Why 85°C Cofounder Resigned and Abandoned Franchise Expansion

When 85°C’s General Manager Xie Jiannan stepped down in late 2014, it wasn’t just another executive shuffle. It marked the end of an ambitious push to expand the Taiwanese bakery-coffee chain through franchising—first in Taiwan, then on the Chinese mainland. What went wrong? Why did a once fast-growing brand with 500 stores pull back from franchising and choose to 'train internally' instead?

In short: 85°C had nearly 500 stores in China and over 475 when Xie left, but its attempt to roll out a franchise (or 'entrusted operation') model in both Taiwan and mainland China stalled. The plan for mainland franchising debuted in Hangzhou in November 2014, but Xie was gone two months later. The brand then chose to focus on internal stability rather than rapid expansion.

Xie Jiannan’s Short-Lived Tenure and Unfulfilled Franchise Plans

Xie Jiannan was brought in by 85°C founder Wu Zhengxue in early 2013 to fix the company’s management woes. At the time, 85°C had 324 stores in mainland China, growing fast in revenue but struggling with operations. Xie’s plan: by the end of 2013, begin rolling out entrusted operations—a halfway step to franchising—where top employees would manage stores with corporate-provided equipment.

That didn’t happen until November 2014, when 85°C awarded its first 'entrusted operation' plaque to a Hangzhou store. By then, the chain had over 475 stores. The move was positioned as a major strategic shift after seven years in the mainland market. But shortly after, Xie was out.

Xie also tried reforming Taiwan’s franchise model in March 2014, replacing the old 'voluntary franchise' with 'authorized franchising'. He aimed to reframe the relationship between head office and franchisees from seller-buyer to business partners sharing profits. He also raised prices in Taiwan, claiming long-term benefits—though critics doubted the short-term impact on sales.

Despite his initiatives, reports emerged as early as late 2014 that Xie was losing influence. In January 2015, local media said he was sidelined and replaced by another executive. By April 2015, 85°C announced Xie would become a group advisor, with founder Wu Zhengxue taking over as GM again. At the time of his resignation, 85°C had nearly 500 stores in mainland China—but no formal franchise system in place.

Why 85°C Stepped Back from Franchising

Industry experts suggest that abandoning the franchise path may have been the right move for the brand’s long-term health. Wu Jian, head of the China Catering Industry Research Institute, noted that while scaling via franchises would have grown 85°C’s footprint, it might have hurt the brand. “If 85°C had pushed franchise expansion,” he said, “its brand impact in mainland China could have suffered.”

Others agree the impact of Xie’s departure was limited due to his short tenure. Yet the bigger issue was 85°C’s unclear positioning. From the start, it struggled to define whether it was a coffee chain or a bakery—and in China, it ended up more like the latter.

“In Taiwan, 85°C was known for coffee first, baked goods second,” said industry analyst Wu Jian. “But in mainland China, it flipped. That confused consumers and made it tough to build a loyal, targeted customer base.”

What Went Wrong in the Mainland Market

85°C entered the Chinese market in 2007 through Shanghai, but it never established a clear coffee-centric identity. Despite its name—inspired by the idea that coffee tastes best at 85°C—the product mix was split evenly among coffee, bread, and cakes. That confused consumers and diluted its brand.

“It’s a bakery chain, not a coffee chain,” said Wade, a Shanghai-based consultant with years in the baking industry. In Taiwan, 85°C competed with Starbucks; in China, it ended up competing with local bakeries like BreadTalk, Paris Baguette, Holiland, and Crystal Sugar.

Its early growth relied on hiring experienced managers from brands like KFC, offering high salaries and big promises. But once that talent pool dried up, the company shifted to promoting from within. While that saved costs, it widened the gap with more professionally run competitors.

85°C also faced intermittent food safety issues in China, leading to a reputation for prioritizing expansion over management. Its once strong brand value eroded over its eight years in the market. “If its edge was affordable coffee, McDonald’s and KFC offer better distribution. If it was pastries, it lacked unique differentiation,” said Wade.

The brand now claims its strength lies in integrating beverages, bread, and coffee—but critics argue that’s a common formula. Meanwhile, 85°C has been quietly shuttering underperforming locations and focusing on training and internal stability. “We’re improving our team, refining operations, and closing weak stores. We aim for a big turnaround soon,” the company stated.

Intensifying Competition in China’s Bakery Market

Even if 85°C had succeeded with franchising, it would have faced mounting challenges. The Chinese bakery sector is now overcrowded and hyper-competitive. “First-tier cities are saturated, so moving into lower-tier markets makes sense,” said an 85°C employee. “Rent and labor are cheaper, and consumer spending power isn’t much lower.”

But the barriers to entry are low, food safety regulations are strict, and labor costs are rising. That’s squeezing margins for all players. Worse, new niche competitors are stealing share. “One Shanghai company selling astrological cheesecakes made 80 million RMB last year,” said analyst Wu Jian. “And traditional restaurants are entering the market too. One Beijing group sells cakes for 60 RMB that others charge 100 RMB for.”

There’s also the rise of hyper-focused products. “Some bakeries succeed by doing just one bread exceptionally well, driven by craftsmanship,” said Wu. “85°C offers everything—bread, cakes, coffee—so it’s hard to stand out as trendy or unique.” In a market where new products are quickly copied, 85°C’s broad assortment makes it harder to build a distinct brand identity.

Frequently Asked Questions

Who was Xie Jiannan, and what role did he play at 85°C?

Xie Jiannan was the General Manager of 85°C, hired in 2013 by founder Wu Zhengxue to address operational challenges amid rapid growth. He initiated plans for entrusted operations (a step toward franchising) in both Taiwan and mainland China, but resigned in late 2014 before seeing them fully implemented.

Did 85°C ever officially launch a franchise system in mainland China?

No. Although 85°C launched its first 'entrusted operation' store in Hangzhou in November 2014, the broader franchise strategy did not materialize. Xie Jiannan resigned two months later, and the company shifted focus to internal development instead of expanding via franchising.

Why did 85°C struggle to define its brand in the Chinese market?

In Taiwan, 85°C was known as a coffee-led brand, but in mainland China it became more of a bakery, with an even product split between coffee, bread, and cakes. This mismatch in positioning confused consumers and made it difficult to cultivate a clear, loyal customer base.

What changes has 85°C made since Xie Jiannan’s departure?

Since 2014, 85°C has chosen to focus on 'training internally', improving team coordination, shutting down poorly performing stores, and reopening better-located ones. The brand aims for a major turnaround after stabilizing its operations and refining its approach.

What’s the current competitive landscape for bakery chains in China?

The market is crowded, with low barriers to entry, rising costs, and new niche players. Independent bakeries, traditional restaurants, and hyper-localized products (like single-flavor cheesecakes) are all competing for market share, putting pressure on larger chains like 85°C.

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