Having suffered the consequences of “excessive infrastructure”, Mixue Ice City and its franchisees embark on the path of falling in love and killing each other?

Wen| chopsticks play thinking

Mixue Ice City is an infrastructure provider dressed in a new tea drink.

That’s not what I said. In an interview with Caijing magazine, founder Zhang Hongchao once said that Mixue Ice City should unite people in China who want to be bosses to create an infrastructure for selling happiness.

A short sentence contains a huge amount of information. The first half of the sentence talks about the franchise model. Selling happiness is the natural duty of milk tea, while infrastructure guides it to open up the situation from a sinking market. With an average of 18.2 new stores per day, the total number of stores opened (so far) exceeds 46,000 stores, selling 9 billion cups a year.

Every China who has experienced the era of large-scale infrastructure is no stranger to this model. The implicit question is when infrastructure becomes saturated and the entanglement becomes more intense, where should we find new growth momentum?

Mixue Ice City is in this painful stage of looking for new momentum. The store closure rate is increasing, reputation and user satisfaction are declining, and food safety problems are frequent. Several stores can be opened on one street, and its own people are fighting each other. Mixue Ice City has thought of many ways to alleviate this pain, the most typical one being seeking to go public. After failing to list A shares in 2022, he moved to Hong Kong. In 2024, the listing in Hong Kong failed. New Year’s Day in 2025 was the third attempt of Mixue Ice City, and this time it finally came to light.

On January 7, Mixue Ice City received a filing notice for overseas listing from the China Securities Regulatory Commission. The IPO is expected to open this week.

Snow King has made no secret of its desire for the capital market, but listing can only be regarded as a powerful painkiller at best. After the effect, Mixue Ice City will eventually face the consequences of extensive expansion.

“Infrastructure expansion is blocked, and franchisees are abandoning Mixue Ice City

In the new tea beverage industry, there are only two types of entrepreneurs.

One is people like Xi Tea Nie Yunchen and Naixue Peng Xin, who are young, trendy, avant-garde and fashionable. Whether in terms of personal image or SKU design, the products they sell implement the novelty of new tea drinks to the extreme.

The other is Zhang Hongchao.

Wearing a pair of square glasses, his hair is a little sparse, and the most commonly worn clothes are various shirts and suits, coupled with the somewhat old-fashioned posture with hands folded around his chest that is often used to express ability. At first glance, it seems that he is from a certain traditional manufacturing industry or has a real estate background. This is the first impression given by the head of Mixue Ice City.

This is a collision between the new and the old schools, and Zhang Hongchao also follows the classic path of infrastructure when making milk tea.

This was helpless at the beginning. At a time when all brands are racking their brains to settle in the first-tier market and fight for three acres of land, Mixue Ice City can only avoid the first-tier and second-tier cities with intensive firepower, target the young people in the town and shout out for everyone to enjoy the slogan of high quality and affordable food.

Following the sinking route, it has gradually developed two major characteristics: wide coverage and low prices, and infrastructure-based expansion has also shifted from helplessness to proactive embrace. In the three years from 2019 to 2021, this thinking has caused its revenue to nearly triple and its net profit to quadruple in three years.

Behind this alternative growth is the extremely unique business logic of Mixue Ice City. What it makes is never the money from selling milk tea, but the money from franchisees.

Franchisees are responsible for their own profits and losses. Mixue Ice City does not provide any other support except providing low-cost raw materials from its own supply chain. This is the premise. Mixue Ice City can have two main incomes.

The first is the franchise fee. According to official website data, the franchise fee required to join a Mixue Ice City in provincial capitals is 11000 yuan/year, 9000 yuan/year for prefecture-level cities, and 7000 yuan/year for county-level cities, starting from 3 years. In addition, there are a series of expenses such as an annual management fee of 4800 yuan, a training fee of 2000 yuan and a deposit of 20000 yuan.

Some media have calculated that according to this standard, including equipment procurement and other expenses, the cost of opening a Mixue Ice City will cost about 370,000 yuan, which means that at least 50,000 cups of milk tea will be sold to recover the capital.

The second is raw material purchase fees, which account for a large proportion of Mixue Ice City’s revenue. Some franchisees said that raw material purchase fees account for more than half of the store’s total revenue, and a batch of 60,000 yuan raw material stores are exhausted in one month.

