In-Depth Analysis Report of CHAGEE's Food Safety Crisis and Franchise Quality Control Dilemma

Now I will provide you with an in-depth analysis report on CHAGEE’s food safety crisis and performance decline.

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CHAGEE experienced two major food safety incidents consecutively from December 2025 to January 2026, attracting widespread market attention:

Date	Event	Public Opinion Heat	Official Response
December 26, 2025	Caffeine controversy hits Weibo hot search	High	Official popular science explanation stated that the caffeine content of the tea drink is equivalent to that of a latte
January 6, 2026	“Hand-beaten milk tea” video sparks public outrage	Extremely High	The involved store is closed for rectification indefinitely, and the employee is fired

: On January 5, 2026, a consumer exposed that a CHAGEE store employee squeezed lemons with bare hands, stirred milk tea cups by hand, and used waste materials reported as damaged that day during business hours. The video quickly climbed to Weibo’s hot search list, triggering public opinion ferment[1]. The company then took emergency measures, closing the involved store indefinitely for rectification, dismissing the involved employee, and demoting the store manager and supervisor.

: The caffeine content of multiple products reaches as high as 220mg per cup, causing symptoms such as palpitations and all-night insomnia in many consumers[1]. CHAGEE’s official response stated that based on public data and test results, the caffeine content per 100ml of a tea drink made with freshly brewed original leaves is roughly equivalent to that of a latte.

According to data from the Black Cat Complaint platform, as of January 6, 2026:

• Total Complaints
  : 2,992
• Resolved Complaints
  : 2,400
• Complaints in the Past 30 Days
  : 46, with 11 resolved

include[1]:

• Poor customer service attitude
• Unfair clauses
• Food safety issues involving foreign objects
• Product spoilage

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CHAGEE (Stock Code: CHA)’s Q3 2025 financial report shows that the company is facing severe performance pressure:

Indicator	Q3 2025 Figure	YoY Change	QoQ Change
Operating Revenue	RMB 3.208 billion	-9.4%	-
Net Profit Attributable to Parent Company	RMB 394 million	-38.5%	-
Total GMV	RMB 7.93 billion	-4.5%	-
Domestic Same-Store Sales	-	-27.9%	-
Overseas Same-Store Sales	-	-23.4%	-

[1]:

• Operating Revenue: RMB 9.933 billion, up 9.5% YoY
• Net Profit: RMB 1.152 billion, down 38.4% YoY
• Net Profit Attributable to Parent Company: RMB 1.107 billion, down 37.6% YoY

The current share price is

, a drop of approximately from the 52-week high of , with market capitalization shrinking to USD 2.46 billion[0].

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Zhu Danpeng, Vice President of the Guangdong Food Safety Promotion Association and Chinese food industry analyst, pointed out that CHAGEE has serious problems in internal governance:

“Judging from various incidents, CHAGEE’s internal governance seems chaotic. From the earlier Ice Blanc incident to the December caffeine incident, and then to this bare-hand operation incident, the company’s entire quality internal control system seems to be non-existent.”[1]

:

1. Lack of Franchisee Management
   : The brand is severely lacking in overall management, inspection, audit, and surprise checks of franchisees
2. Quality Internal Control System is Nominal
   : There are loopholes in the full-chain supervision from raw material procurement to store operations
3. Inadequate Standard Implementation
   : There is a significant deviation between franchisees’ implementation standards and the headquarters’ requirements

CHAGEE adopts the “1+1+9+N” franchise management system[2], and the pursuit of rapid expansion has led to a sharp increase in management pressure:

Indicator	2024 Data	First Three Quarters of 2025 Data
Global Store Count	6,440 stores	7,338 stores
YoY Growth	83.4%	-
Total Number of Employees	4,800 people	-
Employee Growth	145%	-
New Stores in Q3	-	300 stores (54 overseas)

: The aggressive store expansion strategy has caused severe internal competition and customer diversion. Newly opened stores not only failed to bring incremental growth but also diluted the performance of existing stores.

The average monthly GMV per store in Greater China has

to , plummeting YoY[2].

Since the Q4 2023 peak of RMB 574,000, single-store GMV has declined for

, shrinking by a full .

The new tea drink industry generally faces human resource challenges:

• Single Age Structure
  : Most employees are between 18 and 30 years old
• Extremely High Turnover
  : Industry characteristics lead to frequent employee turnover
• Unsustainable Training
  : Serious food safety training and brand value inculcation cannot keep up with the speed of employee turnover
• Prevalence of “Meme” Culture
  : When “fun” social memes take precedence over food safety norms, failures are inevitable[3]

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Zhang Junjie, founder of CHAGEE, once stated high-profilely that he adheres to a high-value brand strategy and will not blindly follow the trend to engage in price wars[2].

