Summary of the Key Points in Plain Language
Recently, Guming released its 2026 mid-year report: The company reported a substantial profit in the first half of the year, with its profits increasing by 44% year-on-year. However, the revenue growth of its over 10,000 franchise stores plummeted from 20% to 3.4% per store. This means that each store only sold 200 yuan more per day than last year, which was not even enough to cover the rising costs of rent and labor. As a result, 521 stores had to close within half a year, and the company only met less than one-third of its annual franchise opening targets set at the beginning of the year. Facing increasing difficulties in attracting new franchisees, Guming urgently introduced a new policy aimed solely at new franchisees, designed to reduce their financial burden. The changes include reducing the one-time franchise fee from 98,800 yuan to 15,000 yuan per year, adjusting the equipment financing terms, and offering up to 50,000 yuan in compensation to stores that close within half a year. Additionally, Guming has taken full control over the buying and selling of used equipment. On the surface, these measures seem to be benefits for new franchisees, but there are several hidden motivations behind them, and the situation is not as rosy as it is presented.
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Detailed Analysis in 5 Dimensions
1. The “burden reduction” in the new policy is merely a temporary relief: The longer you operate, the more you pay
Many people think they are getting a great deal when they see the franchise fee reduced from 98,800 yuan to 15,000 yuan. However, the changes actually increase the long-term costs:
- The first 6 years of operating a franchise are more cost-effective: The total franchise fee over these 6 years is less than 90,000 yuan, which is cheaper than the one-time fee of 98,800 yuan. This gives franchisees more cash flow in the initial stages. But after 7 years, the annual fee increases to 15,000 yuan, effectively turning the “one-time entry fee” into a perpetual rent. The longer you operate, the more the brand earns.
- The equipment financing benefits are actually a form of increased pressure: Under the old policy, new stores had a year to avoid paying for equipment. Now, the repayment period has been moved to the second month of operation, and the deposit for the equipment is no longer available. This means new stores have to start paying for the equipment loan immediately, increasing their short-term financial pressure.
- The 50,000 yuan closure subsidy is essentially a “half-year risk coverage”: If a store closes within half a year, the franchisee can receive up to 50,000 yuan in compensation. This seems like a benefit, but it only applies if the store closes within the first year of operation. After that, there is no compensation, meaning the brand only covers the risks of the first half of the franchise period; any subsequent losses are the franchisee’s responsibility.
2. The new policy is not about helping franchisees; it’s Guming’s growth strategy failing
Guming has two separate sets of financial records:
- The brand’s financials look excellent: Revenue in the first half of the year was 7.47 billion yuan, with a profit of 1.57 billion yuan, showing rapid growth. Guming’s income comes mainly from selling raw materials and equipment to franchisees, so it doesn’t rely on store sales. As long as the number of franchisees increases, its revenue grows, without the risk of losing money on individual stores.
- Franchisees’ financials are struggling: Revenue per store has stagnated, and the additional sales are not enough to cover increased costs. Guming needs to open more stores to maintain its growth, relying on franchise fees and equipment sales. However, it only added 797 new stores in the first half of the year, falling short of its annual target of 3,000. This indicates that Guming is struggling to grow, and it has lowered the franchise fee to attract new franchisees.
3. All benefits are for new stores; old franchisees get nothing
The new policy only applies to stores opened before September 1, 2026. Guming’s stores are now spread across both urban and rural areas, with most of the good locations already occupied. New stores are forced to target less profitable markets, making it difficult to attract new franchisees without additional incentives. Old franchisees, who have already paid the full franchise fee, are not benefiting from the new policy and are expected to upgrade their small stores to larger ones at their own expense to qualify for the compensation. Guming’s focus is on new stores, with the majority of its profits going to shareholders.
4. Guming takes full control of used equipment
The new policy strictly regulates the purchase of used equipment. Franchisees can only buy it from Guming or through approved transactions between other franchisees. This creates a closed market for used equipment, allowing Guming to control the pricing and revenue. The used equipment industry typically has a high margin, providing another source of revenue for Guming. Franchisees are completely dependent on Guming for all equipment-related needs.
5. The new policy is neither a generous offer nor a scam; it’s a strategy to meet the goal of 20,000 stores
Guming claims this policy is a shared risk, but in reality, it’s a way to meet its growth targets. While the cost of closing stores is reduced, the overall financial burden remains high for franchisees. The new policy is more about driving growth than genuinely helping them. Guming’s goal is to open 20,000 stores by 2027, and it uses these measures to achieve this. Franchisees who join now will pay more over the long term and face greater financial pressure, especially with the equipment loan repayments starting from the second month of operation. In short, Guming is using these measures to meet its financial goals, with new franchisees mainly filling the gaps in its growth.