Heytea closed 680 stores in a year — and told its staff it was done with scale games

Heytea was the brand that defined China's new tea drink category — premium fruit tea at premium prices, queues around the block, and from 2022 a franchise model that scaled it to more than 4,600 stores by October 2024. Then the category's price war arrived: competitors drove prices down, and the franchise machine kept opening stores into a market that could not absorb them.

In February 2025 Heytea did something rare for a chain at that scale: it stopped. An internal all-staff email titled 'Not participating in digital games and scale involution, returning to users and brand' paused new franchise applications and rejected the low-price war outright. The contraction that followed was steep — by October 2025 the store count had fallen to about 3,930, a net loss of roughly 680 stores in twelve months, with Shanghai and Chongqing among the cities losing outlets. More than half of the 230-plus branches of its Shenzhen operating company were deregistered.

The pivot may yet prove sound — Heytea is choosing margin over footprint while weaker chains die — but the case is the 680 stores, not the email. A franchise model measures success in openings; the incentives of franchisor, franchisee and landlord all point at more stores, and reversing that machine takes a crisis. Heytea's competitors are closing too; the category that grew on the assumption of infinite traffic is discovering the assumption was the business plan.