After experiencing losses in the previous quarter, on May 29th, Bawang Tea Lady (NASDAQ: CHA) released its financial report showing that it achieved a total revenue of 3.546 billion yuan in the first quarter of 2026, a year-on-year increase of 4.52%; The net profit was 450 million yuan, a year-on-year decrease of 33.66%.

The financial report points out that the direct reason for the decline in profits is self operated expansion, which has pushed up the operating costs of stores and significantly increased management expenses.

The number of franchise stores of Ba Wang Cha Ji in Greater China decreased by 97 in the first quarter, while the number of self operated stores increased by 146. As of March 31, 2026, the proportion of direct operated stores of Bawang Tea Ji in Greater China is close to 8%, higher than 2.86% in the same period last year. Among them, the operating cost of self operated tea shops reached 497 million yuan, a year-on-year increase of 216.6%; The general and administrative expenses amounted to 462 million yuan, a year-on-year increase of 30.9%.

In the first quarter, Bawang Tea Ji's self operated store achieved a revenue of 802 million yuan, a year-on-year increase of 230.4%, and its proportion of total revenue jumped from 7.2% in the same period last year to 22.6%. The announcement stated that this growth is mainly due to the adjustment of the structure of domestic stores, that is, some franchised stores have been converted to self operated.

A franchisee in East China told reporters that since the end of last year, he has transferred more than ten franchise stores of Ba Wang Tea Ji to Ba Wang Tea Ji, some of which are profitable. He left because he was not optimistic about short-term development and hoped to recoup funds to join other brands. As an early franchisee, he has already received substantial returns in these stores.

On March 31st, Bawang Tea Ji submitted its first complete annual report since going public. According to financial report data, the net income of BaWang Tea Ji for the whole year of 2025 was 12.907 billion yuan, a year-on-year increase of only 4%; The growth rates for 2023 and 2024 are 843% and 167%, respectively. The net profit attributable to the parent company has suffered a sharp decline, dropping from 2.435 billion yuan in 2024 to 1.135 billion yuan, a year-on-year decrease of 52.4%. Among them, in the fourth quarter, the profit of 640 million yuan in the same period of 2024 turned into a loss of 35.5 million yuan, which is the first quarterly operating loss of Bawang Tea Lady since its large-scale expansion.

In addition to repurchasing franchisees' stores, Bawang Tea Ji has initiated a series of adjustments since December last year. In terms of franchise model, the company has cancelled the fixed franchise fee and switched to a cooperation model based on GMV commission. According to the new policy, after deducting a fixed discount of 10% and a comprehensive brand service fee of 17% from store revenue, the remaining 73% belongs to the store.

During the earnings conference call, Yin Dengfeng, Global COO of Bawang Tea Ji, stated that the brand has shifted towards GMV revenue sharing, aiming to establish a "risk sharing and benefit sharing" relationship with franchisees. For brands, revenue is deeply tied to store performance, and an increase in store sales is beneficial for the company's revenue and gross profit margin, achieving a win-win situation. Compared to franchise stores, direct operated stores have higher gross profit margins.

In the past, the growth of Bawang Tea Lady relied heavily on a super single product called "Boya Juexian". This light milk tea product contributes over 40% of the company's sales, and the top three SKUs together contribute 60% -70% of the total revenue.

The above-mentioned franchisees stated that the single product strategy has helped BaWang Tea Ji quickly establish brand awareness in the highly competitive new tea beverage market. The simple product line has also improved supply chain efficiency, and the speed of cup dispensing in stores is also very fast. But this product encountered homogenization and low price impact in 2025.

In 2025, competitors such as Luckin Coffee, Guming, and Chabadao will intensively launch low-priced light milk tea products, all priced lower than Bawang Tea Lady. Among them, Luckin Coffee's "Light Jasmine" light milk tea sold over 44 million cups in the first month and was priced at 9.9 yuan per cup after its launch, earning the nickname "Boya Juexian Pingti" among netizens.

The iteration speed of Bawang Tea Lady's new products lags far behind the industry average. In the whole year of 2025, only 8 new products of Bawang Tea Lady were launched, and none of them were able to take over and become new bestsellers.

On the product side, Bawang Tea Ji is consciously breaking its long-term dependence on large products. Entering 2026, the pace of new product launches has significantly accelerated. Yin Dengfeng said that 12 new products have been launched in the first quarter, which exceeds the total number of new releases for the whole year of 2025. Among them, the newly launched Dahongpao series in February exceeded the historical average in various indicators such as first week GMV, cup contribution ratio, first week repurchase rate, and direct recruitment of new products.

Meanwhile, Bawang Tea Lady is also expanding into new categories. After the May Day holiday, Bawang Tea Lady launched 10 new flavors of ice cream in 9 stores across the country. Among them, the "Boya Juexian" ice cream, which has the same flavor as the tea drink star, led to a month on month increase in store performance.

However, it is not only Bawang Tea Lady who is optimistic about the ice cream track. During the May Day holiday, a limited edition ice cream cup was tested at the flagship store of Meixue Ice City, causing a long queue. Earlier, HEYTEA had already launched a variety of freshly made "HEYTEA" fruits in its laboratory store model. A social media user posted that the independent store "gelato lab" of Heytea Xilado Laboratory has set up fences in Xiamen Wanda Plaza, Shenzhen Shenye Shangcheng, Beijing Qinghe, Shanghai Wujiaochang, and other places.