Core Viewpoint - Kudi Coffee has announced an extension of its current store subsidy policy until December 31, 2028, and introduced a new subsidy for "high rent, low cup volume" stores to lower the barriers for franchisees and accelerate market cultivation [2][5]. Subsidy Policy Details - The new subsidies include a training subsidy for stores in lower-tier markets, with specific support based on daily sales volume. For stores selling fewer than 40 cups daily, the subsidy per cup is increased by 2 yuan, reaching a total of 11.9 yuan. For sales between 40-70 cups, the subsidy is 1.5 yuan, totaling 11.4 yuan. No subsidy is provided for sales above 130 cups, as this is near the breakeven point [3][4]. - For high-rent locations, stores with monthly rents between 15,000 and 20,000 yuan receive an additional 1 yuan per cup, totaling 10.9 yuan. For rents between 20,000 and 25,000 yuan, the subsidy is 1.5 yuan, totaling 11.4 yuan. Stores with rents above 45,000 yuan receive a 4 yuan subsidy, totaling 13.9 yuan [4]. Market Strategy - Kudi aims to penetrate lower-tier markets where coffee consumption habits are not fully developed. The strategy of "compensating quantity with price" lowers the profitability threshold for franchisees, allowing them to establish a foothold in low-frequency consumption areas [5]. - The company also encourages franchisees to open stores in core business districts, enhancing brand exposure and creating synergistic effects for surrounding stores, thereby increasing overall market penetration [5]. Operational Model - Kudi has introduced a management model in certain regions, allowing franchisees in major cities to apply for management services for a fee of 1% of store revenue. This reduces operational complexity for franchisees, enabling them to focus on market expansion rather than daily management [5]. Sales Performance - Kudi's sales surged recently, with a reported tenfold increase in orders on the Ele.me platform within 24 hours of launching on Taobao Flash Sale, making Kudi the top coffee brand on the platform [5]. Sustainability Challenges - The sustainability of Kudi's subsidy policy is questioned, particularly regarding the potential conflict between reliance on subsidies and profitability goals. For instance, a store selling 40 cups daily could receive over 200,000 yuan in subsidies annually, leading to potential annual subsidy expenditures exceeding 5 billion yuan if half of the targeted 50,000 stores require support [6]. - Concerns also arise about the diminishing marginal returns of the subsidy policy and whether consumer demand in lower-tier markets can sustain high subsidy levels. Additionally, the risk of price wars due to high-rent subsidies may pose future challenges for Kudi [6].