Kuala Lumpur loses Butter Factory franchise

Home-grown nightlife brand The Butter Factory is taking back the name and branding rights from its franchisee in Kuala Lumpur.

The group announced on Thursday that it has terminated its franchise agreement with Malaysian operator JV Entertainment - which has been running The Butter Factory KL since August 2012 - due to "numerous" contractual breaches by JV Entertainment.

The Butter Factory's executive chairman Tay Eu-Yen tells Life! that the breaches included violations of a non-competition clause when JV Entertainment promoted another club and The Butter Factory Group's branding standards. JV Entertainment also defaulted on payment over the past six months.

Without delving into details, she acknowledged that there were also issues over the KL club's branding and marketing strategy, which she felt "impaired The Butter Factory's reputation".

She did not say how much money was owed to her company.

JV Entertainment, led by executive chairman Victor Hoo, signed a three-year franchise agreement with The Butter Factory in 2012 and started the KL club in August that year.

Located in Jalan Kia Peng, the 10,000-sq ft, two-storey nightclub, which was set up at a cost of $2.45 million, quickly became a destination nightspot in Kuala Lumpur.

It was the first franchise outlet started by The Butter Factory Group, which currently runs its nightclub at One Fullerton and Sauce Bar at the Esplanade.

Ms Tay, who stressed that the partnership "did not end on bad terms" and that JV Entertainment "understood why we needed to do that", adds: "The gist is, we feel that in terms of brand and reputation, we have been hurt by the way JV Entertainment has conducted business.

"I don't think it was ill-intended or malicious... they're trying their best. It's just a business decision that we cannot continue."

Ms Tay says it was a "series of events in the last quarter" that led to the company finally deciding to terminate the franchise agreement. But the straw that broke the camel's back was when JV Entertainment was found to be promoting another nightclub, Mastro KL.

Mastro KL, which opened last month, takes over the second-storey space of The Butter Factory KL.

Ms Tay says: "We cautioned that it shouldn't be another club because that would cannibalise The Butter Factory KL and would be bad for JV Entertainment's business."

She later found out via Facebook that JV Entertainment had entered into a management agreement to promote the competing club above Butter Factory KL.

She says: "That, to us, is a very clear breach of our non-competition clause."

But Ms Tay says she has no regrets about her company's first franchise venture and is not ruling out other franchise opportunities in the future.

"I don't think we see this as a failure, we're very willing to explore franchise opportunities across the region; it's not something demoralising. It was a good experience and we had a good time in KL."

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