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Luckin Coffee's Low-Price Private Domain Franchise Rapid-Response Business Model

1) Sales revenue from freshly prepared beverages in company-operated stores; 2) Franchise fees and supply chain price di

MODEL

Key Fields

FIELD STAMPS

IndustryFood & Beverage

RegionChina

ScaleGiant

ChannelHybrid

📌 Background

The Chinese freshly prepared beverage industry entered a period of deep adjustment in 2026. While Starbucks contracted and Cotti Coffee hit the brakes, Luckin Coffee expanded against the trend to 36,000 stores. Its Q2 net revenue reached approximately 15.9 billion RMB, a year-on-year increase of 28.5%, with monthly active users (MAU) exceeding 100 million. The 9.9 RMB low-price strategy was once a powerful tool for customer acquisition, but a 5.3% decline in same-store sales signaled that growth had peaked. Luckin has begun shifting toward high-quality growth, gradually reducing low-price subsidies, resulting in a 22% increase in profit.

👤 Target Customers

End consumers who pay for coffee/beverages, and franchisees who pay franchise fees and supply chain procurement costs.

💰 Revenue Streams

1) Sales revenue from freshly prepared beverages in company-operated stores; 2) Franchise fees and supply chain price differentials from franchised stores; 3) Profits from brand licensing and the supply of core raw materials such as coffee capsules.

🧮 Cost Structure

Store rent and labor costs, procurement costs for raw materials like coffee beans and dairy products, supply chain warehousing and logistics costs, R&D and maintenance costs for digital systems, and brand marketing and subsidy costs.

🛡️ Moat

Dense network effect formed by 36,000 stores and supply chain scale advantages, self-built digital middle platform supporting private domain operations and rapid product launches, light-asset rapid replication capability of the franchise model, and barriers created by brand recognition and price positioning.

🔑 Keys to Success

Digital middle platform supporting private domain traffic operations and precise, rapid product launches.
Light-asset franchise model enabling high-speed store replication and economies of scale.
Vertical integration of the supply chain and self-control of raw materials to ensure low costs and consistent quality.

⚠️ Risks

Continued decline in same-store sales leading to deteriorating profitability expectations for franchisees.
Over-reliance on low-price strategies hindering brand premiumization.
Excessive store density leading to internal cannibalization.

🏢 Cases

Luckin Coffee's Q2 net revenue reached approximately 15.9 billion RMB, up 28.5% year-on-year, with over 100 million MAU and 36,000 stores.
After gradually reducing 9.9 RMB subsidies, Luckin achieved a 22% profit increase, shifting toward high-quality growth.

📊 SWOT Analysis

Strengths

Deeply ingrained low-price brand perception; the 9.9 RMB strategy successfully captured market share rapidly.
High repurchase rate through the App + Mini Program private domain closed loop, with MAU exceeding 100 million.
Franchise model enabled rapid expansion to 36,000 stores, achieving a scale that dwarfs competitors.

Weaknesses

Same-store sales declined by 5.3%, a clear signal that growth has peaked.
Difficulty in raising prices after the low-price label has solidified, limiting room for brand premiumization.
Quality control challenges in franchised stores increase as the scale grows.

Opportunities

Low penetration rate of coffee consumption in lower-tier markets, offering growth potential in third and fourth-tier cities.
Digital supply chain capabilities can be extended to more product categories.
Significant room for margin improvement after reducing low-price subsidies, as evidenced by the 22% profit growth in Q2.

Threats

Cross-category competition from milk tea brands like Mixue Bingcheng, leading to spillover price wars.
Severe homogenization in the coffee track, making product innovations easy to imitate.
Declining franchisee profitability due to intensified competition, which could trigger a wave of store closures.

Sources