Franchisee Renames 'Cross-Strait Coffee' After Five Years Unprofitable

In Hangzhou’s Yuhang district, a coffee shop owner who spent five years running a branded café says he never turned a profit — and when his contract ended, he quietly changed the name. This isn’t a story about changing coffee roasts or switching beans. It’s about what happens when a five-year, 2-million-yuan franchise investment doesn’t pay off, and the legal grey area that follows.

The answer is simple: the owner invested over 2 million yuan in a “Cross-Strait Coffee” franchise, ran the 600-square-meter shop for five years, but didn’t recoup his costs. With rent rising and profits stagnating around 300,000–400,000 yuan annually, he changed the name to “Rain Bank Coffee” just before the lease and contract expired.

The Five-Year, 2-Million-Yuan Franchise That Didn’t Break Even

Five years ago, Mr. Zhao partnered with Cross-Strait Coffee, a well-known Chinese chain, and opened a 600-square-meter location on Zhengfa Street in Linping, Yuhang. He spent upwards of 2 million yuan — covering advertising, interior design, franchise fees, deposits, equipment, and a full year of renovations — before opening. But despite years of operation, the shop never became profitable.

“The rent started at 250,000 yuan per year, then jumped to 480,000 yuan in the final year,” Zhao said. Annual profits ranged between 300,000 and 400,000 yuan — not enough to cover the initial investment or rising costs. With his franchise contract set to expire in December, Zhao decided not to renew. “If I close when the lease ends, I can cut my losses,” he said.

What Changed When the Name Did

Three months prior to the contract’s end, Zhao went to the local administration office and renamed the shop “Rain Bank Coffee” — identical to “Cross-Strait” except for one character. To regular customers, little else appeared different. Staff still wore Cross-Strait uniforms. The menu carried the same items under the new name, and many table signs still displayed the old Cross-Strait logo. Even the VIP card from the original chain could still be used for discounts.

But not all cards worked. “Cross-Strait stored-value cards have never been accepted here,” Zhao explained. “Only the prepaid cards sold in our own shop are valid. If customers don’t spend them all, we’ll refund the balance.”

Why the Owner Didn’t Walk Away Sooner

Zhao acknowledged that part of the problem might have been management. “The store was mostly run by hired managers. The franchisor sent people to help early on, but follow-up support stopped,” he said. “My wife and I were busy with other businesses and didn’t manage this location closely. With more hands-on effort, we might not have lost money.” Still, the financial numbers didn’t add up, and with the franchise agreement expiring, Zhao chose not to reinvest.

Is Renaming the Same Shop Legal?

Legally, it’s murky. Liu Zhisong, a lawyer with Zhejiang Kingdom Law Firm, said that while Zhao may have felt cornered, changing only the name and keeping everything else the same “might be risky.”

“This is a case of ‘same soup, different label,’” Liu said. “It’s a high-risk move by someone trying to protect their investment. Once the franchise contract expires, the franchisee is obligated under contract law — specifically the duty of good faith and post-contract obligations — to stop using the original brand elements like the logo, uniforms, and menus. Even with a new sign, using the same visual identity could still infringe on the franchisor’s trademarks.”

Liu advised Zhao to consider transferring the shop or starting a fresh venture to limit losses. “If he believes the franchisor breached the contract and caused his losses, he could try negotiation or legal action,” Liu added.

Frequently Asked Questions

How much did the franchisee invest in the Cross-Strait Coffee shop?

The owner reported investing over 2 million yuan in total, covering franchise fees, store design, advertising, equipment, deposits, and a full year of renovation before opening the 600-square-meter location.

Why didn’t the coffee shop make a profit?

The shop earned around 300,000 to 400,000 yuan in annual profit, but with rising rent — from 250,000 yuan to 480,000 yuan over the years — and high initial costs, the owner couldn’t recover the 2 million yuan investment within five years.

What did the owner change when renaming the shop?

The franchisee changed the name from “Cross-Strait Coffee” to “Rain Bank Coffee,” altering just one character. Most other elements — staff uniforms, menu items, interior, and even some signage — remained unchanged.

Were customers able to use their old Cross-Strait Coffee cards?

Cross-Strait stored-value cards were not accepted, but the shop continued to honor its own prepaid cards and the original brand’s VIP discount cards for discounts, though not for stored value.

Is it legal to keep using the same branding after a franchise ends?

According to a lawyer, once the franchise contract expires, continuing to use original logos, menus, and uniforms — even with a new name — may breach trademark and contract laws, particularly the duties of good faith and post-contract obligations.

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