Molly Tea New York: When a Chinese Tea Brand and Its US Partner End Up in Court
- Jul 7
- 8 min read
Key Takeaways
Molly Tea (茉莉奶白) opened its first overseas store in Flushing, New York in April 2024 and ran at roughly US$500,000 a month, well above the US$150,000 to US$300,000 that Chinese new tea stores typically do in North America.
Eighteen months later the brand and its US partner were in court. By June 2026 four New York stores had stopped using the trademark and the brand was claiming more than US$5 million in damages.
The breakdown was structural, not personal: a joint-venture control fight, a Franchise Disclosure Document that arrived more than two years late, and the absence of the territorial protection that US franchising treats as standard.
The case marks a shift. Chinese tea is moving from a land-grab phase, where growth covered every gap, into a deeper phase where compliance, localization and partner terms decide who survives.
For operators, the lesson is that a record opening month is the easy part. The hard part is the legal and operating scaffolding that has to be in place before the first store, not bolted on after it.
In April 2024, a Chinese tea brand most Western observers had never heard of opened a single store in Flushing, Queens, and quietly rewrote the math of Chinese food and beverage in the United States. The Molly Tea New York debut reportedly ran at about US$500,000 a month, a figure the Chinese business outlet 36Kr put well above the US$150,000 to US$300,000 that most Chinese new tea stores manage in North America, and above even the roughly US$400,000 ceiling of category leader HEYTEA (喜茶). The store became a destination, the kind of opening that gets screenshotted and forwarded across founder group chats back home.
Eighteen months later, the same store sat under a blank board with a white question mark on it. By June 2026, Molly Tea and the local partner who built its US business were suing each other, and four of its New York locations had gone nameless. How a record-setting debut turned into a courtroom is the most useful story in Chinese consumer brand globalization right now, because almost nothing that went wrong was about the tea.
How Did Molly Tea New York Become an Overnight Success?
Molly Tea is not a household name even in China. The company was founded in 2020 and grew the slow way, running directly operated stores in second and third tier cities, and only passed 100 stores around June 2023. That makes its overseas leap unusual. Most Chinese tea brands test the waters in Southeast Asia, where Chinese diaspora demand is dense and the regulatory bar is lower. Molly Tea went straight for the hardest market on the board, the United States, and led with one store in the most demanding tea corridor in the country.
The bet worked because of who was placing it. The US side was a Mr. Liu, operating through an entity called MHL NY LLC, who had been helping Chinese food and beverage brands land in the US market for nearly a decade. He took on the lease risk, the buildout, the hiring and the local credibility that a brand sitting in Shenzhen could not. The Flushing store was not luck. It was years of local operating knowledge applied to a brand with a clean product and timely momentum. On the back of that proof point, Molly Tea expanded into Canada, Australia and the UK, and on into Southeast Asia, with the headline numbers getting better at each opening.
This is the part of the story that travels well on LinkedIn and in trade press: Chinese speed meets American scale, and the cash register agrees. It is also the part that hides the problem. A US$500,000 month does not prove that the underlying relationship is sound. It only proves that demand is real. The two are very different things, and the gap between them is where this case lives.
What Actually Broke Down Between the Brand and Its Partner?
The legal scaffolding never matched the commercial momentum, and the documents tell the story. The two sides signed a brand authorization and technical service agreement in December 2023 that allowed five stores. In July 2025 they layered on a joint-venture structure in which the brand held 19.9% and the partner held 80.1%. The economics, in other words, were heavily tilted toward the operator who had taken the risk. Then the balance of power started to move.
In January 2026, the brand sent revised shareholder agreements that reset the split to 35% and 65%, and, almost in the same breath, sent the partner its Franchise Disclosure Document for the first time, more than two years after the cooperation began. For a high-performing Columbia University location, the brand reportedly pushed for a 70% to 30% split in its own favor. The sequence reads as an attempt to convert a partner-led business into a brand-controlled one once the hardest work was done and the locations were proven.
From there it escalated fast. On 31 March a brand director messaged the partner that if he did not sign the FDD, all stores would be suspended. On 2 April several stores were ordered into indefinite suspension and the brand cut off supply chain, logistics, delivery platform and POS support. The partner sued in mid-April and obtained a temporary restraining order. On 1 May the brand terminated the trademark license, and on 15 May it countersued in federal court in the Southern District of New York for trademark infringement. By 11 June, four stores in Flushing, Brooklyn, Chinatown and near Columbia had stopped using the Molly Tea name, the brand was claiming more than US$5 million in damages, and the partner had covered the storefront signs with question marks, rebranding them as "? Tea". The legal fight over the future of those New York locations is still unresolved.
