Seven years ago, a store was involved in a fake cigarette case. Meiyijia's network of 40,000 franchise stores faces another test | Big Fish Finance

Why does AI · Meiyijia’s franchise model have blind spots in tobacco regulation?

On the evening of March 14, the Guangdong “3.15” evening event’s undercover footage put the long-established convenience store giant Meiyijia, which has been deeply involved in the sinking market, in the spotlight.

The program team randomly visited 10 Meiyijia stores in Guangzhou, Foshan, and Dongguan, and all found issues with the sale of counterfeit cigarettes, with a total of 854 packs confiscated on site. The next day, Meiyijia headquarters issued an apology statement, announced the suspension and investigation of the involved stores, and launched a nationwide inspection.

For a company that just crossed 40,000 stores in early 2026 with annual sales reaching 55.8 billion yuan, this is not just a public relations crisis.

Although 10 stores are not enough to infer systemic problems, this incident has renewed external attention on its franchise management capabilities. New Huanghe reporters found that Meiyijia stores were involved in a fake cigarette case as early as 2019, with consumer disputes over counterfeit cigarettes even turning violent.

Not earning from “retail sales,” but from “wholesale margins”

From an industry ranking perspective, Meiyijia has been climbing in recent years.

The China Chain Store & Franchise Association (CCFA) released the “Top 100 Chinese Chain Stores” list, showing Meiyijia Holdings ranked 11th in 2022, rose to 10th in 2023, and further advanced to 9th in 2024.

However, when looking at store scale and sales data together, another trend emerges.

In 2023, Meiyijia’s store count increased by 12.8% year-on-year to 33,848 stores, with sales reaching 54.19 billion yuan, up 20.1%. By 2024, stores continued to expand to 37,943, a 12.1% increase, but sales only grew to 55.88 billion yuan, with growth slowing to 3.1%.

Stores are still increasing, but overall sales growth has noticeably slowed, and signs of diluted per-store revenue are beginning to appear.

To understand this controversy, we must start with its franchise structure.

In many consumers’ eyes, Meiyijia is similar to 7-11 and FamilyMart—convenience stores. But in terms of business model, Meiyijia is more like a supply-oriented company centered on logistics and supply chains.

Foreign convenience store systems usually have strong control over stores, with headquarters earning profits through sales sharing, typically between 25% and 35%.

Meiyijia, however, chose a different path.

It keeps franchise thresholds low, with an initial investment of about 300,000 yuan to open a store. The headquarters does not participate in sales sharing, only charging franchisees a fixed monthly fee of about 1,000 yuan.

This model significantly lowers the entry barrier for individual entrepreneurs into the convenience store industry and quickly attracts many small family and individual merchants. But the question then arises: where does the headquarters’ income come from?

Multiple industry insiders’ estimates and public data show that most of Meiyijia’s revenue actually comes from supplying goods to franchise stores.

Leveraging its large procurement scale, the headquarters can obtain lower purchase prices from upstream FMCG brands, and through self-built warehousing and logistics systems, distribute products to stores, earning the wholesale margin. In this system, stores are both the brand’s end point and stable “purchasing customers.”

Tobacco: A “profit dead zone” outside the supply chain system

But this model almost doesn’t work for cigarettes.

In the convenience store industry, cigarettes have always been one of the most stable customer traffic items. Many stores’ daily foot traffic is often related to tobacco sales. However, China enforces strict tobacco monopoly regulations. Legal cigarettes must be distributed uniformly by local tobacco monopoly bureaus, and only licensed merchants can sell them.

This means that for the critical category of cigarettes, headquarters cannot include them in its supply chain to earn margins; and because the supply isn’t routed through the headquarters’ warehouse but directly supplied by local tobacco companies to stores, the headquarters system finds it difficult to implement penetrating supervision over these “external circulation” products.

For franchise stores operating at their own risk and profit, this is precisely an area prone to gray areas.

If tobacco quotas are tight or profits from other FMCGs are limited, some store owners may attempt to replenish through informal channels to maintain or increase sales. Smuggling low-priced cigarettes or counterfeit cigarettes often enter the market under such circumstances.

In a network with over 40,000 stores, the headquarters’ inspection and random check systems are difficult to cover all details. When illegal gains clearly outweigh the risks of being caught, some local gray operations may gradually spread.

In fact, franchise stores have previously been involved in fake cigarette transactions. A criminal judgment from the People’s Court of Luohu District, Shenzhen, shows that police dismantled a fake cigarette sales gang in 2019. Court findings revealed that this gang sold counterfeit cigarettes to downstream “customers,” including a Meiyijia convenience store located on Nigang West Road, Luohu District, Shenzhen. Public judicial materials show that there have been multiple disputes and criminal cases related to fake cigarettes involving some Meiyijia stores, even leading to homicide.

Undercut by hard-discount stores, hitting a wall in first-tier cities

Besides management pressures, Meiyijia also faces new challenges on the consumer side.

Some consumers report that their regular products are priced higher than nearby small shops, which is related to the headquarters markup and the store’s rent and labor costs.

Meanwhile, hard-discount brands like “Zhao Yiming Snacks” and “Snacks Are Busy” are accelerating into county and township markets, competing for foot traffic with lower prices, squeezing the price space of convenience stores. In the context of shrinking FMCG profit margins, this competition is becoming more direct.

In high-tier markets, Meiyijia’s expansion also faces resistance. Take Beijing and Shanghai as examples; their store numbers have not yet formed scale. High rents and operating costs mean convenience stores in first-tier cities must rely on high-margin fresh foods like rice balls and bento to turn a profit—this is the core moat of Japanese convenience stores. In contrast, Meiyijia, which is more adept at distributing ambient FMCGs, is still in the process of developing its fresh food system.

Despite this, Meiyijia has not slowed its expansion. The company’s management has set a long-term goal of reaching 100,000 stores.

To strengthen management capabilities, Meiyijia has accelerated digitalization in recent years, including upgrading store systems and promoting data-driven operations, attempting to enhance headquarters’ control over the franchise network through technology.

The “3.15” fake cigarette incident has sounded an alarm for this domestic convenience store giant.

After surpassing 40,000 stores, the company’s issues are no longer just about expansion but about how to integrate scattered franchise stores across the country into a more unified and transparent management system.

Next, Meiyijia needs to prove that it is not just capable of expansion but also of effective management.

Reporter: Du Lin Editor: Chen Tongtong Proofreader: Gao Xin