Ye Guofu's blood-sucking franchise: from Oops to Mingchuang Premium, how does he make franchisees pay for the company?

Reporter Liu Yadan

Edited by Gao Yulei

"I tell you this, only 15% of the franchisees who make money (of Mingchuang Premium) make money," a franchisee of Mingchuang Premium who has been engaged in chain operations for many years told the power plant. This proportion of losses has not been officially confirmed by Mingchuang Premium, but multiple sources of information show that there is indeed a large area of losses in the losses of Mingchuang Premium franchisees. This "financial" game, which is considered by industry insiders to be more open to shops and the more franchisees lose money, is more obvious this year in the form of the epidemic and the reduction of offline crowds.

As of December 2021, Miniso Premium has only 5 directly operated stores in China, and more than 99% of the remaining are franchised stores. Franchise stores need to pay a variety of fees such as royalties, sales shares, and goods deposits, as well as labor and rent costs – that is, most of the operational risks. Therefore, in the second half of 2021, in the case of large-scale losses by franchisees, Mingchuang Premium achieved profitability.

Such a story not only reminds people of the jewelry chain company founded in 2004. As the first brand that Ye Guofu started, it also operated in the same way, and eventually declined under the influence of multiple factors.

According to Bloomberg, Minchuang Premium is considering returning to Hong Kong for listing in 2022, and Minchuang Premium said it has not received any news. However, Ye Guofu's franchise model will not stop, after the Creation of Famous Products, he set up WOW clour to focus on domestic cosmetics.

Taking risks alone and competing with each other, franchisees have obvious losses

Li Yongzhe has just taken down the Mingchuang premium store in Chengdu, and he can still see his posts selling shelves and cash register systems on social platforms. "Mainly because of the epidemic, it was closed."

In the second half of 2021, Mingchuang Premium is finally profitable. Within 6 months, the total revenue of Minchuang Premium products was 5.427 billion yuan, an increase of 24.2% year-on-year, and the net profit was 339 million yuan, achieving its first profit since the disclosure of financial data.

However, for the franchisees of Mingchuang Premium Products, the signal of "losing money" is becoming more and more obvious.

The epidemic has hit offline stores, the reduction of advantageous store locations, the competition brought about by the large density of stores, and the blossoming of ten yuan stores and online stores have all impacted the profits of franchisees.

According to a franchisee, when Mingchuang Premium entered the core business circle of a second-tier city, because the stores opened in the early stage occupied several advantageous locations, the customer flow and sales were very considerable, thus attracting a large number of franchisees. However, in the later period, all kinds of 10 yuan stores entered the market, and the offline passenger flow of Mingchuang excellent products was taken away, and many stores closed their doors after less than 1 year.

"Have that money and eat some interest, don't invest." I lost 230W, opened for a month, encountered the epidemic, and now shut down. Lin Fan, a franchisee of Mingchuang Premium Products, told the power plant that only 15% of the Mingchuang Premium Franchisees he contacted made money.

Early Mingchuang premium franchisees can indeed make money, and they will have better advantages in location selection. However, more and more stores joined in the later period, and the density in the same business circle increased, and the profits between each store were affected.

Sun Hong is from an online shop and has several good online store resources. "I have sold Mingchuang premium products online, and I still make money. However, the cost of offline stores is too high, and the impact of the epidemic on offline stores is too great, and I dare not open them after the investigation. Sun Hong's experience tells him that the combination of online and offline is a more secure model. Because offline stores can ensure a stable supply of goods, and online profits can maintain offline performance.

According to the information on the official website of Mingchuang Premium, if franchisees want to become "partners", they need to pay the royalty trademark use fee, the product deposit and the decoration advance payment, and at the same time bear the store rent and labor costs. 38% of the store's sales revenue goes to the franchisee (33% of the food), and the rest goes to the headquarters. This means that franchisees bear most of the operational risks, for Mingchuang Premium, the more stores are opened, the higher the revenue, but most of the risk is passed on to the franchisees.

If you want to open a famous product in an ordinary second-tier city, the initial cost of franchise fees and store decoration is often 2 million to 3 million. Among them, all operating costs are borne by franchisees, and Mingchuang Excellent Products mainly provides goods and staff training. At the same time, franchisees cannot interfere with the operation of the store.

The power plant reporter learned that there are still many loopholes in the direct management model of Mingchuang Excellent Products. For example, employees are under pressure to perform, and are often forced to buy expired snacks in the store at the end of the month, or open their own cards.

