Overview: Franchisees raise concerns about the model
In a move that has raised questions about the viability of certain growth tactics in the bubble tea sector, a number of Chatime franchisees have voiced concerns about the company’s business model. The core of the dispute centers on a benchmark set for daily sales that many operators say is unrealistically high given market realities, costs, and regional variations. The discussion reportedly began in early 2022, when a meeting involving long-time chief executive Carlos Antonius and a key developer, identified here as Ben, touched on a stringent performance target and the broader financial framework that would govern franchise operations.
The benchmark debate: 150 cups a day
At the heart of the controversy is a benchmark of 150 cups per day. Franchisees say this figure, while perhaps appropriate in a booming market, proved difficult to achieve in many locations, thanks to factors like foot traffic fluctuations, seasonality, competition, and rising operating costs. Some operators claim the target was embedded into revenue projections and fee structures in ways that could penalize underperforming outlets, creating pressure to push volume even when demand or margins do not support such strategies.
What this means for profitability
Even when a shop hits the daily cup target, profitability depends on more than headcount and volume. Ingredient costs, labor rates, rent, and marketing funds all erode margins. Franchisees argue that the model did not adequately factor in regional rent disparities or the price elasticity of bubble tea, leading to a fragile financial forecast for many stores. Analysts say that if a benchmark is coupled with rigid fee structures or stepped royalties, operators could face thinner margins than anticipated, undermining long‑term sustainability.
Franchisee autonomy vs. corporate expectations
The dispute also highlights a broader tension between franchisors and their operators: how much autonomy should franchisees have to adapt menus, pricing, and operations to local conditions? Critics of the model contend that a one-size-fits-all approach may hamper responsiveness and innovation at the store level. Proponents, conversely, argue that standardized processes help maintain brand consistency and streamline supply. The current debate is testing this balance in real-world settings, with operators calling for more flexibility and clearer performance metrics that reflect local markets.
Operational controls and support structures
Beyond the daily target, franchisees point to the support framework as a key area for improvement. They are seeking clearer guidance on inventory planning, supplier pricing, and store-level marketing initiatives. In markets where customer demand is volatile, having adaptive inventory and staffing plans can be the difference between a cash‑flow positive month and a loss. Some operators are pushing for more transparent financial modeling and risk-sharing mechanisms that align incentives with both the franchisor and the shop floor realities.
Industry implications and what comes next
The Chatime discourse is emblematic of a wider trend in the quick-service and beverage franchise space, where growth targets must be carefully calibrated to local conditions. Investors and potential franchisees will want to scrutinize model assumptions, including the assumed daily volume, operating expenses, and ramp-up timelines. For existing operators, the episode may spur renegotiations of terms, clearer key performance indicators, and possibly staged targets that better reflect market dynamics. Stakeholders are watching to see whether the franchisor will adjust its framework or reinforce the current structure with revised support and risk-sharing measures.
Conclusion
As franchise ecosystems evolve, the ability to align ambitious growth with sustainable profitability becomes crucial. The bubble tea sector’s experience with a high benchmark and the associated financial framework underscores the need for adaptable models that account for local demand, costs, and competition. Whether the parties will converge on a revised, more flexible approach remains to be seen, but thedialogue itself signals a maturing franchising landscape that prioritizes both brand integrity and franchisee viability.
