Rushing Honey Snow Ice City, struggling franchisees

Image source @ Visual China

Wen | open pineapple finance, the author | Jin Jiepan, Editor | Ai Xiaojia

In 1997, Zhang Hongchao, a work-study college student, opened his first store around Zhengzhou University, and the so-called shop was just a stall selling shaved ice, called "Cold Stream Shaved Ice". Two years later, the stall was renamed Assite Ice City, and since 2010, it has officially entered the expansion mode of "direct operation + franchise", and the store has grown like a weed.

Under the epidemic situation, The Honey Snow Ice City has not stopped, expanding from 10,000 stores to 20,000 stores, it took only one year, and now the number far exceeds the number of ancient tea, tea hundreds, a little, hey tea, Naixue tea, the sum of the stores of these five brands.

Michelle Ice City can be described as fame and fortune, the signboard is getting louder and louder, the company's valuation is 20 billion, and it has won 800 million profits a year. The franchisees in this business empire have also become a huge group, but have they all made money? Combined with the statement of many franchisees, this is not a business that makes a steady profit, and the store return cycle after 10,000 stores is getting longer and longer. Their living conditions can also be seen from the latest preferential policies recently released by Mi Xue Ice City.

On April 20, Michelle Ice City issued two support policies for franchisees: one is to reduce the franchise fee for 1 year, for all franchisees whose stores are in operation before December 31, 2021, the franchise fee from county-level cities to provincial capital cities ranges from 7,000 yuan to 11,000 yuan, and the official said that the total amount of reduction is nearly 200 million yuan; the second is the price reduction of some materials, including ingredients, packaging materials, consumables, machines, etc., which officially accounts for 50% of the materials in the Hyper store.

A number of franchisees said to Kai Pineapple Finance that raising their hands in favor of these reductions and exemptions cannot fundamentally alleviate the pressure they are facing.

They believe that the lack of site selection guidance before opening the store, the lack of regional protection after the opening of the store, and the cost of raw materials accounting for up to 50% of the flowing water have made the pressure on the operation of the store under the epidemic situation more and more. Among them, the cost of materials has improved now, but some franchisees said that "the overall price reduction is not large, involving 69 material products, there are some raw materials, but the mechanical category accounts for more." ”

In the middle of 2021, the Honey Snow Divine Comedy and "Wild Consumption" once made franchisees squeeze their heads to grab a point. Today, Michelle Ice City is also copying the franchise model to its coffee brand Lucky Coffee and Ice Cream Brand Ji Latu.

However, the franchise system has made Michelle fall into a whirlpool of public opinion several times. For example, Before the Honey Snow Ice City was exposed to food safety problems many times, and recently there was news of sudden death of store employees at work. Some analysts said that the various problems exposed by franchisees today are related to the fierce competitive environment on the one hand, and related to the strategy of Michelle Ice City on the other hand, and the possibility of franchisees taking risks under the pressure of profitability has increased.

In the eyes of franchisees, which are the three major "harsh policies", which are reasonable choices under the business model, and which are the "sequelae" of rapid expansion? This article attempts to examine the huge franchisee empire behind Michelle Ice City from multiple perspectives of franchisees and industry insiders.

Submitted site selection, frequently rejected

From June to August 2021, it is the crazy period of joining Michelle Ice City. Combined with the statement of many franchisees, most people's enthusiasm for joining The Honey Snow Ice City was ignited by two events: in June, the magic theme song of "You Love Me, I Love You, Honey Snow Ice City Sweet Honey", so that the brand was hot on the social platform, in August, during the Henan flood, donated 22 million, and polished the corporate image of Honey Snow Ice City for a few points, and the store was "wild consumption" by consumers.

Ji Qing of Wenzhou is one of the people who applied to join the Headquarters of Mi Xue in June 2021.

According to Ji Qing, according to the process, after getting the "Open Shop Audit Qualification Certificate" issued by Mi Xue Bingcheng, you can start to find the store, after choosing the right location, submit the location review, you need to ask the landlord or intermediary for drawings and other materials, upload to the background, after the preliminary review, pay a 500 yuan audit fee, the headquarters will send staff to the local audit.

Ji Qing had long been ready for the 500,000 yuan invested in the early stage, but he did not expect to be stuck in the site selection, and it was more than 3 months to find a store. He recalled that during that time, he drove almost all over Zhejiang, focusing on Dongyang, Huzhou, Jinhua, Yiwu, Cixi, Taizhou, in the hottest weather, to the streets of Furong Town and Nantang Town, riding a shared bicycle to find a location. "I paid a total of 3,000 yuan in manual review fees, and the feedback I got every time was, 'Your audit failed.'"

