Indonesia, Vietnam: Scaling franchise retail is hard

Chinese food and beverage chain Mixue, the world's largest by store count, has reduced its overseas store footprint by 89 locations in the first half of 2026. According to a report from VnExpress, many of these closures occurred in Vietnam and Indonesia. This contraction coincides with a 15% year-on-year decline in the company's net profit.

For a brand known for its rapid, low-cost franchise model, these closures are a significant development. They suggest that even for a company with immense capital and a popular product, translating a large consumer market into a sustainable, profitable business is not automatic. The experience of Mixue in two of ASEAN's largest markets offers a case study in the executional challenges that often follow initial investment announcements.

Institutions and Investable Depth

The appeal of markets like Indonesia and Vietnam is obvious: large, young populations with growing disposable incomes. This demographic scale is a powerful magnet for foreign direct investment, especially in the consumer sector. However, as the book ASEAN Rising notes, "scale matters only when institutions can turn it into investable depth." The gap between a press release announcing hundreds of new stores and the reality of operating them profitably is filled with the mundane but essential work of securing property, navigating local regulations, and staffing each location.

Mixue's rapid expansion was built on a franchise model that delegates these tasks to thousands of small entrepreneurs. The recent store closures suggest that this model may be encountering friction. When franchisees struggle with securing suitable locations, obtaining the necessary business permits, or ensuring reliable electricity, the brand's overall growth trajectory can falter. These are not headline-grabbing issues, but they are fundamental to turning market scale into genuine business depth.

From Announcement to Execution

The path from an investment announcement to a profitable operation is often longer and more complex than anticipated. FDI announcements generate excitement, but as the book points out, "realised flows depend on the slower work of land, permits, power and talent reaching the ground." Mixue's retrenchment in Indonesia and Vietnam is a tangible example of this principle.

The franchise model is designed to accelerate growth by leveraging local knowledge and capital. However, it also distributes risk. If the underlying institutional framework makes it difficult for individual franchisees to succeed, the entire network becomes vulnerable. Issues that are manageable for a single large corporate entity can become overwhelming when multiplied across hundreds or thousands of small operators, each with limited resources to navigate bureaucracy or infrastructure gaps.

The Talent Constraint

Beyond physical infrastructure and regulatory processes, the availability of trained and motivated talent is a core component of execution. Each of Mixue's thousands of stores requires staff to prepare products, manage inventory, and serve customers. As a brand scales, maintaining consistent quality and service standards becomes a significant operational challenge.

In competitive labor markets, attracting and retaining reliable employees for retail and service jobs requires competitive wages, good working conditions, and opportunities for advancement. If the franchise model squeezes margins for the local operator, it can have a knock-on effect on the ability to build and sustain a capable workforce. For a consumer-facing brand, this is not a minor detail. The customer experience is the brand, and that experience is delivered by its people on the ground. What to watch

Observe whether Mixue's franchisee terms in Southeast Asia are adjusted to account for higher-than-expected operating costs. The company