Franchisees play a vital role in the territory of MINISO Premium, with more than 95% of its global stores being franchisees and agent stores. As of December 31, 2021, of the 3168 stores in Minchuang Premium China, 3146 are franchise stores, and only 5 are official direct stores.

Oops, Mingchuang Premium, WOW clour, Ye Guofu three combos

Before founding Mingchuang Premium, in 2004, Ye Guofu had founded a chain beauty brand called "Oops".

Oops, which is mainly based on beauty jewelry, relying on celebrity endorsements has also once become a popular FMCG brand of the year, and later embarked on the franchise model. In the news reports that analyzed the failure of Oops, its failure was blamed on the rise of e-commerce such as Taobao.

But ignore the huge problems that Oops has in the franchise model. Oops, once franchisees revealed that the quality of the unified allocation from the headquarters is poor, and the purchase price is generally higher than the market. In 2015, an Oops ordinary mobile phone pendant was priced at nearly 50 yuan, and the style and quality of ordinary earrings cost more than 70 yuan. In addition, the quality problems of broken wallets and easy to break women's hairpins are often complained about by customers in the store.

"Don't join the Oops, the losses are all franchisees, the profits are particularly low, and the problematic companies will not be solved", another Hebei Oops franchisee claimed. Now in the douyin and other live broadcast rooms, there are still marketing experts telling the story of Oops, saying that after the franchisees joined, they purchased their own goods, impacting the brand of Oops, and Ye Guofu decided to give up Oops in a huff. But the truth is,

"Exactly the same stockings, Oops sell for 29.9 yuan, outside the market sells for 20 yuan," some franchisees of course chose a cheaper source.

According to interviews with the power plant, the reason for the failure of Oops was the high quality and inferior price of the product, the negligence of regional dealer management and the competition of similar stores, and the franchisees of that year were completely wiped out.

But by the time Ye Guofu reappeared, he had already brought a new project, Mingchuang Premium. Like Oops, Mingchuang Premium is also a small single product of 10 yuan and tens of yuan. The method of the 10 yuan jewelry store this time was used in the operation of the whole category of home furnishing stores. For example, the double-sided mirror of 29.9 yuan, the sunglasses of 29.9 yuan, the deodorant spray of 9.9 yuan, and Mingchuang Excellent Products eventually embarked on the franchisee model.

In 2018, Miniso Premium launched the "100 Million Stores Plan" in a high profile, planning to expand the number of stores to 10,000 by 2022. However, if the number of franchise stores increases, the operating efficiency of a single store will decrease, which also means that the interests of franchisees will be damaged.

In the market, there are more and more "excellent" ten-yuan stores, especially in third- and fourth-tier cities and townships.

Chen Haosuo, founder of the chain home home HOME, once said: "Mingchuang Premium is a game for financial players, and the sharp increase in the number of stores has revealed the multiple operational risks of its increasingly high franchise costs, franchisees losing money, and plummeting domestic expansion speed." In fact, most franchisees of Mingchuang Excellent Products have a hard time escaping the strange circle of 'the decline in the flow of water in March of opening, and the loss of 2 years of opening'. ”

Chen Hao even believes that the "Ten Yuan Shop" of Mingchuang Excellent Products is essentially an upgraded version of the Japanese brand under the banner and guise of a Japanese brand.

The idea that the franchise model of Mingchuang Premium is actually a financial game has been reached in the industry.

"Mingchuang Excellent Product dares to sell the eyeliner pen at a factory price of 15 yuan to 10 yuan, why? You pull products to make money, people take products to pull people... You don't have to manage, you don't have to operate, you don't need to market. The financial field especially likes to use this game, I use the direct management model, nearly 40 billion a year on my account. Third-party marketing expert Guan Lixin commented.

It is foreseeable that as the more Stores mingchuang products open, more and more franchisees lose money, and the mingchuang premium brands will also be eaten back, just like the oops of the past. The power plant reporter contacted Mingchuang Premium Company on related issues, but the other party refused any form of response.

However, Ye Guofu is not in a hurry, after Mingchuang Excellent Products, he has silently established another new brand - WOW clour, focusing on domestic beauty. At present, WOW COLOUR has obtained A+ round of financing, with a valuation of about 1 billion, and signed Ouyang Nana as a spokesperson. Of course, Ye Guofu is also ready to continue to pull people to open stores to join.