Cotti Coffee closed 617 stores in 90 days — more than it opened for the first time

Cotti Coffee (库迪咖啡) was founded by Luckin Coffee's ousted co-founders and grew explosively through an aggressive franchise model, reaching approximately 18,000 stores globally. The strategy relied on heavy subsidies to attract franchisees and rapid store-count growth to signal market dominance.

In the 90 days ending July 2026, the chain closed 617 stores while opening only 544 — the first time closures exceeded new openings. Net growth turned negative at -73 stores. Franchisees reported intensifying losses as subsidies were reduced and market saturation made it impossible to recoup investments.

In March 2026, Cotti abruptly paused franchising in provincial capitals and above, pivoting to a direct-operated model for higher-tier cities — a tacit admission that the franchise model could not sustain profitability in competitive urban markets. The chain also lost its brand ambassador, Wang Yibo, further weakening consumer-facing marketing.

The case mirrored Luckin's own overexpansion trajectory: rapid store-count growth driven by subsidies creates the appearance of success while masking unit economics that do not work for individual operators. When subsidies shrink, franchisees exit faster than new ones arrive.

Cotti closed 617 stores in 90 days, net negative for the first time, after subsidies were cut and franchisee unit economics collapsed.

Cotti's subsidy-driven franchise model attracted operators who depended on financial support — when subsidies were cut, franchisee unit economics collapsed.

The chain expanded to ~18,000 stores without validating whether the market could absorb that density, leading to cannibalisation among nearby stores.

The March 2026 pause on high-city franchising acknowledged that the franchise model could not work in competitive provincial capitals — the markets where the brand needed presence most.

Franchisee exit mechanisms were tightened, trapping operators who could not recoup investments but could not leave without penalty — a sign of systemic model failure.

A franchise that grows by subsidising store operators creates growth that lasts only as long as the subsidies — when they stop, the closures start.

Cotti paused high-city franchising and pivoted toward direct-operated stores. The 90-day negative net growth marked the end of the chain's hyper-expansion phase. Franchisee confidence remained low, with reports of operators unable to recoup investments despite the brand's global store count.