The Straits Times
Nov 17, 2007
Ministry of Sound parent sues Singapore franchise
UK nightlife giant unhappy over local licensee’s running of its nightclub here
By Sujin Thomas
THE London-based parent company of the nightlife giant Ministry of Sound (MoS) has filed suit against its Singapore franchise, alleging a litany of shortfalls in the way it is run – from the kind of music played to its unstable website.
MoS filed suit in Britain’s High Court of Justice on Thursday, seeking damages and a court order to force its Singapore licensee LB Investments to fall in with its guidelines on running the club.
LB Investments is a subsidiary of Singapore mainboard-listed company LifeBrandz.
MoS has alleged, among many things, that LifeBrandz’s focus has been on promoting its stable of other nightclubs in Clarke Quay, such as The Clinic, Fashion Bar and Lunar.
Court papers also said the MoS Singapore website has ‘often been down or inaccessible’.
LB Investments is also said to have breached its contract in the areas of staff uniforms, music policy, door policy and the dismissal of key employees.
The bottom line: It had ‘failed to develop’ the club here ‘in a manner consistent with the reputation of the brand’.
LB Investments signed the contract in April 2005 for 15 years and threw a big bash when the 40,000-sq-ft party venue opened in December 2005.
The lawsuit caps an almost year-long exchange of letters and talks, which MoS said ‘was never taken seriously’.
LifeBrandz chief executive Clement Lee said: ‘We don’t think these breaches are of any substance. They have claimed certain things and I don’t think all of them are true.’
He added that his lawyers from Rajah & Tann would draft a reply to MoS.
Besides the alleged breaches of contract, MoS claims that it is owed $200,000 in royalties which were due in April.
But Mr Lee said he was due to pay only next month: ‘Their claim of our not paying them the money is ridiculous because the contract is not even due.’
MoS International’s president Michael Wilkings, who has visited the club here, told The Straits Times on the line from Dubai: ‘The breaches are material, substantial, continuing and unremedied. We are out of patience.’
He has been overseeing the nightclubs and bars under the MoS brand outside Britain for the past 11/2 years; MoS makes about $300 million worldwide every year and now has another franchise in Egypt.
He said: ‘We have been trying to deal with Clement Lee and his colleagues through most of this year, to try and make him understand MoS Singapore has to be operated at a standard that is acceptable to MoS.’
When asked how MoS was alerted to these breaches, he said that, besides customer feedback, periodic checks are made on the group’s clubs, some without the licensees’ knowledge.
‘We obviously don’t have a lot of confidence in their ability to operate the club,’ he said.
Rumours of an imminent closure have churned among partygoers since last month, when industry sources began speculating about unhappiness in Britain’s MoS about the way the club here was run.
But as far as Mr Lee is concerned, the party goes on, since the franchise has not been revoked.
He said: ‘There just seems to have been a difference in direction as to what is expected and what we’re delivering.’
ST
Sun 26 Nov 2007
Canned brands – a hit or miss?
A foreign club brand may entice a crowd at the start, but it’s not enough to keep them coming back
By Frankie Chee
MADE in Britain, established since 1991.
That’s what its tag would read if the Ministry of Sound (MoS) had one.
The nightspot’s London outlet’s reputation for thumping house beats spurred Singaporean clubbers to endure long queues to check out the action when MoS opened in Clarke Quay in 2005.
Listed home-grown company LifeBrandz, which brought in MoS, went on to introduce other established nightspot brands from overseas such as Cafe Del Mar, Fashion Bar and Barfly.
Mr Clement Lee, chief executive of LifeBrandz, says brand names ‘come with recognition’.
His take is that ‘it’s the success of the investment that counts. If I have to pay for something that will give me a better chance of making it, then why not?’
But LifeBrandz ran into some turbulence last week when reports said that it had been sued by MoS’ London-based parent company.
The latter cited a list of infringements – from the music genre offered to the uniform of its staff, and even its unstable website.
It is believed that LifeBrandz has a 15-year deal to use the MoS monicker.
‘We will be answering them through a lawyer, and will look at what we can do when we get more detailed information on their complaints,’ Mr Lee says.
To be sure, imported brand names are not a recent trend.
