Since 9 January, netizens on Weibo have started to notice that their local hospitals now host a familiar face: Luckin Coffee. Many commentators online find that coffee is “needed by everyone except the patients” in the hospitals. Some even joked that the smell of coffee helps to soothe people in these anxiety-inducing environments.
This is not the first time branded coffee chains have entered Chinese hospitals. A few years back, Starbucks opened its own coffee trailer in a hospital in Shanghai, but this move did not catch on due to its higher price points. Recently, brands such as Luckin and Cotti have been competing fiercely with lower prices. Luckin being a pioneer for high quality low-priced coffee, its weekly 9.9 RMB promotions (1.39 USD) have impacted the coffee landscape significantly. Luckin itself also experimented with opening a hospital branch prior to the COVID-19 outbreak, along with equipping hospitals with coffee vending machines during the pandemic.
On 3 January, it was reported that Luckin had opened a new type of franchising mode called “targeted location franchising”. The coffee brand published a list of locations that it wanted to open a branch in, and those with the resources to open said branches were welcome to contact Luckin about franchising. The list included hospitals, as well as office spaces, university campuses and tourist attractions. This move came about 7 months after Luckin opened franchising to those with existing storefronts and remaining leases. The new targeted locations also require franchisees to secure the storefronts themselves.
Luckin is leveraging this tactic to expand into lower-tier markets. In Q3 2023, 818 of the 2437 new branches opened were franchised locations. Not only does franchising help avert risk, but it is also becoming a key growth engine for Luckin. In the same quarter, revenue of franchised stores grew 104.7%, compared to 79.3% of directly operated locations. By promoting targeted location franchising, Luckin sets out to take over locations with high footfall while minimising risk and investment.
