「Core Tips」
A change in the previous good at heavy asset investment, burning money for scale of play, Lu Zhengyao's tip of the tongue workshop has embarked on a franchise model, with prefabricated dishes as a spear, so that franchisees become "investors", can you recreate a Luckin, which wave of leeks does Lu Zhengyao want to cut this time?
Author | Pan Jie
Edited by | Xing Yun
If according to Lu Zhengyao's plan, soon after the Spring Festival of the Year of the Tiger, a new brand face will appear intensively in the streets of Beijing, Shanghai and other cities - the tip of the tongue workshop, focusing on pre-made dishes, the speed of opening stores and the impact of marketing, just like when Luckin Coffee rose.
In October 2017, Luckin Coffee opened its first store in China, and by December 25, 2018, the number of stores had reached 2,000. Luckin speed allowed Lu Zhengyao and the Shenzhou department to usher in a highlight moment, but the rapid listing of Luckin soon broke out another 2.2 billion financial fraud, how glamorous before, after this there was a mess.
Now that Lu Zhengyao and other relevant parties have been completely cleaned out of Ruixing, the old cannon of the business world, who is not willing to be lonely, has re-emerged from the jianghu to toss new entrepreneurship.
In August 2021, Lu Zhengyao's fun small noodles opened, planning to open 500 stores across the country, and in the eyes of the outside world, this project with its own Luckin gene did not stir up much splash. Three months later, after experiencing the storm of renaming, financing was difficult to solve, and the progress of expanding the store was greatly lagging behind.
Since then, Lu Zhengyao, who has set his sights on another prefabricated dish, changed his good at heavy asset investment and burned money for scale, and embarked on a franchise model. Can the Tip of the Tongue Workshop carry Lu Zhengyao's new ambitions?
1, Lu Zhengyao also fancyd franchisees?
Lu Zhengyao is good at finding the lifeblood of wealth on the outlet.
In the first half of 2021, capital is keen on "eating noodles", Lu Zhengyao's tongue tip technology launched interesting noodles, helplessly poor results, after quickly adjusting the direction, determined a new outlet - pre-made dishes.
Pre-made dishes are pre-made semi-finished products, and manufacturers process the dishes in advance and sell them through frozen or vacuum packaging. In the past, pre-made dishes were more for the B-end business of the catering industry, and now with the rise of young people "under the kitchen", pre-made dishes have taken a fancy to ordinary consumers at the C-end, and the ingredients have been processed, and they only need to be simply stir-fried to be out of the pot, catering to the needs of young consumers.
The C-end market has great potential, and Lu Zhengyao's tip workshop has targeted the C-end track.
On January 21, Li Yingbo, rotating CEO of Tongue Technology, said in an interview with Caixin and other media that recently, Tongue Technology has opened 10 offline direct stores, signed more than 3,000 franchisees, and plans to expand from the end of February with the franchise model.
A tip of the tongue workshop directly operated store in Beijing / Leopard Change
The speed of joining the store is much faster than that of direct operation, which is probably also based on the experience and lessons of previous projects such as Luckin and Fun Noodles.
The expansion speed of Luckin's early direct stores has amazed the industry, growing to 3,000 stores, which took 21 months. However, behind the directly operated stores means that rent, decoration costs, equipment, labor, marketing and many other costs require brand owners to bear huge financial pressure.
According to the prospectus disclosed by Luckin at the time of listing, in 2018, sales and marketing expenses, store rent and labor were the two largest expenses, reaching RMB750 million and RMB580 million respectively, and the proportion of these two superimposed total costs was 53.6%, while the total revenue of the year was only RMB840 million. The high cost led to tight cash flow, and Luckin had to keep financing to find money.
The model of joining the franchisee, the various risks and costs are more dispersed to the franchisees, reducing the risk of the tip of the tongue workshop itself, and is an asset-light model for the brand. In the past, from the Shenzhou department to Luckin Coffee, and even fun noodles, Lu Zhengyao focused on the path of asset promotion, and now he has to start a franchise store.
