By LI Ye, ZHANG Xiaoyi
Cotti Coffe CEO, QIAN Zhiya, celebrated the company’s first anniversary with an internal memo, chastising the supply chain for its failure to keep up with rapidly expanding business.
“The explosive growth of storefronts poses significant challenges to Cotti’s supply chain, operations, and technology systems,” Qian wrote.
Too much too soon
Cotti franchisees, even those in Shanghai, are facing short supplies of raw materials, with poor logistics and frequent changes in suppliers at fault.
Cotti has more than 6,000 stores worldwide, all opened within a year, making it the fourth-largest global chain. It took Starbucks 23 years to open its 6,000th store.
According to a China Merchants Securities report, Cotti’s supply chain shows inconsistencies in equipment and ingredients, leading to different equipment in every store. Cotti established a supply chain base in Anhui province in September. Supply chain management has become an urgent issue for the company.
Making it easy
It doesn’t cost much to become a Cotti franchisee, and you don’t have to prove much either, just front up some cash, find a location and your store will roll up in trucks and be installed before your eyes. Cotti doesn’t charge franchise fees. Instead, rakes in a share of the gross profit, reducing cash needed upfront.
In contrast, Luckin requires higher upfront investments for franchisees and asks a lot of finicky questions about money, experience and location, hence a higher success rate, and bigger profits all around.
Cotti provides subsidies to its franchisees, with the company paying 9.5 yuan of the cost per cup, which can increase to as much as 14 yuan.
If you can’t beat them, join them
Cotti’s approach to opening stores is quite straightforward: it closely follows Luckin and simply opens a store next door. It saves Cotti the bother of doing any groundwork at all.
Cotti’s rapid expansion is undoubtedly rare in the business world, made possible in part by the vast Chinese market and the maturity of the restaurant chain franchise model.
