royalty rate for Tealive is 6% of gross sales, excluding taxes and some other items. This means that if your store generates, for example, RM50,000 (about USD12,000) in sales per month, you would owe Tealive RM3,000 (about USD730) as a royalty fee. The royalty fee is intended to compensate Tealive for its continuing services and intellectual property rights, and to motivate the franchisor to help the franchisee succeed.

Duration and Renewal

The Tealive franchise agreement typically has a duration of 5 years, with an option for renewal for another 5 years, subject to certain conditions. The renewal fee is currently set at RM50,000 (about USD12,000) for a standard kiosk or shop, and may be adjusted by Tealive at its discretion. The renewal process involves a review of the franchisee`s performance and compliance with the terms of the agreement, as well as the availability of suitable locations and market demand. The franchisee may also have to upgrade or renovate the store according to Tealive`s standards and pay additional fees for training or marketing.

Territory and Competition

Another important aspect of the Tealive franchise agreement is the territory granted to the franchisee, which defines the geographic area where the franchisee has the exclusive right to operate and promote the Tealive brand. The size and shape of the territory may vary depending on the market, the population, and the competition. For example, in Malaysia, Tealive may grant a territory of 3 km radius for a kiosk and 5 km radius for a shop, while in other countries, the territory may be based on postal codes or other demographic criteria. The purpose of the territory is to prevent overlapping or cannibalization of sales among Tealive stores, and to allow the franchisee to focus on building and serving a loyal customer base.

However, the territory may also have some limitations and risks. For example, the franchisee may not be able to operate outside the territory or online without Tealive`s permission, which may restrict the growth potential and flexibility of the business. Moreover, the territory may not be completely impervious to competition from other bubble tea brands or similar products, especially if the market is crowded or dynamic. Therefore, the franchisee should conduct a thorough market analysis and due diligence, and be prepared to adapt and innovate to meet the changing demands and trends of the tea industry.

Other Terms and Conditions

The Tealive franchise agreement may contain many other terms and conditions that affect the franchisee`s obligations, rights, and risks. For example, the agreement may specify the quality and quantity of the products and supplies that the franchisee must purchase from Tealive or its designated suppliers, the training and support programs that the franchisee must attend and complete, the standards and procedures for store operations and management, the obligations and restrictions on advertising, marketing, and social media, the dispute resolution mechanisms, and the termination and transfer provisions. Some of these terms may be negotiable or subject to change, while others may be non-negotiable or essential to the Tealive system and brand. Therefore, the franchisee should carefully read and understand the agreement, seek professional advice from lawyers, accountants, or franchise consultants, and communicate openly with Tealive representatives.

Conclusion

The Tealive franchise agreement offers a potentially profitable and rewarding opportunity for tea enthusiasts and entrepreneurs who want to tap into the growing demand for bubble tea in various markets. However, franchising is not a guarantee of success, and requires diligent research, planning, and execution. By understanding the key terms and considerations of the Tealive franchise agreement, franchisees can make informed decisions and maximize their chances of achieving their goals.