By October, Ji Qing really couldn't hold on. "The staff at Michelle Ice City just told me, 'Golden Horn Silver Edge (referring to the corner of the intersection or T-shaped intersection, and the location of 1-2 storefronts nearby), where there is a lot of traffic'. Our family is originally in business, and we all understand this truth. ”

A number of franchisees who have not succeeded in joining Michelle said to Kai Pineapple Finance that their biggest dissatisfaction with Michelle is that they do not provide site selection guidance and services, and the submitted site selection is frequently rejected.

Open pineapple financial telephone consultation Honey Snow Ice City official customer service "whether to join the site selection support", the reply is, "the site selection needs to be selected by the franchisee", as for whether the site selection is passed, it will review whether the store meets the requirements, comprehensively assess the business circle, traffic flow, attendance rate, and estimate the turnover range and return cycle after opening the store.

Site selection is a very technical step, if there is no professional support, the difficulty can be imagined. Hou Xiaoguang, an entrepreneur in the tea field, told Kai Pineapple Finance that it is not to say that it is a small white franchisee, even if it is a slightly experienced franchisee, in the case of not understanding the flow of people in the nearby area, it also needs to be manually measured by itself, and it is extremely difficult to judge.

"The vast majority of tea brands will provide site selection advice services and data support to franchisees, not only for franchisees to do more with less, but also for brands to open stores with a much higher success rate." Hou Xiaoguang said.

Some franchisees have been selected for half a year, and they have to give up after being unsuccessful, "The density of Michelle's stores has been very large, and it is also issued a store opening permit, and it is an irresponsible performance to not provide site selection assistance."

After communicating with a number of industry people, Sun Ke, the founder of the tea brand, felt the change of Mixue. "A year ago, the approval rate of Michelle's franchise stores was higher than the industry average, much higher than that of a little bit and guming, and now the audit of site selection is tightening."

Ji Qing learned through a regional manager that "because there are too many stores through the site selection in mid-2021, small counties in many places have been paved, and there is a trend of tightening the location of the store in the later stage."

Is it the honey snow next door that kills the honey snow?

Zhu Qi, a franchisee in Nanjing, Jiangsu Province, is a native of Henan, and he has a sense of trust in the brand of Michelle that came out of his hometown, and has been paying attention to it, and last year he had plenty of funds in his hands and joined the first time.

Compared with Ji Qing, Zhu Qi's location can be regarded as "bumping into great luck". In June 2021, on the eve of the Fire of the Mixue Ice City Divine Comedy, he and his wife finally found the "gap" of the store near the golden confucius temple scenic spot after struggling for more than a month.

"That day, it was really a coincidence." At that time, looking for a nearby store, he just found that a store with a good location was being transferred, and he "picked up a leak". The store area is larger, correspondingly, the rent is also expensive, 180,000 a year, far higher than Zhu Qi's budget.

But he knows that for office workers like him who have not dealt with the catering business, it is not difficult to get a store opening permit, and it is not easy to find a suitable store. Now, the opportunity is in front of him, he and his wife after a brief discussion, while quickly submitting for review, while gritting their teeth to put the store under the plate, signing a lease contract for 5 years, the initial investment of 480,000, the store soon opened.

After passing the "site selection pass", what awaited him in front of him was that there were too many competitors, especially the Mixue Ice City next door.

Near the Confucius Temple, it has long been all over the place, Coco can be, in the past two years, it has become the world of honey snow. When his store opened, there were only 2 Mixue nearby, and then 4 appeared in succession. Now, within 200 meters of the south gate of the Confucius Temple, there are 4 Mixue Ice Cities, "one outside the door inside the door, one on the left and one on the right side of the door", and there are as many as 18 within 2 kilometers of the surrounding area.

There is a saying circulating among The franchisees of Michelle, "The store secret is not terrible, and whoever has poor business is embarrassed." Fortunately, the location determines the passenger flow, according to Zhu Qi's calculations, in these honey snows, the traffic of his own shop is on the upper middle.

But it is inevitable that customers will be diverted. Zhu Qi's store in the Number of orders on the Meituan takeaway platform, "about 1,000 orders a month", he looks at it from the map, the location of the nearby Mixue store is good, but the monthly sales of takeaway are not high, but the location is remote, the surrounding Mixue density is relatively low, the takeaway platform shows that the monthly sales can reach three or four thousand.