Why Do Chinese Tea Brands Keep Ending Up in Court in the US?
The specific actors here are less important than the pattern they expose. Chinese new tea grew up in a home market where a brand can sign a partner, ship product and sort out the paperwork later, because enforcement is loose and growth forgives almost everything. The United States runs on the opposite logic, and three structural mismatches show up again and again.
The first is franchise disclosure. US franchising is governed by a federal FTC Franchise Rule that requires a disclosure document covering 23 specific items to be given to a prospective franchisee before any money changes hands, and on top of that, a set of states require franchise registration before a brand can sell there. An FDD that surfaces more than two years into a relationship is not a technicality. It changes the legal character of the deal retroactively and hands the other side a grievance. The "get on the train first, buy the ticket later" habit that works in China is a liability in the US.
The second is territorial protection. Mature US franchising treats area protection as a default term, so an operator who builds a market knows it cannot be undercut by the brand opening next door or reclaiming the best sites. When that protection is missing, every successful location becomes a reason for the brand to renegotiate, which is precisely what appears to have happened here. The third is the role of the local partner. The person who signs the lease, guarantees it personally and absorbs the early losses is indispensable in year one and inconvenient in year three, once the stores are proven and the brand would rather run them directly. Without contractual clarity on that transition, the relationship breaks at exactly the moment it starts to pay.
None of this is unique to Molly Tea. Industry operators describe a recurring "we can win anywhere" confidence colliding with a fragmented legal system that varies state by state. In one widely cited account, a Chinese tea brand let several franchisees pitch the same shopping mall at once under a horse-racing approach, and got blacklisted by that mall for the chaos it created. The brands that travel well are the ones that treat the US as a different operating system, not a bigger version of home.
What Can Operators Learn from the Molly Tea Dispute?
Chinese tea is not retreating from the world. Mixue (蜜雪冰城) ran nearly 4,900 overseas stores by the end of 2024, with HEYTEA past 70 abroad, and Chagee (霸王茶姬) operated about 156 overseas stores and was preparing to open its first US teahouse in Los Angeles. The category is going global with real momentum. The question Molly Tea raises is not whether to expand, but how to structure the expansion so a hit store strengthens the partnership instead of detonating it.
The contrast that matters is with brands that localized deliberately. ChaPanda (茶百道) opened its overseas first store in Seoul's Gangnam district and built a profitable Korea operation led by a dedicated market head before listing in Hong Kong in 2024. The difference is not luck. It is that control, economics and the role of the local team were defined up front, rather than fought over once the business worked. A clean structure is what lets a brand reward the partner who opened the market instead of trying to claw the market back from them.
For founders building across borders, the Molly Tea New York case is a cheap lesson in an expensive subject. Decide before the first store who owns the entity, who owns the trademark license and on what terms, what happens to a high-performing location, and how a partner is bought out if the relationship outgrows its original shape. The same discipline applies in reverse. International brands entering China win or lose on local structure and local partners, a dynamic we have traced in cases from Chinese consumer behavior in Europe to how China-born brands such as VIVAIA earned global trust. Cross-border execution is a localization problem in both directions, and the brands that respect that are the ones still standing when the heat of the opening fades.
Molly Tea is also not the first to learn this in public, and will not be the last. Other Chinese brands stumbled over franchising before it, and the same fault lines run well beyond tea, wherever a company scales faster than the rules of the market it enters. There is a deeper layer too. Even as Chinese companies have become highly modern and professional, business in China still runs partly on relationship and trust, the personal guanxi (关系) a contract alone does not capture. That is a real strength and a double-edged sword. When the relationship holds, it fills the gaps the documents leave open. When it breaks, those same gaps become the battleground, because nothing was written down. The lesson is not to choose between trust and process, but to build both, so the relationship carries the early risk and the contract carries the later weight.
Molly Tea proved the demand. What it could not prove was the partnership, and in the US the second one is harder, slower and far more consequential than the first. The record opening month was never the achievement. The achievement would have been a structure strong enough to survive its own success.
Double V is a cross-border operating partner and intelligence house for emerging consumer brands, based in Hong Kong and Shenzhen. We help brands connect China and the world through three businesses: Brand Operation (marketing and distribution for brands on retainer), Brand Incubation (sister company Glam Infinite and our own-built brands), and Industry Intelligence (cross-border research and reports). Talk to our team.
Comments