:

• Brands such as HEYTEA, NAYUKI, and GUMING have entered price wars, using real subsidies to seize market share
• Luckin launched a “RMB 9.9 alternative to Boya Juexian” (Qingqing Jasmine), with a similar formula but half the price
• Consumer brand loyalty is vulnerable in the face of low-price temptations

Since 2025, CHAGEE has only launched

, mostly “derivative versions” of classic models[2].

:

• The industry average launches 40-60 new products per year
• Over-reliance on the super hit product “Boya Juexian” is a double-edged sword
• Lack of new hit products to take over, facing aesthetic fatigue and declining repurchase rate

Indicator	Data
Overseas Market GMV	Over RMB 300 million
YoY Growth Rate	75.3%
QoQ Growth Rate	27.7%
Proportion of Total Market	Less than 4%
Overseas Same-Store GMV	Declined for three consecutive quarters

: The base of the overseas market is too low, and its current scale is difficult to fill the huge performance gap in the domestic market. In addition, overseas same-store GMV plummeted 23.4% this quarter, also facing the internet celebrity curse of “peaking at debut”[2].

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1. Strengthen Inspection Mechanism
   • Increase the frequency of mystery shopper unannounced visits
   • Establish a surprise inspection system
   • Introduce third-party regulatory agencies

2. Upgrade Employee Code of Conduct
   • Clarify social media posting norms
   • Establish full-process monitoring of in-store operations
   • Strictly enforce waste disposal procedures

3. Optimize Crisis Public Relations
   • Establish a rapid response mechanism
   • Proactively and transparently disclose information
   • Sincere apology and rectification commitment

Reform Area	Specific Measures	Expected Effect
Supply Chain Management	Establish raw material traceability system, implement full cold chain monitoring	Control quality from the source
Franchisee Screening	Raise access thresholds, establish credit rating system	Select high-quality partners
Training System	Mandatory pre-job training, regular retraining, assessment-based employment	Improve employees’ professional quality
Technology Empowerment	AI video monitoring to identify abnormal operations, automatic early warning system	Real-time monitoring of store operations
Incentive Mechanism	Include food safety in franchisee assessment, establish incentive fund	Guide compliant operations

1. Reassess Expansion Strategy
   • Shift from “scale first” to “quality first”
   • Moderately slow down the store opening pace
   • Optimize store density layout

2. Optimize Single-Store Profit Model
   • Adjust franchise fee structure (shift from supply chain price difference to GMV commission)
   • Provide more subsidy support to franchisees
   • Improve single-store operational efficiency

3. Product Innovation and Upgrading
   • Increase R&D investment
   • Establish product innovation mechanism
   • Reduce reliance on a single hit product

4. Brand Value Reconstruction
   • Rebuild consumer trust
   • Strengthen the “healthy tea drink” positioning
   • Enhance brand reputation

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Risk Type	Risk Description	Risk Level
Food Safety Risk	Quality control is difficult under the franchise model, and negative incidents may continue to occur	High
Performance Decline Risk	Single-store model continues to deteriorate, net profit shrinks significantly	High
Valuation Bubble Risk	Share price has dropped 68% from the high, market confidence is frustrated	Medium-High
Increased Competition Risk	Price wars continue, market share is eroded	High
Management Capability Risk	Rapid expansion does not match management capabilities	High

1. Short-Term
   : It is recommended to wait and see, and wait for the management to introduce a systematic rectification plan
2. Mid-Term
   : Pay attention to the actual effect of the 2026 franchise model adjustment
3. Long-Term
   : Evaluate whether the company can find a balance between quality control and scale

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CHAGEE’s food safety crisis and performance decline are not isolated incidents, but a concentrated outbreak of deep-seated contradictions in the rapid expansion franchise model. The company’s core challenges include:

1. Severe mismatch between quality control system and expansion speed
2. Systemic defects in internal governance
3. Continuous deterioration of single-store profitability
4. Conflict between price war pressure and brand positioning
5. Lackluster product innovation and insufficient growth momentum

Solving the franchise quality control problem requires the company to systematically advance from three dimensions:

, , and . In particular, it is necessary to re-examine the “scale-first” development strategy and place quality control capability building at the core.

For investors, it is recommended to closely monitor the company’s subsequent rectification measures and performance improvement, and carefully evaluate investment risks.

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[1] NetEase News - 《Another Side of CHAGEE’s “Hand-Beaten” Food Safety Crisis: Performance Decline and Share Price Halved》 (https://www.163.com/dy/article/KILHQT5S0552HN90.html)

[2] Sina Finance - 《20 Billion Evaporated in 200 Days! CHAGEE’s High Valuation Bubble Bursts》 (https://finance.sina.com.cn/roll/2025-12-11/doc-inhakruq8168712.shtml)

[3] Sohu News - 《CHAGEE’s “Hand-Beaten” Milk Tea Sparks Public Outrage: Why Do Tea Shops Frequently Fall into Management Crises?》 (https://m.sohu.com/a/973522431_100001551?scm=10001.325_13-325_13.0.0-0-0-0-0.5_1334)

[4] Jinling AI Real-Time Market Data [0]