FamilyMart is suing its Chinese partner in a dispute over royalties which could spell the end of the joint venture.
With 2500 stores across China, FamilyMart has the second-largest network of foreign players, but the highest market share at around 8.4 per cent, according to Euromonitor data. The Chinese business, owned by Taiwan-based Ting Hsin International Group, is considered a mainland entity having had a presence there since the late 1980s.
Japan’s FamilyMart UNY has lodged a suit in the Cayman Islands, where both companies are registered, seeking to force Ting Hsin to relinquish its 60 per cent stake in the venture, according to documents sighted by Bloomberg. It claims the Chinese company has not been fairly sharing the profits from the chain’s expansion in China.
But Ting Hsin counters that familyMart is seeking royalty fees three times higher than rival chains such as 7-Eleven, which is also Japanese owned.
A FamilyMart spokesperson says the company cannot comment on matters of litigation. Ting Hsin cited confidentiality agreements for not commenting.
However FamilyMart UNY is alleging that Ting Hsin sought to reduce the royalty fee it pays for using the brand from 1 per cent of sales to 0.3 per cent or less. At one point, it allegedly withheld royalty payments for seven months.
Ting Hsin has also been accused of failing to adequately disclose transaction data which would allow familyMart UNY to gain an accurate picture of the business’ performance in China.