Tea Beverage Supply Chain Franchising (Selling Ingredients to Franchisees)

📌 Background

China's new-style tea beverage market has transitioned from an expansion race to deep inventory cultivation, with headquarters' profits increasingly relying on selling raw materials and equipment to franchisees. In 2025, Mixue Group's revenue increased by 35% year-on-year to 33.6 billion RMB, and net profit grew by 33% to 5.93 billion RMB, while overseas stores saw a net decrease of 428 locations in the same year (according to the company's financial reports); 97.6% of revenue came from selling goods and equipment to franchisees. The divergence between economies of scale and single-store profitability for franchisees is precisely the core contradiction of the supply chain franchising model.

👤 Target Customers

Target customers are small- and medium-sized investors and individual entrepreneurs who open stores as franchisees, paying franchise fees as well as ongoing purchases of goods, equipment, and raw materials to the headquarters, expecting to gain terminal retail gross margins supported by the headquarters' brand power.

💰 Revenue Streams

1) Supply chain sales: Selling raw materials and packaging materials to franchisees based on order volume with fixed markups to earn the price difference, typically accounting for the vast majority of headquarters' revenue; 2) Franchise fees and equipment: Collecting a one-time franchise fee upon signing and selling equipment per unit; 3) Brand management fees: Periodically collecting management and service fees from franchisees; 4) Upstream production capacity external sales: Self-built or deeply bound raw material factories supplying third parties by order (opportunity item, external sales revenue has no public figures yet).

🧮 Cost Structure

Main costs are allocated to fixed asset investments in self-built or deeply bound upstream raw material factories, the construction of a multi-warehouse national logistics and distribution system, new product development at R&D centers, and labor costs to ensure the operation of the supply chain.

🛡️ Moat

An extreme low-price mindset and a high-density store network form a strong moat. The massive cost advantages brought by self-built supply chains make it difficult for new entrants to replicate; meanwhile, the massive store scale in turn absorbs upstream production capacity, forming a supply-demand closed loop. Once scale is established, the barrier for franchisees to switch brands is extremely high.

🔑 Keys to Success

• Self-built or deeply bound supply chain and national logistics system
• Combination of extreme low-price mindset and high-density store opening strategy
• Ensuring the single-store model is replicable with a short payback period

⚠️ Risks

• Franchisees' profit margins are compressed, potentially triggering collective protests or exits
• Excessive store density leads to continuous decline in same-store sales for existing locations
• Faced with fierce competition from local brands and policy uncertainties during overseas expansion

🏢 Cases

• Mixue Bingcheng (HKEX: 02097.HK, 45,000+ stores globally)
• CHAGEE (CHA.US)
• Cotti Coffee (18,000 stores)

📊 SWOT Analysis