Rapid expansion of the stores

Answer 1

The rapid expansion of stores was a common strategy for companies to expand their scale and enhance their brand influence, but there were also some problems that needed attention.

In terms of advantages:
- Use of funds and resources: The joining model can use the funds and local resources of the joining partner to achieve rapid scale expansion. For example, Yum! China added 438 stores in the third quarter of 2024, including 145 new stores. The expansion of the stores will help it further expand nationwide, rapidly increase the number of stores and improve the market coverage of the brand with less self-owned capital investment.
- Reduce operating costs: Can reduce some expenses. Take Yum! China as an example. Although the increase in the proportion of affiliated stores reduced same-store sales, the labor cost and rental expense ratio decreased to a certain extent, maintaining a stable profit level.

However, the rapid expansion of the stores also faced challenges:
- The difficulty of management and control increased: joining was a concession, and it was easy to lose control when expanding rapidly. The headquarters might lack effective control over the Franchisees, resulting in problems such as cross-selling goods and changing brands without permission. If the headquarters didn't have a single store profit model that could be replicated and continuously profitable, it would be difficult to guarantee the operational quality of the Franchisees during expansion. The stickiness between the headquarters and the Franchisees would also decrease. The headquarters 'support would not be in place. They would only provide simple supplies, and the relationship between the two parties would be loose.
- Brand maintenance challenge: Under the background of low consumption investment and heavy asset management pressure, many food and beverage brands opened up to accelerate their expansion, such as Haidilao, Naixue tea, etc. However, this posed a challenge to the maintenance of brand reputation, and the difficulty of brand positioning and quality control increased.

When companies were expanding their stores rapidly, they needed to establish an effective control mechanism, a replicating profit model, and a reasonable brand maintenance strategy.

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