Summary of Key Points
Jituo Express achieved impressive results in the first half of 2026 (a 25% increase in package volume and a doubling of net profit), but it also faced a series of safety incidents (multiple fatal accidents within half a year), revealing the lack of safety management by the headquarters under its regional agency model. Regulatory authorities have expanded the scope of accountability from individual outlets to the brand's headquarters. Jituo's management, especially CEO Liu Wei of the Chinese region, is faced with the difficult decision of whether to prioritize profit or safety. Wang Wei, the chairman of SF Express, joining Jituo's board of directors, may provide insights into how to address the management challenges associated with its franchise model.
I. The “Desperate Growth” Behind the “Bumper Harvest”
Jituo had a remarkable performance in the first half of the year: it handled 17.5 billion packages globally (a 25% increase year-on-year), gained a 11.6% market share in China, and recorded a net profit of $350 million (a 120% increase). The daily average package volume even exceeded 100 million for the second quarter. However, these impressive figures came at a cost of frequent safety accidents: in May, a sorter at the Shenzhen transfer center was killed by a vehicle; in February, a loading and unloading worker in Panjin, Liaoning, was killed by falling goods; and in October last year, a worker in Liuzhou, Guangxi, died in a workplace accident.
Ironically, just weeks after Jituo released an ESG report claiming to have provided safety training to 1.4 million people, another fatal accident occurred in Shenzhen. Investigations revealed that the external contracting fleet responsible for the accident had not received any safety training, and the transfer center had not installed basic safety measures such as barriers to separate pedestrians and vehicles for four years. Although employee benefits increased by 31%, these improvements only benefited headquarters staff. The income and safety of frontline franchise workers depend entirely on the franchisees, who, fearing penalties from the headquarters, are reluctant to invest in safety measures.
II. The Regional Agency Model: A Double-Edged Sword of Rapid Expansion
Jituo's rapid national expansion was facilitated by a three-tier model involving the headquarters managing transfer centers, provincial agents, and frontline franchisees. This model allowed the headquarters to minimize investment while provincial agents were responsible for regional management, and franchisees quickly set up new outlets. However, a major flaw in this approach is the lack of effective control by the headquarters over the frontline:
- Franchisees faced severe consequences for minor issues; for example, a franchisee in Henan was fined $5,000 and had its franchise revoked along with its security deposit after a warehouse-related accident, and a franchisee in Hunan had its operations shut down and was fined $300,000 despite using a compliant location.
- Franchisees were reluctant to invest in safety, fearing that their investments would be taken by the headquarters. This reluctance led to a lack of basic safety investments such as barriers to separate pedestrians and vehicles.
This model enabled Jituo to grow quickly but also planted the seeds for potential safety hazards.
III. Stricter Regulation: The Headquarters Can No Longer Shirk Responsibility
Previously, regulatory issues only targeted individual outlets, but now the headquarters are directly held accountable. In June, the State Post Bureau initiated an investigation, criticizing Jituo for inadequate safety management and recurring safety issues. In July, Jituo itself was fined. The reason is clear: these accidents were not isolated incidents. The authorities had previously discussed safety concerns with Jituo, including after the accidents in Liuzhou and Panjin, yet Jituo failed to make necessary changes.
Regulators have made it clear that the brand headquarters must take full responsibility for the safety of the entire network. The safety costs that were previously borne by individual outlets now fall on the headquarters. Failure to invest could result in heavier fines or even the loss of operating rights.
IV. Liu Wei’s Dilemma: Profit or Safety?
Liu Wei, Jituo’s CEO for China, has a background in marketing and is skilled at expansion and cost control. He increased profits by tightening controls over frontline operations and revoking the rights of inefficient franchisees. However, regulatory pressure now requires him to invest in safety:
- Investing in safety means spending on barriers, training employees, and supervising franchisees, all of which require significant financial resources.
- Such investments may impact efficiency, as measures like barriers and training can slow down cargo handling and take up time.
Liu Wei must decide whether to continue cutting costs to maintain profits or invest heavily in improving safety. This decision involves not only financial considerations but also the safety of employees and compliance with regulatory requirements.
V. Wang Wei’s Role: Can Jituo Learn from SF Express’ Direct-Operation Experience?
In August, it was announced that Wang Wei had joined Jituo’s board as a non-executive director. SF Express once followed a franchise model but later switched to direct operation, achieving better safety and service quality through stricter headquarters control. Wang Wei’s experience could bring two potential benefits:
- He could provide Jituo with guidance on transitioning from a franchise model to a more centralized control structure.
- He could help Jituo balance profit and safety, as SF Express has successfully managed both.
However, whether Jituo can let go of its cost-cutting mindset and accept potential short-term losses for long-term safety improvements depends on the management’s commitment.
Conclusion
Jituo is at a crossroads: it can either continue to pursue aggressive growth, hoping that regulators will turn a blind eye, or it can invest in safety to address its safety shortcomings. The former approach may lead to quick profits but could result in serious consequences, while the latter requires immediate investment for long-term stability. Wang Wei’s involvement may help Jituo make the right choice.