Korean Coffee Chain Caffe Bene Faces Mass Closures in China

Korean coffee chain Caffe Bene is rapidly shuttering locations across China, leaving employees unpaid and franchisees in limbo. Reports indicate that staff haven’t received salaries for months, suppliers haven’t been paid, and the company’s two major shareholders have reportedly withdrawn, while founder Kim Sun-kwon has returned to South Korea.

The chain, which once boasted rapid expansion, is now collapsing under the weight of mismanagement, with over 500 stores opened in just two years before facing widespread closures.

What’s Happening with Caffe Bene in China?

Internal employee reports surfaced online alleging that Caffe Bene China has been struggling operationally, leading to mass store closures. Employees claim three months of unpaid wages, with many quitting, striking, or pursuing legal action. The company’s two main shareholders have left, and founder Kim Sun-kwon has reportedly gone back to South Korea. Leadership has been largely absent, breaching trust with both staff and franchise partners—some of whom have lost deposit money, guarantees, and franchise fees with no resolution.

Which Stores Are Still Open?

Despite the turmoil, some locations remain operational—at least for now. A reporter visiting Caffe Bene’s sole reported flagship store in Hangzhou’s Hubin district found it still open, serving customers and offering a 10% discount for membership card holders. A West Lake area franchisee also stated that their store hasn’t been affected and continues normal operations. However, calls to the official hotline went unanswered, and the brand’s public statement dismissed the claims as “unfair attacks” from competitors, vowing to face challenges head-on.

Why Did the Franchise Model Collapse?

Caffe Bene’s business in China heavily relied on a franchise model—over 95% of its more than 500 stores were franchised, mostly under a 50-50 joint investment scheme. Industry insiders criticized the brand’s low barrier for entry, allowing inexperienced operators into the market, which led to poor site selection and operational missteps. Some franchises reportedly competed for the same high-traffic locations, driving up rents unsustainably—a problem almost nonexistent in corporate-owned stores.

Product consistency also suffered due to lack of standardization. One regular customer noted that identical menu items varied noticeably in appearance and taste across locations. Moreover, franchisees were required to purchase all supplies from the head office, often at higher prices, squeezing already tight profit margins.

How Fast Did Caffe Bene Expand—and Why Did It Fail?

Launched in South Korea in 2008, Caffe Bene grew to over 900 stores domestically before entering China in April 2012. The brand aggressively expanded across Chinese tier-one, two, and three cities, launching more than 500 outlets within two years through seven regional offices. Initially, the brand marketed ambitious expansion targets, shifting from 5,000 stores by 2015 (with a Hong Kong IPO) to 1,500, then 1,000, and eventually just aiming to be a “world-renowned coffee chain brand.”

This unchecked growth mirrored issues seen in South Korea, where aggressive expansion led to internal competition and store closures, only to be offset by opening new ones. Experts note that rapid expansion without solid operational foundations leads inevitably to systemic failure—something now playing out in China.

What’s Next for Hangzhou’s Coffee Market?

Beyond Caffe Bene, other chains like ZOO COFFEE have used similar rapid expansion models. As the coffee shop market in Hangzhou and beyond booms, industry watchers warn that a major shakeout is coming. With so many players relying on high-franchise fees, rigid supply chains, and inconsistent quality control, the market is poised for consolidation.

Frequently Asked Questions

What happened to Caffe Bene in China?

Caffe Bene China is facing widespread store closures due to financial mismanagement, including unpaid employee wages for months, outstanding payments to suppliers, and the apparent departure of its major shareholders and leadership. Over 500 stores were opened in two years, but many are now shutting down.

Are any Caffe Bene stores still open?

Yes, some locations remain open, including at least one flagship store in Hangzhou’s Hubin district and a franchise in the West Lake area, which report normal operations. However, the overall brand is in crisis with many stores closed and others at risk.

Why did Caffe Bene’s franchise model fail?

The brand relied on a largely franchised model (over 95% of stores), with low barriers to entry that allowed inexperienced operators to join. This led to poor location choices, inconsistent product quality, and high supply costs, all exacerbated by unrealistic expansion goals and weak central oversight.

What were Caffe Bene’s expansion targets in China?

The brand’s goals shifted multiple times—from 5,000 stores by 2015 with a Hong Kong IPO, to 1,500, then 1,000, and finally just becoming a globally recognized brand. These ever-changing targets reflected unstable strategy and contributed to operational chaos.

Is the Hangzhou coffee market facing a shakeout?

Yes, with rapid growth from multiple chains using aggressive franchise-driven expansion—including Caffe Bene and ZOO COFFEE—industry experts predict a significant market consolidation as weaker players fold under financial and operational pressures.

Recommended FrontStreet Beans for Café Operations

For café owners navigating market shifts, FrontStreet Coffee’s blends offer dependable performance. The Classic Blend delivers rich crema and a balanced, approachable profile ideal for milk drinks like lattes and cappuccinos, while the Specialty Blend provides a familiar espresso taste using Brazilian and Colombian beans. Both ensure consistency and value, crucial during industry transitions. Freshly roasted within 5 days · Orders placed before 17:00 ship the same day · Next-day delivery across most of Guangdong Province.