news

profits are declining, but tens of thousands of stores are still opened a year. when will the big ship of ruixing be fully staffed?

2024-09-28

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

fengkou finance trainee reporter su tong
when it comes to coffee, brands such as starbucks coffee, luckin coffee, kudi coffee, and lucky coffee cannot be avoided. among the coffee brands, the protracted price war between luckin and cudi is getting more and more intense.
in this war without gunpowder, luckin’s profits fell and kudi shrunk and closed stores. the drastic change in the coffee franchise situation also makes franchisees who are still waiting and watching wonder: can ruixing join this "big ship"?
taken at licun pedestrian street
from deer tea to light milk tea
luckin “old wine in new bottles”
this summer, luckin coffee’s new tea product “light jasmine light milk tea” exceeded 44 million cups in the first month. "light jasmine" is very similar to bawang cha ji's popular product "bo ya juexian" in both its outer packaging and ingredient list. obviously, luckin has targeted the field of tea drinks, trying to cover the whole day of young people with the consumption scene of "morning coffee and afternoon tea".
in fact, this is not luckin’s first attempt at new tea products. as early as 2019, luckin launched an independent sub-brand xiaolu tea. one of the products is called "mantingfang jasmine light milk tea". the concept of "0 non-dairy creamer 0 creamer" is closely related to the concept of "light jasmine tea". "same.
deer tea
at that time, it was the prime time for new domestic tea brands to enter the market. in addition, luckin became the target of public criticism for financial fraud, which made it even more difficult for xiaolu tea to break through in the tea market. in 2020, some skus of xiaolu tea were incorporated into luckin’s menu, and the stores gradually faded out of the market. the qichacha app shows that the business status of xiaolu tea (nanjing) co., ltd. has changed from survival to cancellation. among the 38 companies invested by xiaolu tea (xiamen) co., ltd., only 6 are currently in existence.
a small deer tea was sent away and a light milk tea was welcomed. the reason behind the return of "luckin milk tea" is that the number of luckin stores has exceeded 20,000. in order to meet the more diversified needs of users, the brand further broadens its customer acquisition path. the future development trend of light milk tea can also be gleaned from xiaolu tea.
no franchise fee
maximum 40% gross profit
looking back at the development history of xiaolu tea, we will find that xiaolu tea also used the "new retail partner" model to operate, that is, no franchise fee was charged in the early stage, and after the store made profits in the later period, a certain percentage was taken.
specifically, when the monthly gross profit is less than 20,000 yuan, the gross profit of the goods belongs to the partners. when the partners' gross profit exceeds 20,000 yuan, xiaolu tea will use a stepped commission method to participate in profit distribution. the issue of the commission ratio was still criticized by franchisees when luckin coffee joined the franchise.
luckin's franchise manual shows that after deducting the cost of raw materials, franchisees will not take a commission on the part with a gross profit of less than 20,000 yuan; a 10% commission on the part with a gross profit of 20,000-30,000 yuan; and a 20% commission on the part with a gross profit of 30,000-40,000 yuan. . the portion with a gross profit of rmb 40,000-80,000 will be charged 30%; the portion with a gross profit of more than rmb 80,000 will be charged a flat rate of 40%. when many franchisees talk about the commission ratio, they all say that "joining luckin means working for luckin." even so, there are still many entrepreneurs eager to join luckin coffee.
ruixing landing cost
although luckin has been very "cold" to its franchisees in recent years, with the fierce pursuit of its old rival cudi and the hot pursuit of upstart coffee brands such as lucky coffee and manner, luckin has to use its "self-indulgence" to open multiple franchise models based on "camp + franchise".
currently, luckin coffee has three franchise models: franchise with a store, franchise with targeted locations, and franchise with new partners. franchising with a store is suitable for applicants who already have a store, while franchising with a targeted location is aimed at specific scenarios such as work, study and leisure, etc., and is suitable for opening coffee shops in these scenarios. the recruitment of new partners is open to applicants from undersaturated cities, providing more market development opportunities.
in all three modes, luckin coffee does not charge franchise fees. however, the franchise fee is "0", which does not mean that other equipment fees and deposits are "0". based on the brand franchise manual and interviews with relevant staff, the reporter calculated that the initial cost of joining luckin coffee is at least about 591,000 yuan.
