Core Summary
In order to achieve its goal of opening 10,000 stores, Yihetang is making every effort to expand into the rural market. It competes with brands like Mixue Bingcheng by using down-to-earth marketing strategies (advertising on bus seats in tourist areas and on village walls), offering financial incentives to franchisees (no franchise fee, material discounts), and adjusting its store format to suit rural needs (opening larger stores that can serve as gathering places). However, this expansion comes with challenges such as fierce market competition and decreased profits due to shared customer traffic, requiring a balance between growth speed and franchisee profitability.
Detailed Analysis
1. Why Does Yihetang Focus on the Rural Market?
Yihetang currently has over 8,000 stores, just 2,000 short of its goal of 10,000. The remaining stores are difficult to open because the best locations in first- and second-tier cities have already been taken by leading brands, and the growth rate in higher-tier cities is slowing down. In contrast, lower-tier cities (third-tier and below) account for 62% of its stores, with a growth rate increasing from 0.58% in January to 2.39% in May—much faster than in higher-tier cities. Therefore, it must look towards the rural areas. This strategy is not about "rural areas surrounding cities" but rather continuing its affordable pricing model and competing directly with Mixue Bingcheng in local markets.
2. How Does Yihetang Attract Franchisees to Rural Areas?
To encourage franchisees to set up stores in rural areas, Yihetang has introduced a "Rural Entrepreneurship Subsidy Program." This includes a zero-franchise fee for new stores in Shandong, Zhejiang, and eastern Hubei, a discount of 20,000 yuan on initial materials, a free ice-making machine (essential for opening a store), and subsidies for storefront and larger store renovations. These measures aim to reduce franchisees' startup costs and push them into the rural market.
3. Are Rural Stores Different from Urban Stores?
Rural stores operate using a different approach:
- Store Format: Urban stores are usually small or street-based, focusing on delivery and self-service. Rural stores are larger (over 30 square meters) with seating areas because there are fewer social gathering places for young people in rural areas, making them suitable as community hubs.
- Marketing: Urban stores use celebrity endorsements and partnerships, while rural stores rely on direct advertising methods such as wall postings ("Choose Yihetang for your milk tea in Henan") and bus seat advertisements ("Stop by Yihetang before visiting Biquanxia"). The goal is to create local awareness without relying on online buzz.
- Customer Traffic: Rural areas have less customer mobility, so store owners rely on repeat business from regular customers. While the headquarters provides products and supply chains, maintaining relationships with local customers falls on the franchisees.
4. Challenges in Expanding to Rural Areas
The rural market is no longer a "blue ocean": Brands like Mixue Bingcheng, Guming, and Hushang Aiai are also competing there, often with multiple stores in the same area. For example, a franchisee in Hebei reported that opening four Yihetang stores within 500 meters each other reduced sales from 240,000 to 150,000 yuan per month. Franchisees in Anhui also mentioned daily sales of only 6,000-8,000 yuan on weekdays.
There is a contradiction: while the headquarters prefers more stores to spread out procurement and delivery costs, franchisees worry about losing customers and not recouping their investments. If franchisees cannot make a profit, the brand loses both stores and its customer base.
5. Yihetang's Advantage: Experience from Its Early Campus Model
The company started with a campus business, attracting students with affordable large cups of baked milk (a price-sensitive, high-frequency purchase). It expanded through franchising and opening many stores quickly. The needs in campuses and rural areas are similar: both rely on affordable prices and large cup sizes, and frequent customer visits help reduce costs. This successful model provides the foundation for expanding into rural markets.
Conclusion
Yihetang's expansion into rural areas is driven by its goal of reaching 10,000 stores, but it faces significant challenges. To achieve this, it must balance growth speed with franchisee profitability. Rural businesses rely on repeat customers, and only with stable franchisees can the brand remain successful.