A person in charge of the Beijing Tip Workshop to join the investment told "Leopard Change" that there are currently 3 directly operated stores in Beijing, and 360-370 franchise stores have been signed in various districts of Beijing, only Dongcheng, Xicheng, Shunyi, Fangshan and other places can sign franchise contracts, and other regions have been taken down by franchisees.
There are 5 types of franchise stores provided by the tip workshop, the smallest area is 8 square meters, and the investment amount is from 30,000 yuan. To join a tip of the tongue workshop, you need "30,000 brand usage fees, 30,000 deposits, 20,000 operating costs per year, 1,800 design costs", "1.31 before the payment of the intention to pay, 30,000 brand use fees directly reduced".
If you simply calculate according to the current intention to pay 10,000 yuan of intention to join, 3,000 franchisees have let Lu Zhengyao precipitate more than 30 million yuan of funds in a short period of time. Compared with the pressure of cash flow under the previous direct operation method, the franchise model comes to money much faster, and the more stores signed, the greater the wealth snowball.
In addition to the single store franchise, the package area franchise is a new way for the tip of the tongue workshop to run the horse.
The so-called regional franchise is that the two sides have agreed to stipulate how many stores to open in this area in a year, which is equivalent to packing out a regional franchise. "Chaoyang District franchise has already packaged 80 stores", the above-mentioned person in charge revealed that there is no restriction on the store type in the package area, and 80 stores can also be stall stores.
The investment materials of the tip of the tongue workshop said that the gross profit margin of the project was 50%. In order to ensure the gross profit margin of the franchisee, the supply price of the brand side is provided according to 50% of the list price of the product, and the final franchisee can set the price according to its own needs.
However, this practice is easy to let franchisees fall into a price war, although there is a minimum price setting, but the price adjustment has become a sensitive competition between franchisees, and franchisees who occupy a large number of stores have more advantages. The merchants of the tip of the tongue workshop promised that in order to prevent malicious competition, the 500-meter radius of the store would be set as a protective distance.
The tip of the tongue workshop that opened the way with the franchise model also copied the high-subsidy play method that Lu Zhengyao was good at before, did not accept the franchisee's profit share, and gave the franchisee a head reward. On the one hand, trying to stimulate the fission of stores, for example, if a franchisee in a super first-tier city introduces a new partnership as a companion, or opens another store by itself, it can get a bonus of 25,000 yuan / store. On the other hand, new qualified consumers who are pulled in the early stage will also be rewarded with rewards ranging from 7 to 15 yuan.
It sounds like the threshold for joining is not high, there are many subsidies, and behind it is also a continuation of Lu Zhengyao's past ideas, rapid scale, and then find profit points. But for price-sensitive consumer groups, low prices are the eternal cheese, and how to retain users after subsidies recedes has always been a problem.
Of course, according to past experience, Lu Zhengyao can also choose to go public after the scale becomes larger, and go to the capital market to exchange time for space.
In recent years, crazy applications have been added to projects such as catering, milk tea, and education, accompanied by the question of "cutting leeks", and even routine franchises and contract fraud. A large number of brands rapidly expanded their influence with the help of the franchise model in the early stage, but the follow-up could not be followed up in supply chain control, quality assurance, price competition, and personnel management, resulting in the dilemma of franchisee operation, and the contradiction between franchisees and brands intensified under the tide of store closures.
For Lu Zhengyao, who has no franchise management experience, the real test has not yet begun.
2. Is pre-made food a good track?
With the development of the "lazy house economy", pre-made dishes have gradually moved from the B-end to the C-end and become the outlet. The local New Year has spawned a wave of prefabricated vegetable markets.
Why did Lu Zhengyao's team also look at pre-made dishes?
Li Yingbo once said in an interview with the media that cooking is more extensive than the audience of coffee, the demand is more rigid, the normalization of the epidemic is changing the public's dining habits, coupled with the progress of cold chain preservation technology, making pre-made dishes enter a more mature stage.