in comparison, ruixing’s initial implementation cost is higher than that of kudi and lucky ka. because he once stated in the franchise consultation call that he wanted to compete with starbucks and had requirements for store area, and the larger the area, the better. kudi and lucky cafe both have small store models, so they reduce the initial landing costs in terms of rent and decoration.
kudi coffee cost
cost of landing lucky coffee
the large initial investment may cause the store to take longer to recover the cost, but the contract period between luckin and the franchisees is three years. it was not until september last year that luckin launched an operating cooperation agreement with a term of up to 5 years. this has also led to the "renewal policy after expiration" becoming one of the focus issues for franchisees.
luckin coffee officially responded in july 2023, stating that about 6 months before the contract expires, the system will automatically remind partners to initiate the renewal process, and the regional investment manager will also simultaneously remind and assist applicants to complete the online renewal process. process. in line with the company's development plan, there are no violations or breaches of contract, and the operation level, profitability and other audit standards are met, and all joint-venture stores can successfully complete the renewal. as of the end of march 2023, 636 luckin joint stores have completed contract renewal, with a renewal rate of 97%.
compared with the number of franchise stores, which exceed 6,900, the number of samples is less than one-tenth of the total. it is worth noting that franchisees do not join at the same time, so the contract expiration time is not uniform. it is understandable that the number of samples as of the end of march 2023 is small. when reporters asked about the contract period during interviews this year, the staff did not give a clear answer.
the payback cycle continues to lengthen
in addition to the initial implementation costs, for franchisees, return on capital and profitability are the main issues they consider.
in july, luckin coffee officially opened its 20,000th store. it took luckin five and a half years to go from 0 to 10,000 stores. it only took luckin one year to go from 10,000 to 20,000 stores. however, the number of stores and users has both surged, but the actual effect on overall performance is very limited.
second quarter financial report data shows that luckin’s revenue in the first half of 2024 was 14.681 billion yuan, a year-on-year increase of 38%, which is far less than the growth rate of doubling the number of stores.
the surge in stores has caused the density of luckin's stores to continue to increase. according to jihai brand monitoring data, nearly half of luckin coffee's stores are encrypted stores, and the average shortest distance between stores is only 403 meters. the most direct impact of encryption on franchisees is that the number of customer orders in stores has been visibly reduced, and the payback cycle has been continuously lengthened.
source: extreme sea data monitoring
in response to luckin's expansion, kudi has launched a series of franchisee subsidy policies. orders below 9.5 yuan will be settled at 9.5 yuan. in addition, if the franchisee's store location is less than 100 meters from luckin, a subsidy of 1.5 yuan per cup will be provided; if it is less than 150 meters away, a subsidy of 1 yuan will be provided; if it is less than 200 meters away, a subsidy of 0.5 yuan will be provided; if there is more than one store, the subsidy will be 1.5 yuan. , a subsidy of 0.5 yuan per cup; if the rent exceeds 15,000 yuan, a further subsidy of 0.5 yuan will be provided.
source: extreme sea data monitoring
data shows that 35% of luckin coffee’s stores are “cannibalizing stores”. among them, the cannibalization situation in new first- and second-tier cities is the most serious, even exceeding 40%. this also means that while franchisees are involved in the same brand, they also need to face the encirclement and suppression of competing products.
in addition, under the traditional franchise model, revenue can usually go directly to the franchisee's account. regardless of whether it is xiaolu tea's "new retail partner" model or luckin coffee's "new retail partner" model, revenue will flow to the headquarters first. the accounts are then distributed regularly by the headquarters. this method allows luckin to have a steady stream of cash flow, but there is a lag in payment collection for franchisees, and the reserve funds required for store operation will also increase.
generally speaking, in the context of more intense price wars, greater store density, and longer recovery cycles, it will be easier for the first batch of franchisees in the sinking market to make money. because the earlier you join, the more advantage you will have in choosing a location. but as franchisees flock in, the market is gradually showing a trend of saturation. by then, if luckin joins this big ship, it will be considered truly "full."
(the opinions in this article are for reference only and do not constitute investment advice. investment is risky, so please be cautious when entering the market!)
report/feedback