Summary of Key Points
The Wenzhou-based bakery brand, Owen Ye Room, suffered a collapse due to rapid expansion that led to a break in its supply chain and an out-of-control franchise model. As a result, the company's financial chain collapsed: it owed employees 1.53 million yuan and suppliers 2.6 million yuan, leaving only about ten of the nearly hundred stores open. The founder, Dai Pengfei, started a live-streaming campaign to repay the debts, using 70% of the revenue from each stream for repayment. However, progress has been slow (only 1,500 yuan was repaid in the first stream), and the company is facing additional crises such as a run on consumer prepaid cards and employees demanding their wages. This incident exposes the pitfalls of blind expansion in the bakery industry—ignoring the supply chain, cash flow, and franchise management, which ultimately led to its downfall.
I. Live Streaming for Debt Repayment: A Meager Attempt at Self-Help
Dai Pengfei's live-streaming debt repayment efforts are more akin to a public display of hardship than an effective solution:
- Meagre Revenue: The first stream generated over 8,700 yuan in sales, but after refunds, only 2,150 yuan was available for repayment, with 70% of that amount (1,500 yuan) going towards debt repayment. To pay off the 1.53 million yuan in arrears, he would need to stream continuously for 1,000 episodes (one per day for three years), and he admits it will take at least a year to overcome this situation.
- Consumer Concerns: The coupons sold during the streams are only valid at the three direct-operated stores in Wenzhou; other stores, especially franchise locations, do not accept them, and prepaid cards cannot be used. Consumers are worried their money is wasted, so they flock to buy bread and spend their balances.
- Employees and Suppliers Unpaid: Netizens have reported that no payment has been made to employees, and suppliers have stopped supplying materials due to the 2.6 million yuan debt, forcing the company to scrounge for supplies.
The live streams serve as a temporary measure to stabilize public opinion but do not address the underlying issues.
II. The Fatal Traps of Expansion: Supply Chain Disruption and Franchise Model Problems
Owen Ye Room gained popularity in Wenzhou and then expanded to Ningbo, focusing on its "healthy oat bread" product line. However, it made two major mistakes during expansion:
- Supply Chain Issues: When opening more than 30 stores in Ningbo, the company initially relied on local manufacturers for production, but they suddenly raised prices. After switching to a central kitchen in Wenzhou for distribution, additional costs of several hundred thousand yuan per month were incurred due to cross-city logistics and warehousing.
- Franchise Model Problems: The company adopted a "loss-absorbing franchise model" where franchisees paid 300,000 to 360,000 yuan to operate stores without needing to manage them, in exchange for a monthly income of 18,000 yuan. Two years later, the stores were supposed to belong to the franchisor. This model led to a disconnect between franchise and direct-operated stores—prepaid cards and group purchase coupons were only valid at direct-operated locations, causing a trust crisis among consumers.
The more stores there were, the greater the losses, as direct-operated stores had to bear additional logistics costs, and the uncontrolled franchise network became a source of financial drain.
III. The Run on Prepaid Cards: The Last Straw in the Collapse of Trust
Once the crisis erupted, consumers began to panic and redeem their prepaid cards:
- Hasty Spending: Some people visited multiple stores in a day to buy bread, while others spent over 300 yuan at once, fearing their cards would become invalid.
- Franchise Stores Rejecting Cards: A franchise store in Wenzhou explicitly stated that prepaid cards and stream coupons were not accepted because the company failed to set up a settlement system with them. This exposed financial and operational chaos: the company had collected money from consumers but could not process it properly, leading to further consumer dissatisfaction.
The run on prepaid cards not only strained the cash flow but also severely damaged the brand's reputation, affecting order volumes during the live streams.
IV. Lessons for the Bakery Industry: Focus on Fundamentals Rather than Just Opening Stores
Owen Ye Room's tragedy is not an isolated case. The bakery industry often falls into these pitfalls during expansion:
- Avoid Blind Expansion: Many brands mistakenly believe that more stores equal greater profits, neglecting the importance of supply chains, logistics, and management costs. Opening stores is a form of addition, but poor management can lead to significant losses.
- Cash Flow Is More Important Than Scale: The bakery industry is capital-intensive (with high rent, raw material, and labor costs), and prepaid card and franchise fees are considered advance payments, not profits. Rapid expansion can quickly deplete cash reserves.
- Quality and Efficiency Are Key: Consumers buy bread for its taste and freshness, not just the number of stores. Owen Ye Room initially succeeded with its low-fat, low-sugar, freshly baked products but later shifted focus to expansion, forgetting its core values.
In short, having more bakery stores does not necessarily mean better success; stability is key. Companies should first secure their supply chains and cash flows before expanding rapidly, as going too fast can lead to failures.
Final Conclusion
Entrepreneurship is not about "rushing" but about "walking steadily"—especially in a tangible industry like baking, where consumers expect high-quality products at reasonable prices, and brands need to ensure profitability while avoiding losses. The myth of large-scale success should not cloud judgment.