The opening of several directly operated stores in the tip of the tongue workshop before the Spring Festival is a test of products and models.
The tip of the tongue workshop relies on offline store sales, and users can also choose to pick up or deliver to their homes after placing an order online. In mid-January, "Leopard Change" observed in the offline direct operation store of Beijing Tip Workshop (Jinyu Lijingyuan Store) that 5 freezers were arranged on the spot, and the staff said that the current delivery distance of the Tip of the Tongue Workshop is three kilometers, and other orders support consumers to pick up offline.
As an old user of Luckin, the model of the tip of the tongue workshop is not unfamiliar, in the APP to select orders, in the form of takeaway delivery, Luckin relies on low prices, distribution to break Starbucks's mental occupation of consumers. Luckin Coffee can still gain a foothold in the field of coffee chains after experiencing the fraud storm and team reshuffle, which is related to its product strength, and the new product "raw coconut latte" in 2021 will become popular and even trigger the consumption boom of Luckin again.
For the tip of the tongue workshop, in addition to the low price, the emergence of a popular product is the key to playing the brand influence. There are currently 100 SKUs in the tip of the tongue workshop, and the staff of the store said that the sales of Kung Pao chicken are currently better.
Pre-made dishes/leopard changes inside the Tip Workshop
Cultivating explosive products with high recognition in the consumer group is related to how the follow-up tip workshop breaks through among a group of prefabricated dish players.
As early as before the establishment of the tip of the tongue workshop, the competition of the prefabricated vegetable track has been very fierce, upstream meat, aquatic products companies, midstream frozen food, fast food, downstream fresh e-commerce platform, brand catering and other companies have begun to have a layout, many players are also aimed at C-end users. In April 2021, the first share of prefabricated dishes was listed, which promoted the optimism of the secondary market and further stimulated the enthusiasm of the primary market for pre-made dishes.
Compared with other brands, the tip of the tongue workshop was established later, these opponents have a strong consumer perception and a fixed consumer group, the main pre-made dishes of the rare small plum garden, wheat mother and other customers unit price between 20 yuan and 40 yuan, has been capital support. Catering players such as Xibei opened the "Jia Guolong Kung Fu Dish" prefabricated dish brand. Hema, Dingdong Buy Vegetables, Daily Excellent Fresh, Yonghui, etc. have extended the consumption possibilities of prepared dishes in their own fields.
In particular, these fresh retail e-commerce players have a strong supply chain system, rich SKUs, and perfect distribution capabilities, which will form direct competition with the tip of the tongue workshop. In 2021, there are more than 800 SKUs of pre-made dishes on the daily excellent fresh platform; Dingdong BuyCai also said that in 2021, the sales volume of all products of prepared dishes on the platform will increase by 300% compared with 2020.
Where the competitive advantage of the tip of the tongue workshop is, and how much market it can tear apart in the pattern of many players, it is not clear at present.
Behind the rapid gathering of franchisees, the tip of the tongue workshop is also trying to break this situation, only the scale of the franchise store is large enough to negotiate with suppliers, enrich SKUs, get more bargaining power, earn supply chain price differences, and reduce the cost of distribution and other aspects.
In addition to using subsidies and support to win franchisees, the tip of the tongue workshop in the user side to try to occupy the vision of the target customer group through younger channels, Li Yingbo once said that it will do a lot of investment in Douyin, Xiaohongshu, B station, the public domain traffic to the Tip of the Tongue Workshop App, and then distribute to offline franchise stores.
The playing method of strong marketing is consistent with Luckin Coffee that year, but there is a difference between the mode of direct operation and franchise, and the final effect of the money marketing may not be consistent, after all, the brand side of the direct store is easier to do quality control and management, to ensure subsequent consumption and repurchase, the management uncertainty of the franchise store is more, once there is a service defect, quality problems, it will lead to the brand being regurgitated.