"Everyone in the circle knows that honey snow has no regional protection." Sun Ke's feeling in some cities in the southwest is that many commercial circles are concentrated stores, and the Honey Snow stores affect each other.

In this regard, the opening of pineapple financial telephone consultation Honey Snow Ice City customer service learned that the official website of the store suggestion is not to conflict with the old store, the early suggestion to avoid the old store straight line 500 meters away from the site selection, the later specific situation to the audit manager's audit results prevail. "If it's a place with a lot of traffic, you might be able to open two shops on one road."

This was similar to Zhu Qi's understanding. The deciding factors for The location requirements of Michelle are the business circle and the flow of people, and it is not a clear distance limit. "For example, our store is very bustling and has a large flow of people, and a small business circle has been formed within 200 meters, which means that another small business district 200 meters away may also open another Mi Xue Ice City."

In some cities, it is not uncommon for 3-5 Mi Xue Ice Cities to appear on a road of several hundred meters. A catering practitioner in Shijiazhuang mentioned that on a pedestrian street of about 600 meters in Shijiazhuang's Yuhua District, there are 5 Mixue Ice Cities, and on the Minzu Road in the same city, there are 10 Mixue Ice Cities on one street.

The overly dense number of stores undoubtedly touches the core interests of franchisees.

"If your brand does not have regional protection, it is difficult to avoid the situation of 'infighting' in the same brand store." Hou Xiaoguang said that the vast majority of tea brands have regional protection for franchisees, "such as a little bit, Coco and some new milk tea brands, will stipulate that within a few hundred meters are not allowed to open again, a maximum of a few in a business circle."

Why are franchisees complaining?

New franchisees are facing difficulties in site selection, and some old franchisees are required to open new stores. The "had to open" store, and the rising cost of raw materials, put some franchisees in a dilemma.

Li Mu is an A-class franchisee of Michelle Ice City, with more than a dozen stores in Sichuan and Zhejiang provinces. Most of them are old stores opened before 2018; two are new stores that opened in December last year.

Recently, the regional manager contacted Li Mu to continue to open new stores and find locations. "The feedback from the regional manager is that the flow of our store is at a medium and high level in the vicinity. And the nearest honey snow to us was around 5 km. In this case, the headquarters will definitely need to open a new store, the regional manager will first ask the A-level franchisee, if the A-level franchisee does not open, it will authorize other franchisees. ”

But sometimes, franchisees have to open new stores because they don't want the store to be diverted, after all, "if you don't open it, this position will be opened by someone else," Li Mu said.

Soon after Zhu Qi, an ordinary franchisee with average financial strength, opened a shop, he opened a Mixue Ice City nearby, which allowed him to operate with a sense of crisis every day. "It is better for others to open the store than to open it yourself", although the first store does not know when it will be able to return the cost, but Zhu Qi has begun to apply to join the second Michelle.

This time, he truly realized that "it is difficult to open a store". The site has been located for more than a month, and a suitable location has not been found, either the submission of the audit is not passed, or the rent and transfer fee of the store are ridiculously high.

Before 2021, the annual rent of his shop was less than 100,000, and it will rise directly to 180,000 in 2021. Recently, he learned that the transfer fee of the nearby store has risen to 200,000, and his "neighbor", another Michelle franchisee, has invested as much as 600,000 yuan in the early stage.

"The psychological expectations of nearby shop landlords have been raised by Mi Xue, in fact, landlords and intermediaries only see that Mi Xue's flow of people is the largest, but it really does not make money." Zhu Qi said helplessly.

Material costs are the highest mountain in the eyes of franchisees. Combined with a number of franchisees in Michelle Ice City, about 50% of the turnover should be used for material purchases, rent and employee wages accounted for nearly 20%, and then remove all kinds of miscellaneous expenses, and the profit was between 15% and 20%. Zhu Qi's shop is opened in a prime location in Nanjing, and the cost of materials accounts for 50%-55%, which is greater than the rental pressure. A number of franchisees have reported that the cost of materials will rise sharply from 2020, but the price of drinks will remain unchanged.

For the "price reduction of some materials" policy launched by Michelle a few days ago, franchisees raised their hands in approval.

