Former Luckin Coffee Chairman’s New Venture Expands in China

Cotti Coffee, a new venture of Charles Lu, the former chairman of Luckin Coffee, opened its first offline store in Fuzhou in late October, and the brand has been making further progress since then. According to the New Consumer Daily, it has entered Beijing in a low-key manner, seeking to stir up the coffee market at the price of one cup of coffee for 9.9 yuan ($1.38). Lu’s team also announced the goal of establishing 10,000 stores in three years, and the brand is expanding rapidly.

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It can be seen from Chinese social media platforms that Cotti Coffee stores in Hangzhou, Nanjing, Shenyang, Xiamen, Chengdu, Chongqing and other places across China have already started construction. According to Chinese media outlet KamenClub, an unnamed industry practitioner revealed that some investors of the brand disclosed that “there are over 1,000 contracted stores of Cotti Coffee in China, and in some cities, the number of joint stores is full.”

Looking back at Luckin Coffee founded by Charles Lu, a direct sales mode, low price strategy and multiple rounds of financing were all essential factors to its rise. However, this time, Lu’s team did not choose to operate directly, but opened franchise stores less than one month after the opening of the first store. Cotti Coffee staff revealed, “The Beijing stores offer pick-up services and are direct sales stores, but the brand has opened a franchise and people interested in opening a Cotti store can contact agents.”

However, the fast-paced style of the franchise has puzzled many catering consulting practitioners. “It takes at least six months to a year for the single-store mode to conduct full tests. Such a rapid franchise shows that the financing ability of Lu’s team may encounter bottlenecks,” said one such individual.

Moreover, the compliance of this practice is still debatable. According to Chinese labor law, enterprises that carry out direct franchises must be established for more than one year, and the operating time must reach more than one year before others can join.

According to some catering employees, the quick start of franchise may be possible with different contracts. “Under normal circumstances, companies that aim for short term interest will conduct franchise mode before full test of single-store mode. It is surprising that Lu’s team is also eager to open franchisees,” said Tang Li, a marketing expert, adding that this move could remind people of rip-off behavior.

In fact, this is not the first time that Lu’s team has quickly started a franchise. In January, 2022, the first store of pre-cooked food brand “A-Bite Workshop” was opened in Beijing. In April, the venture announced that it had expanded to 78 cities with 210 stores, and more than 6,000 potential franchisees had paid 10,000 yuan of franchise intention money. However, within less than a year, A-Bite Workshop began to face a large number of store closures.