3, twists and turns, new stories are not easy to tell
Lu Zhengyao re-emerged from the jianghu this time, and the entrepreneurial project was twisted and turned, and twice in four months he changed direction. From the heavy asset play method that the team was good at in the past to the asset-light model of joining, it is both active and passive and helpless.
At the beginning of August 2021, as Lu Zhengyao's last battle before retirement, "Fun Small Noodles" was officially opened, and it seems that this project carries "Luckin gene". According to the plan at that time, the second batch of stores of Fun Small Noodles would reach 500.
However, a month after opening, Tech Planet quoted an interview with an employee of a tip-of-the-tongue technology company as saying that it was basically in a state of total loss at that time. In early September, the expansion plan for the second batch of cities was suspended.
In the previous store message of Fun Noodles, it can be seen that many consumers feel that a noodle price is 20-30 yuan, the package needs forty or fifty, the price is not cost-effective, if it is not to do activities to discount, Fun Noodles is not attractive in the competition of a number of flour brands.
At the end of October, Fun Noodles began to add a new dish, Bayu Hotpot Fort, hinting at the route adjustment. In November, the name of the shop was also changed to Fun Bayu, and the menu was expanded to expand the previous main pasta. According to public reviews, there are currently 3 Qu Bayu stores in Beijing, with ratings below 4 points. The first store in Beijing, The Fun Small Noodles store located in Phoenix Hui Shopping Center, was also shut down in early January 2022.
The recruitment situation reflects that from November 2021, Lu Zhengyao's team has begun to recruit pre-made dishes related personnel. At that time, the plan to cut into the pre-made vegetable track should have been implemented, and the Spring Festival was a key time to feel the pre-made vegetable market through the directly operated stores.
In Lu Zhengyao's business development, burning money for scale has always been the key. From Shenzhou Car Rental, UCAR to Luckin Coffee, heavy asset investment in the early stage, burning money subsidies to obtain users, and then in order to benefit from scale.
When Shenzhou Car Rental was frantically marketing and attracting new users to aggressively expand through "0 rent on the first day", Lu Zhengyao once said that the scale effect usually has a critical point, as long as it reaches this point, it will definitely be profitable. In the Fun Noodle Project, Lu Zhengyao's plan strategy is to "open 500 stores across the country" and "make a food city and eventually form an online App".
But as soon as the story began, the pause button was pressed quickly. Behind the epidemic affecting offline business, there are also difficulties such as financing problems.
Heavy asset investment and cash-burning subsidies mean that a lot of capital support is needed in the early stage, and after experiencing the fraud storm, Lu Zhengyao's reputation in the capital market is not as good as before. In April 2020, Luckin was exposed to financial fraud of up to 2.2 billion yuan, triggering a crisis of trust in Chinese stocks, and the domestic investment circle also extended the trust crisis of Lu Zhengyao.
According to public information disclosure, Tip Technology completed a Series A financing of RMB 550 million in August 2021, led by Yingke Capital. A month after the launch of the Fun Noodle Project, it was exposed to financing news. In the first half of 2021, the flour noodle business was favored by capital, from the new ramen brands Ma Jiyong, Zhang Lala, Chen Xianggui, to the small noodles, drunken noodles, and Hefu Lao noodles, and major noodle restaurants have raised funds. However, Fun Xiaomian valued itself at 1 billion yuan and sought financing of 100 million yuan, and finally there was no following.
Throw yourself into the prefabricated dish outlet, choose to create a tongue tip workshop brand in the form of joining, the threshold of capital in the early stage is not high, as long as you can gather a wave of franchisees, it is equivalent to convening a wave of "investors" for the brand side.
It's just that these "investors" are also the operators of various franchise stores, and at present, it seems that the tip of the tongue workshop can start quickly through the franchisee model, but the difficulty of follow-up deep ploughing is exponentially escalating. For Lu Zhengyao, the real test is still ahead.