Zhu Qi had not yet enjoyed the discount when he purchased at the end of April. Li Mu said that the store has enjoyed this preferential treatment, "but the price reduction is not large, 69 material products have been reduced in price, some are raw materials, and the proportion of machinery is relatively large." ”

Where do franchisees go from here?

A tea brand, whether to directly operate or find franchisees, the choice behind it is who will bear the management costs and capital costs.

Li Xinyi, an analyst in the brand retail industry at Analysys, said that under the franchise model, it is certain that Mi Xue Bingcheng will achieve profitability through franchise stores, but franchisees may not be profitable.

On the one hand, Michelle Ice City needs intensive distribution to reduce raw material procurement and logistics costs, on the other hand, its product pricing is low, the profit margin is small, if you do not grasp the density of the distribution point, it is easy to make franchisees lose money, and franchisees may be desperate under profit pressure, inducing food safety problems.

According to the summary of many interviewees, the dissatisfaction of franchisees with Michelle Ice City is concentrated in three aspects, there is no store opening guidance, no regional protection, and the proportion of raw material costs is too high.

In Hou Xiaoguang's view, compared with high-end tea drinking Naixue's tea, 33% of the money is used for raw material costs, and Honey Snow, as a cost-effective brand with an average price of 6 yuan, accounts for about 50% of raw materials, and the proportion is indeed high. "However, for tea franchise brands, controlling raw materials and making money from the supply chain must be a continuous action, so that there can be a steady stream of income." He believes that some franchisees have insufficient cognition of Michelle, and those who join with the herd mentality will inevitably pay tuition.

For the statement that there is no store opening guidance and no regional protection, Li Xinyi believes that this may be a strategy taken by Mi Xue Ice City, more for the purpose of optimizing franchisees, selecting franchisees with stronger resources.

An investor who pays attention to the field of new catering believes that this is one of the "bad consequences" under the crazy expansion of Michelle Ice City, if the management is too poor, if it does not provide some necessary help in time, it may face franchisees leaving in batches. "In the relatively large-scale franchise system on the market, Michelle is relatively loose, from front-end site selection, personnel training to daily inspection, and providing some directional methodologies, this set of support systems for franchisees is relatively poor in the industry."

"I heard that some franchisees rented out shops that were empty for three months because There were not enough people in The Honey Snow Ice City." Sun Ke said to Kai Pineapple Finance. However, he believes that this will also improve with the improvement of Michelle's franchise system.

After the madness, Michelle's franchise system may undergo a round of reshuffle in 2022, and franchisees with different minds will also make different choices.

After weighing it up again and again, Ji Qing gave up his plan to join Mi Xue.

When looking for stores, he learned from a number of franchisees that only about 60% of Michelle's franchisees made money. "Many franchisees say, you watch me sell hundreds of cups a day, but the profit margin is low, and it can't even cover the costs of materials, labor, and rent." When the store is opened three years later, the store will be upgraded, renovated and re-purchased most of the equipment, which costs about 80,000 yuan, which is equivalent to making 20,000 cups of lemonade. ”

A-level franchisee Li Mu refused the regional manager's invitation to open a store. With more than a dozen stores in his hand, he plans to keep some of them, abandon some of them, and then he will not join Michelle's new stores.

"At that time, the second new store in Zhejiang was opened under the recommendation of the regional manager." He told Open Pineapple Finance that the 2 new stores are not like the original regional manager verbally promised, "6-8 months to return the cost", calculated down, a month flow of 10,000, a year can return the cost is not bad. The more than a dozen old stores are becoming more and more difficult to make money, mainly because in addition to the objective factors of the epidemic, there are also price increases in raw materials and fines from time to time.

Zhu Qi, who is looking for a second store, only hopes to seize the opportunity in the next few months.

In late July last year, the epidemic struck, breaking the daily life of Nanjing people, and also caused Zhu Qi's store to miss the sales season of summer + summer vacation from July to September. This year, into March, the store operation has just warmed up with the weather, the usual single-day flow is around 7,000 yuan, the weekend can exceed 10,000, as a result, since the end of March, the epidemic in Shanghai has spread between surrounding cities, and his store turnover has halved.

Calculate down, the average turnover of a month, about October last year was 170,000, this year this year's single month average of 130,000-150,000, paying 180,000 rent, when to return the cost, Zhu Qi has no idea.

At 1 a.m., Zhu Qi's lover was still busy in the store. "The general business hours are from 10 a.m. to 10 p.m., and as the weather slowly warms up, we want to delay the opening hours as late as possible."