This is the most fundamental secret of Mixue Ice City, which has an average unit price of only 6 yuan but can achieve a net profit of nearly 2 billion yuan a year. In addition, it adopts a model of charging first for franchisees before supplying goods, which is equivalent to ensuring revenue in floods and floods.

In other words, in theory, as long as the plates are spread large enough, the business model of Mixue Ice City is logical, but in reality, the opposite is true. Now, Mixue Ice City, which has 46,000 franchisees, has its growth slowed down?

Because franchisees are abandoning Mixue Ice City, let’s take a look at a set of data:

In 2024, one in every 5.9 new stores opened in Mixue Ice City will close down.

Jihai brand data shows that Mixue Ice City opened 1139 new stores and 869 new stores closed in 90 days. The gap between the two is narrowing.

From 2021 to the first nine months of 2024, the number of franchised stores closed by Mixue Ice City was 577, 696, 1307 and 1298 respectively, increasing year by year.

Joining Snow King, why is it not so good?

Unable to achieve both the speed of expansion and the precision of management, how many franchisees are there really standing beside Mixue Ice City?

What are the eternal problems in business? You can never have both the speed of expansion and the precision of management. Snow King is no exception. Although it has a huge team of franchisees, its confidence is far less than it seems.

The franchisees of Mixue Ice City are mainly divided into three echelons, of which the first and second echelons are high-quality startups with dozens or even hundreds of stores. The advantage of this model is that multiple stores in many regions actually belong to the same franchisee. They are more sensitive to market perception, which makes it easier for the latter to adjust the number of stores at any time based on the industry and performance.

These stores are the biggest contributors to Snow King’s victory over the country, and are also the backbone of the franchise team of Mixue Ice City. In the process of the rise of Mixue Ice City, most of them have achieved freedom of wealth, and as a result, they have more options than Snow King. This is human nature. After all, Snow King’s growth has reached a bottleneck, and franchisees ‘desire to increase wealth is endless.

However, the unstable hearts of franchisees are disastrous for Mixue Ice City. Maintaining stability by continuous painting is one aspect, and tangible sweetness is indispensable.

Some industry insiders said in an interview with “Business” that Mixue Ice City is so eager to go public, perhaps because these first and second tiers of franchisees are likely to be the first batch of new shares after Mixue Ice City is listed in the future. However, for Snow King, the more difficult issue is the sharp deterioration of its relationship with the third tier of bulk franchisees.

Compared with the first and second echelons, most of these franchisees have no power and no power. They hope to climb the growing tree of Mixue Ice City and realize the growth of their own wealth.

Reality is bony. In the past few years, the Snow King has been running wildly. The needs and situations of these bulk franchisees have naturally been ignored. They have become ants crushed by the wheels of progress with bad checks.

Behind the growth myth of Mixue Ice City, the living space of bulk franchisees is becoming increasingly narrow: due to the low unit price of goods, even if store sales are high, net profit is basically saved from labor, rental and raw materials. They obviously no longer have the ability to enter the delivery platform. The latter’s commission and labor costs are likely to push them directly below the profit and loss line.

One data is enough to illustrate this point. According to Netease’s hard-core billboard, the return cycle of a single store in Mixue Ice City is not as optimistic as advertised. Any store with a less prosperous location will take about two years to recover its return. In addition, the market is deteriorating. In the first nine months of 2024, the average single-store retail sales of Mixue Ice City dropped from 1.44 million in 2023 to 1.08 million yuan. Not only has this problem not been solved for a long time, but it has intensified significantly after the epidemic.

At that time, Snow King implemented a one-year free-of-franchise fee management policy, which resulted in a surge in the number of stores, exceeding the company’s management capabilities. Snow King, who could not come up with practical management methods, chose the simplest and most crude way to impose fines.

In hindsight, this was a foolish move. According to “Business”, regional managers who already have a certain say have become even more unscrupulous after receiving the imperial sword from the headquarters: they require dealers to respond to intensive notices on time, otherwise they will be fined 200 to 500 yuan, which will not be questioned, otherwise they will be fined and even suspended.

It is difficult to test whether Mixue Ice City understood in advance the possible consequences of this one-size-fits-all measure. It is just that the difficult situation of bulk franchisees is enough to show that they may not be the key to Mixue Ice City’s grand blueprint. They may play a role of cannon fodder.

