Korean Brand Caffe Bene Faces Mass Store Closures in China

Caffe Bene, once a fast-growing Korean coffeehouse brand, is now grappling with widespread store closures across China. Internal reports cite unpaid wages, outstanding payments to suppliers, and franchisee disputes as key issues. Many employees haven’t been paid since October, and two major shareholders have reportedly exited, leaving the business in turmoil.

Yes, Caffe Bene is closing many stores in China. Over 500 locations were opened in just two years, but reports confirm numerous closures—including stores in Guiyang, Changshu, and Fushun—and staff claim three months of unpaid salaries as of late 2014.

What Sparked the Closures?

The trouble began with anonymous employee reports online. Staff alleged that Caffe Bene China had withheld three months’ wages, prompting walkouts, strikes, and legal actions. According to insiders, both major shareholders had pulled out, and founder Kim Sun-kwon had returned to South Korea. Leadership went missing, and funds from franchise deposits, guarantees, and fees were unaccounted for.

Beyond staff claims, multiple stores—such as the Guiyang Friendship Road, Changshu Hualian, and Fushun Wanda locations—have already shut down. Industry observers suggest the brand's rapid expansion created unsustainable pressures on its franchise network.

What’s Happening in Key Cities?

In Hangzhou, the situation appeared mixed. The sole Caffe Bene company-owned store on Hubin Road remained open, with staff offering 10% membership discounts and reporting no knowledge of closure plans. A franchisee at Xixi Paradise also stated normal operations. However, the official hotline was consistently busy, and the brand’s public response—through a letter on its website—denied the rumors, blaming “unfair competition” and “media attacks.”

Why the Franchise Model Failed

Caffe Bene’s business in China relied heavily on franchising. With fewer than 5% of stores company-owned, the brand used a so-called “entrusted entrepreneurship franchise model,” with a 50-50 joint investment structure being most common. This rapid, decentralized growth came at a cost.

Franchise entry barriers were low, allowing inexperienced operators into the market. Some fought over prime locations, driving up rents unnaturally—a problem unheard of in corporate-run outlets. Quality suffered too. Customers reported inconsistencies in coffee and pastry quality, with variations in taste and appearance even for identical menu items at the same outlet.

Moreover, the brand reportedly mandated high-priced supplies from headquarters, inflating operating costs. One industry insider remarked, “Many coffee franchises profit more from selling outlets than running them. When management fails, losses for franchisees are almost guaranteed.”

How Did Caffe Bene Expand So Quickly?

Caffe Bene launched in South Korea in 2008 and entered China in April 2012. By 2014, it had over 500 stores across Chinese tier-one, two, and three cities. The brand set up seven regional divisions to drive aggressive expansion. In Korea, it had already opened 900 stores, but similar rapid growth led to store failures due to internal and competitive pressures.

In China, marketing promises shifted multiple times. Early franchise pitches claimed 5,000 stores by 2015 with a Hong Kong IPO, then 1,500, then 1,000, and finally just “becoming a globally recognized brand” by 2015. Such inconsistency eroded trust among investors and partners.

Frequently Asked Questions

Why is Caffe Bene closing stores in China?

Caffe Bene is closing stores due to financial instability, including unpaid staff wages, delayed payments to suppliers, and franchise-related disputes. Internal issues, leadership withdrawal, and operational mismanagement contributed to the closures.

How many stores did Caffe Bene have in China?

By 2014, Caffe Bene had opened over 500 stores in China within two years of entering the market. Most were franchises under a 50-50 investment model.

Are any Caffe Bene stores still open in China?

Some stores remain open, including the company-owned location in Hangzhou’s Hubin district and certain franchises like Xixi Paradise. However, multiple locations in other cities have closed.

What franchise model did Caffe Bene use in China?

Caffe Bene used a franchise model called “entrusted entrepreneurship,” with around 95% of stores being franchised. The most common setup was a 50-50 investment between the company and franchisee.

Did Caffe Bene change its expansion goals over time?

Yes, Caffe Bene repeatedly altered its 2015 expansion targets—from 5,000 stores and an IPO, to 1,500, then 1,000, and eventually just aiming to be a global brand, showing inconsistent messaging.

What problems did franchisees face?

Franchisees reported low entry barriers, leading to inexperienced management, high rental costs from location competition, inconsistent product quality, and high supply costs from mandatory central sourcing.