Everything seems to stop abruptly.
On April 3, the Xiaolu Chamen store on Ningdong Road, Ningbo City, from time to time, customers came to the door. After the fraud incident of Ruixing Coffee was exposed, many customers hurried over and wanted to use the vouchers previously purchased. But the store was closed and empty. Previously, this store has been operating normally.
As a sub-brand of Ruixing Coffee, Xiaolu Tea is not immune to this fraud. In addition to “run-to-run consumption”, explosion of bills, and APP paralysis, Xiaolu tea’s investment joining has also been suspended nationwide. A regional director of Ruixing Coffee revealed that coffee machines and some raw materials are from abroad, and they cannot be supplied normally in a short time. Many employees responsible for joining the business have transferred their work to direct stores.
If it ’s not Ruixing Coffee ’s thunder, Xiaolu tea may be another capital story told by Lu Zhengyao. In July last year, Ruixing launched the Xiaolu tea series of products. Within two months, it announced that it would operate as an independent brand and launched the “new retail partner” model to enter the huge milk tea market. The data shows that three months after the launch of the franchise model, a total of 42 Xiaolu tea stores opened nationwide, and Lu Zhengyao revealed at the third-quarter financial report analysis meeting that nearly 2,000 deposits were paid and some stores were being renovated.
However, if you walk a lot at night, you will always meet ghosts. The story of coffee is missing, and a milk tea story that is almost exactly the same cannot be told anymore. It’s just that the capitalist leeks were harvested by Ruixing Coffee, and the sickle of Xiaolu tea was swept to the franchisees of the second, third and fourth tier cities. In China, franchisees may be the biggest victims of the Ruixing scandal.
Being fooled: Xiaolucha ’s data is doubtful
In September last year, Liu Jian, the chief operating officer of Ruixing Coffee, appeared at the release site of the sub-brand “Xialu Cha” and officially announced the independent operation of the tea drinking sub-brand “Xiaolu Cha” on behalf of Ruixing People mode. This is Liu Jian’s first appearance at a public event. Perhaps he did not expect that after 7 months, he will once again become the target of media attention. Of course, he might have expected such a day.
A few days ago, because Ernst & Young did not dare to sign the audit annual report, Ruixing could not use the self-exposed data to fake the scandal, and Liu Jian was the culprit. The announcement shows that from the second quarter to the fourth quarter of last year, Liu Jianhuo and several employees forged a total of 2.2 billion yuan in sales. This means that from the day the Xiaolu tea brand was born, Ruixing has worked on the data.
Xialu tea and Ruixing coffee are a mother, sharing digital operation system, supply chain, warehousing and logistics, which is the reason why some people choose to join. In other words, Xiaolu tea is almost identical to Ruixing Coffee in terms of operation, and is implemented according to Liu Jian’s operation strategy. In the book “Rui Xing Blitz”, Liu Jian once said that all matters related to income and cost are under his control. The efficiency indicators, financial indicators and final results of all department operations are ultimately controlled by him. From this point of view, the practice of Ruixing Coffee’s data fraud is very likely to be copied to the operation of the Xiaolu tea brand.
According to media reports, store order “jumping number” is a common method for Ruixing coffee data fraud. At this point, Xiaolu tea seems to have a reference. In December last year, in a small deer tea direct store in Pixel Bay, Beijing, the reporter secretly observed that the customer’s single number did not show the number of the day. The clerk said that how the single number came out. He is not very clear. It can be speculated that there seems to be some stupidity in the operating data of Xiaolu Tea’s direct stores.
In order to attract franchisees, Xiaolu Tea has opened many directly-managed stores in first- and second-tier cities as a model. Xiaolu Tea is headquartered in Xiamen. According to the data from Tianyan, Xiaolu Tea (Xiamen) Co., Ltd. is 100% controlled by Ruixing Coffee (China) Co., Ltd. and the legal person is Zhang Qingqiu. There are nearly 20 branches in 100% of its overseas investments. . The operating data of direct stores directly determines the number of “new retail partners” to join, and the franchise store is the key to the rapid expansion of Xiaolu tea and the market value of the parent company Ruixing Coffee.
Picture | Xiaolu Tea Equity Relationship (Partial)
Is the business data of Xiaolucha true? The short-selling agency did not make individual adjustments. However, judging from the results presented in this incident, the business data of Xiaolucha is very doubtful. Once the data falsification is true, Xiaolu Tea ’s franchisees will undoubtedly become green socialist leeks just like Ruixing Coffee ’s investors.
Masked: There are major flaws in the affiliate model
The milk tea market has deep water, and the milk tea joins the water deeper. Although various market research reports claim that the milk tea market is not yet saturated, large-scale supermarkets, university towns and other high-traffic areas have already been occupied by milk tea brands such as Coco, a little, and Mi Xuebing. These brands have a mature franchise model, the brand is also well known to the public, and the expansion rate is very fast. The latest data shows that Coco has more than 4,000 stores nationwide, a little more than 2,300, and Mitsue Bingcheng stores have more than 7,000 stores. In contrast, Xiaolu tea’s popularity is not high. If you want to enter the milk tea market, you can only make a fuss about subsidies, marketing and franchise models.
For this reason, Xiaolu Tea adopts a new retail partner model free of franchise fees, and only divides profits according to profits. In terms of division of labor, partners only need to be responsible for the location and decoration of the store, as well as the responsibility for product production and delivery during the daily operation of the store. The remaining brand marketing, customer development, development iterations of digital operation systems, supply chain management, etc , Will be borne by Xiaolu tea.
