Chinese beverage chain Luckin Coffee announced its launch of a new round of partner recruitment to expand franchised stores on December 5. The initiative covers nine provinces and 41 urban areas, mainly in third- and fourth-tier cities.
Among them, Henan, Shandong, Shanxi, three provinces in Northeast China, are the key points. In the 41 cities that Luckin Coffee will explore, the current number of stores is no more than 10, indicating great potential.
Registering a franchised store of about 80 square meters costs about 380,000 yuan ($54,564), including 180,000 yuan for decoration, 50,000 yuan for the deposit, and 200,000 yuan for production equipment. In terms of income policy, if the gross profit does not exceed 20,000 yuan, it will be returned to the franchisee, and if the gross profit exceeds 20,000 yuan, a certain proportion of profits will be returned to the franchisee.
Luckin Coffee’s last round of partner recruitment started in January 2021, covering lower-end cities in 22 provinces. Shortly after that, Luckin Coffee launched its most popular item “Coconut Latte” on April 12, 2021. By June 30, the monthly sales volume of Coconut Latte exceeded 10 million cups, setting a new record for Luckin Coffee’s new product sales volume. According to the revenue forecast given in its investment manual, a franchised store can make 200 cups of drinks a day, gaining a monthly net profit of 20,000 yuan.
In August, 2021, many franchisees revealed that Luckin Coffee was no longer open to newcomers. However, due to the saturation of stores in a single city, even old franchisees had almost no place to open new stores. In 2021, the number of franchised stores increased by 753 to 1,627, bringing the company 1.306 billion yuan of revenue.
According to the firm’s latest financial report, as of the end of the third quarter of 2022, Luckin Coffee had 7,846 stores, including 5,373 self-operated stores, and 2,473 franchised stores.
Guo Jinyi, Chairman and CEO of Luckin Coffee, pointed out at a meeting after the financial report’s release that after systematic analysis and judgment, Luckin Coffee believes that, regardless of whether it is a first-and second-tier city or a lower-tier city, there are still many optional locations that can meet the brand’s requirements, and market space is far from saturated. With the accelerated popularization of coffee consumption in China, the number of stores continues to expand.
In contrast, Luckin Coffee’s rival Mixue has opened more than 730 stores in Zhengzhou, its headquarters, and 32 stores in Xinzhou, Shanxi Province, where Luckin Coffee has only one store. HeyTea also issued detailed rules of business partnership on November 4, specifying the conditions for franchised stores.