Chatime warns it will close stores across Australia if sales plummet and minimum wage rises

Chatime, the global teahouse chain with more than 200 stores across Australia, is at risk of closing a number of stores due to financial difficulties.

Chief Executive Carlos Antonius said double-digit increases in rent and utilities and a 5.75 percent increase in the minimum wage are making some stores unprofitable.

The boss added that downward pressure on retail sales and rising costs are “putting pressure on marginal profitability” and that stores “might go into the red.”

“Decisions will be made where it may be better to close and move than to renew (a lease) now,” Mr Antonius told the The Sydney Morning Herald.

He added that store closures are “always the last resort” but there will be “definitely” a small number of outlets that will not reopen.

Chatime has dominated the Australian bubble tea industry since its launch in 2009 and has 169 stores, with plans to expand to 250 by 2050.

The Taiwanese franchise has also expanded into a convenience store range at Coles and Woolworths, including DIY milk and iced tea sets.

The brand gained popularity for its variety of beverages, including milk tea, fresh tea and fruit teas and toppings known as ‘pearls’ or ‘jelly’, with its best-selling beverage being a ‘pearl’ milk tea.

Mr. Antonius claimed that wages and wage compliance created an ‘unfair playing field’ and were the biggest challenge for the company.

“We’re seeing a lot more (regulatory) focus on employment or obligations, so I think if there’s no action by the regulators in that regard, it creates a level playing field and means companies are put at a disadvantage,” Antonius said.

Chatime Chief Executive Carlos Antonius (pictured) said downward pressure on retail sales and rising operating costs pushed stores ‘into the red’

In 2019, an investigation into the franchise revealed that as of 2009, Chatime underpaid staff at its stores by as much as $6 million.

An internal audit found that 86 percent of workers in more than 20 stores were underpaid.

In December 2019, The Fair Work Ombudsman took legal action against tea franchise and managing director Chen ‘Charlley’ Zhao for paying 152 workers just $7.59 an hour at 10 outlets in Sydney and nine in Melbourne.

Zhao reportedly knew that staff had been underpaid since 2013 and reportedly “aided and encouraged” the underpayments.

Mr Antonius said affected staff have since been reimbursed but claimed he could not ‘guarantee’ that Chatime was not underpaying workers.

“What I can guarantee is that we have improved systems, everything from time and attendance platforms, to audited payroll processes, to visa spot checks. So we have an improved process and discipline,” said Mr. Antonius.

The Taiwanese franchise has dominated Australia’s bubble tea industry since its launch in 2009 and has 169 stores, with plans to expand to 250 by 2050 – with its top-selling drink being a ‘pearl’ milk tea (pictured)

‘But can I guarantee that (underpayments no longer occur)? I couldn’t do that because with more than 100 locations there could be an error,” he added.

Mr Antonius, who was appointed CEO in 2015, said the franchise did not dispute the underpayments, but disputed the allegations against Mr Zhao – who he confirmed is still involved with the company.

Founded and headquartered in Taiwan, the franchise has more than 2,500 stores worldwide, with the Australian sector making the largest gains in the Western market.

Mr. Antonius was tasked in 2022 with growing the business in New Zealand and the US, while the Australian industry led a global brand review with its Taiwanese parent company.