Figure | Xiaolu tea joining mode division of labor
According to Xiaolu tea customer service, the initial investment in joining Xiaolu tea is about 300,000 yuan. This part of the cost includes 60,000 to 80,000 yuan of store decoration costs (the area of the store is not less than 30 square meters), 150,000 yuan of machine costs and 50,000 yuan deposit, which will be refunded. However, the rent and labor costs of the stores need to be borne by the partners themselves. Compared with Coco Coco, a little bit of other brands, the overall investment cost of Xiaolu tea is indeed lower. Coco can currently adopt the joint venture mode. The franchisee needs to invest 1.5 million yuan, a little is completely the franchise model, and the franchise fee needs 600,000 yuan.
However, in the short report of Muddy Water, he questioned Xiaolu Tea’s franchise model and believes that Xiaolu Tea has the risk of compliance with the franchise business. Because smallLucha was not registered according to law. After the franchise business was launched in September last year, there were no at least two directly-operated stores operating for at least 1 year. The reference to “new retail partners” circumvents the connection with the franchise model, with particular emphasis on not charging franchise fees. However, according to the judicial interpretation made by the Beijing Higher People’s Court, regardless of whether the company calls it a franchise model, according to the definition of the law, the business operated by Xiaolu Tea is a commercial franchise.
Xiaolu Tea ’s franchise model clearly has a legal loophole. Such risks are not covered by a “new retail” concept. The short report pointed out that the negative impact of failing to meet the “lawful operation” regulations may far exceed the amount of fines imposed by listed companies. For franchisees, this is undoubtedly a hidden potential risk.
Being miserable: The profitability of franchisees is more difficult
Only from the perspective of joining conditions, the threshold of Xiaolu tea is indeed lower, but the joining mode of Xiaolu tea is not favored by the industry. Yan Yan is a consultant for a brand franchise agency in Shanghai. He said that although he is also a franchise agent for Xiaolu Tea, he feels a headache for their franchise terms. He bluntly said that, like Ruixing Coffee, the Xiaolu tea project is a “capital operation project”. The specific profitability has not yet been verified by the market, and it is not good to say how long it will take to return.
Picture | Xiaolu tea new retail partner model revenue policy
For franchisees, payback and profit are the main issues they consider. The positioning of Xiaolu tea’s “sinking market” and the marketing model relying on subsidies and insufficient product competitiveness make it very difficult to make profits.
Zhang Qiang lives in Luohe, Henan Province. In November last year, he started business at the Xiaolu Tea franchise store in Changjian Plaza. There are 4 employees in the shop. As the boss, he also personally operates in the shop. In order to open this store, including a rent of 100,000 yuan / year, he spent more than 400,000yuan. Luohe is a typical fourth-tier city. The location of Zhang Qiang ’s store is not a lot of people. In an interview with reporters in December last year, Zhang Qiang said that his store can sell about 200 orders a day, but “many people drink the first cup and then don’t come.”
“There are very few people coming from online, most of the customers are from offline,” Zhang Qiang told reporters. In a sinking market like Luohe, Ruixing Coffee’s brand awareness is not high. Therefore, the “global traffic support” mentioned by Xiaolu Tea in the investment information is actually more difficult to establish in the sinking market. In the first- and second-tier cities, Ruixing’s existing online traffic can still divert the Xiaolu Chamen store, but in the third- and fourth-tier cities, the offline drainage has contributed more to Ruixing.
Picture | Xiaolu Tea ’s Traffic Support Policy for New Retail Partners
Zhang Qiang is 27 years old this year. He has acted as a brand men’s clothing agent and also joined the famous brand. Compared with Mingchuangyoupin, he thinks that Xiaolucha is more worried about joining, and some things as small as decoration must come by himself, while Mingchuangyoupin can be used as a shopkeeper. For him, Xiaolu tea is his own business, not to make data for others to see. He believes that Xiaolu Tea is overly dependent on subsidies. Consumers in sinking markets are more sensitive to prices, more greedy and cheaper, and want to retain customers, testing Xiaolu tea’s ability to continue subsidizing. But over-reliance on subsidies can only lead to “the amount is OK, but no money can be made.”
Compared with other brands of milk tea, Xiaolu tea does not have any competitive advantage in products, because other brands of milk tea tend to have larger cups, more raw materials, and cheaper prices. The muddy water’s short report believes that Xiaolu tea’s products are only 1.0-generation tea beverages and cannot compete with other brands’ 2.0- and 3.0-generation tea beverages. “It is likely to eventually resort to price competition with an inherently low-quality product.”
“The franchisee’s stores are somewhat good, and some are not very good. We are now exploring experience.” Lu Zhengyao said at the financial report analysis meeting in the third quarter of last year. Mr. Lu’s tone of voice is always full of energy, but in the present viewEvery word in his mouth makes people wonder.
The “national brand” Ruixing Coffee harvested not only capitalist leeks, but also a group of Chinese investors such as Xiaolu tea franchisees. The Luckin scandal will inevitably make the profitability of franchisees even harder. But who do they complain to?
When the reporter called Zhang Qiang and several other franchise stores to find out about the situation, several bosses and store managers hung up because of inconvenience.
In the text: Zhang Qiang is a pseudonym.