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Source: Time Weekly Author: Li Xinting

Just two years after its emergence, the Chinese hamburger brand Tustin has put the brakes on its expansion.

Since 2024, the pace of store expansion in Tustin has slowed down significantly. According to data from Zhaimen Canyan, the number of new stores opened in Tustin in 2022 and 2023 was as high as 2,316 and 3,772 respectively. So far this year, the number of new stores opened in Tustin is only 808, a significant decline compared with the previous two years. If the store opening speed in the second half of the year is the same as that in the first half of the year, the number of new stores in Tustin this year will be halved year-on-year.

A Tustin store in Guangzhou. Photo taken by a reporter from Time Weekly.

Franchise fees increased, store openings slowed down

According to Tianyancha information, the founder of Tustin China Burger is Wei Youchun, a native of Ningde, Fujian. He worked as a Wallace agent in the early years and opened 7 Wallace burger stores in three years. In 2012, Tustin was officially established, with its headquarters in Fuzhou, Fujian, and its first store in Nanchang, Jiangxi.

In the early days of its establishment, Tustin started as a Western fast food restaurant, focusing on the dual categories of "hamburgers + pizza". In 2019, after clarifying the differentiated product positioning of "Chinese hamburgers", it began to embark on the fast track of development. According to the data from Zhaimen Canyan, from 2020 to 2022, the number of new stores opened by Tustin was 316, 450 and 2,289 respectively. According to 36Kr, Tustin expects to achieve revenue of 5 billion yuan in 2023.

During the period of rapid development, capital also extended an olive branch to Tustin. In 2021, Tustin received equity financing from Buhuo Ventures and Source Code Capital. Since then, the company has not made any new financing moves. At the end of 2023, 36Kr reported that Tustin was about to complete a new round of financing, and Sequoia China appeared on the list of investors, with a post-investment valuation of approximately 7 billion yuan. However, Tustin denied the information about the new round of financing.

Tustin's rapid expansion relies on the franchise model. However, this year, it has adjusted its franchise policy, which may limit its ability to attract franchisees.

"Tustin's development review has become stricter, and it has become more difficult for new franchisees to enter. Currently, the company no longer approves bad store locations, and people without store opening experience are not allowed to join." On July 30, a Tustin franchisee in Fujian told the Times Weekly reporter.

Public data shows that at the beginning of 2023, the franchise fee for a 60-square-meter standard store in Tustin was 369,800 yuan (excluding rent and other expenses). At that time, a Guangzhou franchisee who opened a store in early 2022 told the Times Weekly reporter that the cost of a Tustin store exceeded 600,000 yuan, including store rent and other types of initial expenses. Tustin's latest franchise policy shows that its single-store franchise fee has increased to 452,300 yuan, and the standard store area has increased from 60 square meters to 65 square meters.

The above picture shows the franchise fee of Tustin in early 2023, and the picture below shows the current franchise fee of Tustin

An insider close to Tustin revealed that in some areas, it now costs about 900,000 yuan to open a Tustin store. Another Tustin franchisee who has been running a store for two years told the Times Weekly reporter, "All the stores are full, and it is not recommended to open a new store now. It is better to directly acquire a store from a franchisee who intends to transfer. Otherwise, it will be difficult to compete with the old stores nearby."

It is understood that Tustin currently arranges 1-2 months of comprehensive and standardized pre-job training for new franchisees, formulates training assessment standards, and only proceeds to the next step after passing the assessment. For franchise owners who want to open more stores, Tustin also needs to confirm that the existing stores meet the company's standards before fission can be carried out.

As the store scale rapidly expands, Tustin's store operations have repeatedly exposed problems. According to the official website, as of June this year, the number of Tustin's contracted stores nationwide exceeded 7,000. But at the same time, there have been frequent complaints about the unstable products and poor service attitude of Tustin stores on the Black Cat platform and social media.

"It is said that Tustin has only recently recruited a development director. The development director had not been in place before, so the number of stores approved by the headquarters was rather chaotic." The above-mentioned Fujian franchisee told the Times Weekly reporter.

KFC is sinking, and Tustin is under siege?

In addition to the number of new stores opened less than last year, the sales and gross profit margin of Tustin stores have also declined since the beginning of this year. "Because the overall operating data is not very good, the company needs to reduce operating costs, so some branches have also reported layoffs." The above-mentioned insider close to Tustin revealed.

On the one hand, the increased store density will affect the customer flow of each store; on the other hand, Tustin is facing competition from all sides.

Since Tustin became well-known, a number of brands named "Tastin", "Taletin" and "Tasfo" have emerged in the market. The names, store decorations and main products of the above brands are highly similar to those of Tustin, and most of them are open to external investment and franchise. According to Zhaimen Canyan, the number of "Tastin" stores nationwide has reached 361. "These brands will have a relatively large negative impact on Tustin. After all, consumers in many places are not able to distinguish." Wang Hongdong, director of Canbaodian Research Institute and catering analyst, told the Times Weekly reporter.

With the efforts of the giants, Tustin's moat is gradually being eliminated.

Tustin, which mainly sells hamburgers and fried chicken, is essentially in the Western fast food market, which is already crowded with McDonald's, KFC and Wallace stores. Previously, "hand-rolled burgers", Chinese stuffing, a youthful national trend brand image, an average price of 18.8 yuan per person, and 60% of its stores in second- to fourth-tier markets were Tustin's differentiated advantages from its peers.

However, in the past year, Wallace, which has more than 20,000 stores and per capita consumption is slightly lower than that of Tustin, is increasing its brand influence by sponsoring the 0713 Brothers Group variety show and officially announcing Fan Chengcheng as its brand spokesperson. In contrast, under the siege of many similar brands, Tustin's market awareness has declined.

According to a report released by Jiuhai Brand Monitoring on July 30, McDonald's has made significant efforts to expand its stores in rural markets over the past year, with a store opening rate of 25% in rural and suburban markets; Yum China, which owns the two major brands of KFC and Pizza Hut, has also continued to reduce the number of stores and prices.

Yum China's financial report shows that in the first three quarters of 2023, due to promotions, KFC's customer unit price decreased by 5% year-on-year. In May this year, Yum China's senior management revealed that KFC has recently developed a "small town mini store model" with lower investment costs for low-tier cities.

In addition, KFC has also been learning from Chinese hamburgers. In June 2023, KFC launched a new product "Bread Hamburger" in Nanchang, Jiujiang, Xinyu and other places in Jiangxi Province, with a set meal price of only 19.9 yuan.

At present, Tustin's key development areas are Jilin, Beijing, Shanghai and Wuhan. At the same time, as a brand with young people and students as its core customer base, Tustin also regards the business district within universities as another blue ocean for store expansion.

However, how to balance brand influence, franchisee management, and store food safety and service issues while continuing to expand may be the issue that Tustin needs to pay more attention to at this stage.