The Hidden Traps Within Mixue Ice Cream & Tea’s Empire

Introduction

Mixue Ice Cream & Tea has taken the milk tea world by storm, opening a staggering 22,600 stores across China as of September 1st. The breakneck expansion of this franchise giant has been fueled by aggressive tactics that squeeze franchisees from every angle while raising serious food safety concerns.

In this exposé, we go behind the scenes with former Mixue franchisees to unveil the web of controversial practices obscured behind Mixue’s meteoric rise. From skirting food safety regulations to exploiting franchisees through exorbitant fees and fines, this is an inside look at the hidden traps within Mixue’s empire.

The Raw Material Racket

Incredibly, the profitability of selling milk tea pales in comparison to the revenues raked in by Mixue’s raw material and packaging suppliers, as listed above. How does Mixue manage this lucrative arrangement? By mandating that all franchisees purchase supplies exclusively from Jiajia International Food Co. Ltd. - Mixue’s own wholly-owned subsidiary.

This captive market allows Jiajia to dictate pricing with impunity, accounting for a whopping 80% of Mixue’s total profits according to insiders. Franchisees are trapped, with no choice but to purchase from the company’s own markedly overpriced supply chain.

One ex-franchisee recounted the nightmare of trying to fulfill minimum order quotas simply to avoid punitive shipping fees. Shortages were deliberately staggered to force franchisees to order double the required inventory. All of this serves to further line the pockets of Jiajia International at the franchisees’ expense.

Excessive Fees & Fines

Supply Chain Markup

• Items like paper cups, milk creamer, fruit juices sold to franchisees by Mixue’s subsidiary Jiajia International Food at inflated prices
• One franchisee’s milk tea with raw material cost of just 3 RMB had to be sold for 6 RMB due to supply chain markups

Mascot Merchandise

• Snow King mascot plush toys cost 300-400 RMB to produce
• Sold to franchisees for 1,900 RMB each
• Franchisees forced to pay 500-600 RMB to staff mascot events

Franchise Fees

• Recent policy waived 1 year franchise fees for stores opened before 2021
• Total fees waived around 200 million RMB
• Attempt to attract more franchisees before IPO

Fines & Penalties

• Fines start at 2,000 RMB with no upper limit
• One franchisee fined 2,000 RMB for lemon weight being 5g over standards
• Single store fined over 30,000 RMB in one month

Controlling the Revenue Stream

Sales Proceeds

• All franchisee sales first pass through Mixue’s accounts
• Mixue estimates access to over 40 billion RMB annually from this process
• Allows company to skim franchisee revenues

Platform Fees

• Franchisees charged fees for using Mixue’s ordering platforms and scanners
• Additional 1-2% deducted from sales even before reaching franchisee’s bank

Forced Promotions

• Franchisees required to participate in promotions where they lose money
• Discounts, combos, etc. all paid for by franchisees
• Some promotions cost franchisees over 70,000 RMB per month

Through its myriad of exploitative fees, fines, and intentionally opaque business practices, Mixue has constructed an intricate trap to profiteer off its franchisees’ successes. All while compromising food safety standards in its blinding pursuit of expansion and an IPO payday.

Food Safety Fallout

The consequences of Mixue’s runaway growth are increasingly being felt in the form of disturbing food safety lapses:

• Insect infestations and employee suicide clusters plaguing stores
• Aging, rotting fruit still served due to shortages
• Prioritizing fines over operational food safety standards

As one multi-store franchisee lamented, “They claim to care about sanitation, but why not address it at the source? Don’t fine us for your rotting fruit.”

Mixue’s labyrinthine supply chain and aggressive enforcement of fines have created adversarial conditions between the company and franchisees. This dysfunctional relationship eliminates any incentive for franchisees to prioritize food safety and quality control.

Conclusion

Behind Mixue Ice Cream & Tea’s flashy 2 billion RMB donation and ambitious expansion plans lies a sordid web of controversies. From supply chain monopolies to exorbitant fees, aggressive fines, and alarming food safety breaches, Mixue’s franchisees find themselves ensnared in a system designed to extract maximum profits at their expense.

As the company barrels towards its IPO ambitions, franchisees are caught in the crosshairs - bled dry by Mixue’s myriad of nickel-and-dime traps. All while a ticking food safety timebomb threatens to undermine the franchise’s breakneck growth.

Mixue’s meteoric rise exposes the darker underbelly of China’s ravenous milk tea frenzy. For the franchisees unfortunately caught in Mixue’s gravitational pull, their chilling stories serve as a sobering cautionary tale of unbridled corporate greed.

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