Chagee is stabilizing, not fixed
- Chagee ended Q1 2026 with 7,531 teahouses, including 7,157 in Greater China and 374 overseas.
- Same-store GMV growth was down 16% in Q1 2026, but that was 10 percentage points better than Q4 2025.
- The company is slowing domestic expansion while it tries to repair store-level sales.
- Overseas growth remains the cleaner growth story, with stores in Southeast Asia and the United States.
- A new USD 150 million ADS buyback may help sentiment, but it does not fix weak same-store demand by itself.
The rebound is still on trial
Chagee is a premium tea chain trying to get past a hard stretch. The main sign of progress is that same-store GMV growth fell 16% in Q1 2026, which was still bad, but 10 percentage points better than Q4 2025. Same-store GMV means sales value at stores that were open in both periods, so it is a useful check on whether existing shops are healthy.
The bull case is that the worst price-war pressure is fading. If store traffic improves, the franchise network could regain operating leverage. Overseas growth is also moving fast, and the USD 150 million ADS repurchase program shows management thinks the stock has support.
The bear case is simple: a smaller decline is still a decline. The FY2025 20-F said store-level performance had moved into a more moderated phase, with lower average monthly GMV per teahouse in China and weaker same-store GMV growth. If that pressure is structural, more stores and new products may not repair unit economics.
A franchise engine under stress
Chagee makes most of its network work through franchisees. Franchisees run many of the teahouses, while Chagee supplies the brand, products, operating system, and network rules. In Q3 2025, management said net revenue from franchised teahouses was RMB 2,811.6 million, or 87.6% of total net revenue.
The model changed in late 2025. Chagee shifted from a traditional supply relationship to a GMV-based revenue sharing model. In plain English, Chagee now lets part of its revenue move up and down with franchisee sales, which can reduce pressure on franchisees when stores are weak.
That change also moves more demand risk back to Chagee. If store GMV stays weak, the company shares more of the pain. Chagee is also converting selected franchised locations into company-owned stores as part of network optimization, which may give it more control but can add operating complexity.
Premium tea, wider dayparts
Fresh-brewed premium tea drinks
This is the core Chagee product. The brand is built around fresh-made tea drinks rather than low-priced mass beverages.
Tea espresso extraction
Chagee uses a proprietary tea espresso extraction method. This helps support the premium brand promise and gives stores a repeatable preparation process.
Low-caffeine collection
The low-caffeine lineup is aimed at evening consumption. It gives customers a reason to buy tea later in the day without as much caffeine concern.
Morning tea lattes
New tea lattes, including Caramel and Long Jing, are aimed at the morning occasion. The goal is to add another daypart instead of relying only on afternoon and evening traffic.
Overseas teahouse menu
International stores give Chagee a second growth lane outside Greater China. The current overseas focus includes Southeast Asia and the United States.
Mostly Greater China stores
The mix below uses Q1 2026 teahouse count, not revenue, because the latest provided disclosure gives store counts by geography. Chagee had 7,157 teahouses in Greater China and 374 overseas at quarter end.
What could still break
Same-store demand stays negative
High impact · High oddsQ1 2026 same-store GMV growth was still down 16%. That was better than Q4 2025, but it means existing stores were still selling less than a year earlier. If declines stay deep, the brand may be facing saturation or changing consumer tastes, not just a temporary price war.
Franchisee economics weaken
High impact · Medium oddsChagee depends heavily on franchisees, so weak store profits can slow expansion and hurt service quality. The GMV-based revenue sharing model was meant to align incentives, but it also means Chagee participates more directly in weak store sales. If franchisees lose confidence, store openings and store health can both suffer.
China price wars return
Medium impact · Medium oddsManagement has pointed to delivery platform price wars as a pressure point. Chagee has tried to hold its premium pricing rather than chase heavy discounts. That can protect the brand, but it may also cost traffic if rivals keep discounting.
Overseas growth outruns execution
Medium impact · Medium oddsThe overseas store base grew to 374 stores by Q1 2026. Fast growth across Malaysia, Singapore, Thailand, Indonesia, the Philippines, Vietnam, and the United States brings new supply chains, landlords, and customer habits. A small overseas base can grow fast, but mistakes can show up quickly in store performance.
Buyback masks weak fundamentals
Medium impact · Low oddsThe USD 150 million ADS repurchase program can support investor confidence. It does not make weak stores stronger. If the company spends cash while same-store sales remain negative, the market may treat the buyback as a signal rather than a real fix.
In one breath
What does Chagee sell?
Chagee sells premium fresh-made tea drinks. Its menu centers on fresh-brewed tea, tea lattes, and newer low-caffeine drinks.
Why are investors worried about Chagee?
The key worry is weak same-store GMV. Q1 2026 improved from Q4 2025, but same-store GMV was still down 16%, which means existing stores remained under pressure.
Where is Chagee growing fastest?
The fastest unit growth story is overseas. Chagee had 374 overseas stores at the end of Q1 2026, with a focus on Southeast Asia and the United States.
What changed in Chagee's franchise model?
In late 2025, Chagee shifted to a GMV-based revenue sharing model. That means Chagee's revenue now moves more with franchisee sales, which can share both risk and reward.