For years, CHAGEE represented the gold standard of China’s 'new-style' tea industry, characterized by rapid-fire store openings and a cult-like following for its signature jasmine milk tea. However, the brand’s 2025 fiscal report reveals a deepening structural crisis lurking beneath its 31.6 billion RMB gross merchandise volume. While total store counts surged by nearly 26%, domestic franchise revenue plummeted by 14.8% in the third quarter, signaling that the brand’s aggressive 'density strategy' is cannibalizing its own partners.
The friction is most visible on the balance sheets of individual franchisees, who once enjoyed payback periods as short as six months. Today, those same operators face a market saturated with identical storefronts, sometimes located less than 500 meters apart. As foot traffic is diluted across multiple locations, gross margins have slipped from a peak of 65% to below 55%, leaving many small business owners struggling to cover rising labor and rental costs.
Adding to the strain is a perceived stagnation in product innovation. CHAGEE has long leaned on its flagship 'Boya Juexian' milk tea, which accounts for up to 70% of its total sales. This over-reliance created a vulnerability that competitors were quick to exploit, leading to what industry insiders call the 'seven-year itch.' For much of 2025, a sluggish internal response to shifting consumer tastes resulted in a noticeable drop in same-store performance and a surge in second-hand equipment sales as disillusioned franchisees exited the market.
In a radical bid to mend these fractured relationships, CHAGEE is overhauling its core business model for 2026. Moving away from a traditional supply-chain markup model—where the brand profits by selling ingredients to franchisees—the company is transitioning to a GMV-based revenue-sharing system. This pivot essentially transforms CHAGEE from a mere supplier into a true partner, aligning its corporate fortunes directly with the daily sales performance of its storefronts.
Early signs of a recovery emerged in the final quarter of 2025 with the launch of the 'Gui Yunnan' series. This Pu-erh-based product line successfully reactivated dormant members, proving that the brand can still innovate beyond its original hits. Founder Zhang Junjie has now signaled a strategic retreat from 'expansion at all costs' toward a 'high-quality growth' phase, focusing on repairing unit economics and seeding international markets like South Korea to hedge against domestic saturation.