The anger of franchisees is not without signs. A big example is the recurring food safety problems in Mixue Ice City. It is just that in the era of rapid growth, a song “You Love Me, I Love You, Mixue Ice City Sweet Honey” The brainwashing song of “Honey” is enough to gain market forgiveness.

However, at a time when milk tea is highly involved and industry growth is slowing down, Mixue Ice City looks around. Among the huge team of franchisees, how many are there really standing by it?

Admittedly, it is not objective to blame Mixue Ice City entirely for the problem. This is a common problem of the loose franchise model. It is just that Mixue Ice City’s pursuit of expansion speed has undoubtedly intensified this contradiction.

The meager profit level is approaching the limit of the channel, and franchisees urgently need to be freed from the fratricidal entanglement.

The purpose of issuing new shares to meritorious ministers is to win back the hearts of people, but this does not solve the fundamental problem of Mixue Ice City.

It had previously failed to find opponents in conquering cities and seizing land, relying on low-cost approaches, but this path is no longer so easy.

On the one hand, his colleagues sank and invaded the Snow King’s base camp. As of the end of 2023, the number of Guming and Chabaidao stores in third-tier cities and below accounted for 49% and 41.6% of the total respectively, an increase of 46.74% and 31.18% respectively over the previous year.

On the other hand, the meager profit level is approaching the limit of the channel. Shortly after it went on sale in July last year, the Snow King Ice Cup, which sold for one yuan, was temporarily removed from the shelves due to unprofitable channels. Excited consumers were covered with dust, and some were even met with sarcasm from the shop owner when purchasing.

In the final analysis, the franchisees who are struggling on the profit and loss line every day are unwilling to spend any effort to maintain the image of Snow King. Therefore, the top priority of Mixue Ice City is to let their franchisees make money, but it is not wise to raise prices rashly. It is a wise move. Just because Mixue Ice City is accepted and recognized by the market for its extreme cost performance, and the market has long formed the mentality that milk tea should return to normal value, raising prices is tantamount to slapping yourself in the face.

In December 2024, Mixue Ice City announced a price increase of 1 yuan for all drinks and ice cream series. Although the price is still the lowest among several major brands, it has already made many consumers feel unfamiliar.

In this case, increasing sales seems to be the only feasible way. How to increase it? We can only rely on excellent products.

This product is not the extreme of a one-yuan ice cup, but a true innovation based on the main business of milk tea and ice cream.

Mixue Ice City actually has successful experience. At the end of 2018, at the new product evaluation meeting, the R & D department launched dozens of new products, and everyone unanimously chose a new product that turned the snow roof upside down and looked somewhat abstract. This new product needs to be shaken well when drinking, but the pain point of its original version was precisely that it could not be shaken evenly. Drinking ice cream, tea and jam separately is obviously not amazing enough.

Later, a researcher who loved playing mahjong had an idea: Add a dice!” rdquo;, so they threw the ice in, and the impact force generated was enough to allow the three to merge. When shaking, it was quite imposing. With the standard movement of the cup facing down and lowering its head over its shoulders, it seemed that a leopard was about to be shaken out soon.

This new product instantly won the favor of consumers. Many consumers even complained to Mixue Ice City because they couldn’t shake it with their own hands. It also became a super single-product shake that Mixue Ice City sells 2000 cups a day.

This product is enough to show that Mixue Ice City is strong in research and development, but the problem is that the milk tea product itself is too simple, which means that the innovation space it can provide is relatively limited, and most innovations can be copied in a short period of time., the competition among many participants exacerbates this point: no one can prove that they are the first, and no brand can label themselves as original.

Therefore, innovation is only one aspect. The more critical measure is that Mixue Ice City needs to optimize its franchise system. This includes not only adjusting the charging standards for franchisees to make them profitable, but also streamlining the franchise network and freeing them from killing each other. Free themselves from the internal circulation.

It is true that this will have an impact on the financial performance of Mixue Ice City in a short period of time, especially after listing, where every number will be placed under the market’s review, and the pain will be extremely intense.

This is the negative consequence of excessive infrastructure that must be eaten sooner or later. For Mixue Ice City, eating it when it is strong and strong is at least much better than swallowing it when it is exhausted and weak.