Over the last 15 years, names like Thailand’s trendy Q Bar and America’s posh Studebaker’s have popped up here, only to fold within five years because of poor business.
Similarly, France’s famous revue, Crazy Horse, trotted off after barely a year here, incurring a write-off of $5.7 million for franchisee Eng Wah Organisation.
No wonder then that industry sources note that a foreign import is no guarantee of surefire success.
Clubbers here are notoriously fickle – the now-deserted Mohamed Sultan Road bears witness to this, after a short three years of fame.
Sure, the nightlife industry may be worth more than $250 million a year but it is contested by many players, from Chinese KTV lounges to the opening of new hubs like Tanglin Village and the revamped Clarke Quay.
Customers are king and are not afraid to barhop.
And the initial gasps soon fizzle out, even for famous overseas brands, if they do not have any particularly strong proprietary edge.
Industry sources say that ultimately, it doesn’t matter who you are but what you can give to the customer.
‘In the end, it’s really the quality of people, music and exclusivity that counts for me,’ says Ms Brenda Kow, 30, a derivatives broker who parties at least once a week.
There are enough local success stories, such as the Harry’s chain, Zouk, the Emerald Hill Group, IndoChine and St James Power Station, to back the contention that home-grown players have the ability to cut it too.
Some, like Attica, IndoChine and Zouk, have expanded to places like Shanghai, Hamburg and Kuala Lumpur.
Pays to be home-grown
THE advantage of incubating homegrown brands is that you can save on paying licence fees and royalties to a franchisor.
‘In a very competitive environment, when revenue goes down, all these excessive costs can become a huge burden on the operator,’ says Mr Dennis Foo, chief executive of St James Power Station.
‘All the money paid to the franchisor after the few years of operation should have been in our own bank account, not theirs,’ he adds.
Upfront licensing fees can number in the millions while royalties can be as high as 10 per cent of the annual profits.
Such payments can become a drag on profits, especially if the customer numbers stagnate, or worse, drop.
Mr Lee admits that the attendance at MoS – which celebrates its second anniversary next month – has tapered compared to its first few months.
He is unable to say how much the numbers have dropped, saying only that it now draws 3,000 to 5,000 patrons on a good weekend night.
Despite the heavy financial obligations, the franchisees don’t get full control over the product.
They have to abide by stipulated management, music and operation standards, and changes have to gain the nod of the brandowner.
This means they will not have a free hand in making the crucial tweaks to give what the local folks want. And foreign operators may not fully understand the local situation and, hence, may not agree to changes in management or concepts.
Each market is different, a fact which local clubbing icon Zouk learnt when it opened its first overseas outlet in Kuala Lumpur in 2004.
Zouk’s marketing manager Tracy Phillips says: ‘It’s a different market over there; they have other kinds of influences that can affect the business, such as the age and operating-hour restrictions.’
Zouk KL’s director Cher Ng says: ‘We had to think about the local culture, like drinking habits and music trends.’
Such attention to detail has allowed it to attract between 5,000 and 6,000 clubbers during the four days it operates a week.
The freedom to innovate was key too for Attica when it exported its concept to Shanghai last year.
‘By owning our own brand, we can play with certain aspects of the club and adapt them to suit the local client base,’ says Mr Mikey M.S., director of Attica.
Another Singapore export is IndoChine which has stretched its wings to Hamburg, Kuala Lumpur, Phuket and New Delhi.
Local players agree that the onus is on the operator to decide which makes better business sense for him – to import a brand or groom his own.
Mr Lee says: ‘Surely, there is more freedom in operating your own brand but, ultimately, it’s the entertainment on offer that’s important, not just the logo.’
LifeBrandz has seen it fit too to invest in its own brandnames such as Lunar and The Clinic in Clarke Quay and Balcony Bar in The Heeren.
Mr Mohan Mulani, chief executive of Harry’s Holdings which operates 25 outlets, says that while ‘developing your own brand is tough and takes time, it’s rewarding”.
Mr Foo also prefers to do things his way.
‘If it’s your own brand, you own it. And if you build it up, it’s yours, not somebody else’s. So if you can build your own brand, why pay for someone else’s and do it for him?’