Sales trends point up as the brand stabilizes
- Chagee ended June 2026 with 7,639 teahouses, including 7,240 in Greater China and 399 overseas.
- Same-store sales declines narrowed to the low single digits by July 2026.
- Management expects same-store sales to turn positive in August, signaling a potential recovery.
- The company is testing new menu categories like gelato in more than 190 locations.
- Overseas expansion continued with the brand entering South Korea during the second quarter.
Nearing an inflection point
Chagee is a premium tea chain navigating intense competitive pressure. The main sign of progress is that same-store sales declines have narrowed significantly. After falling 16% in Q1 2026, July declines were in the low single digits, and management expects August to turn positive year over year.
The bull case is that the worst of the price wars are now in the rear-view mirror. As store traffic improves, the network can regain its footing. Overseas growth is moving fast, with entry into South Korea, and new product lines like gelato offer fresh avenues for growth.
The bear case notes that recent improvement might be seasonal summer peak activity or driven by heavy promotional launches. If the underlying market saturation remains an overhang, existing teahouses could face sustained long-term pressure.
A franchise engine under repair
Chagee relies primarily on franchisees. The company supplies the brand, products, operating system, and network rules, while operators run the physical locations. In late 2025, Chagee shifted from a traditional supply relationship to a GMV-based revenue sharing model to align incentives with store owners.
This shift means Chagee's revenue moves up and down with franchisee sales, sharing both the risk and the reward. To improve network health, the company is moderating domestic franchisee expansion.
Chagee is also converting selected franchised locations into company-owned stores as part of its network optimization strategy. This provides tighter control but introduces more operating complexity.
Premium tea, wider dayparts
Fresh-brewed premium tea drinks
This is the core Chagee product. The brand is built around fresh-made tea drinks rather than low-priced mass beverages.
Tea espresso extraction
Chagee uses a proprietary tea espresso extraction method. This helps support the premium brand promise and gives stores a repeatable preparation process.
Low-caffeine collection
The low-caffeine lineup is aimed at evening consumption. It gives customers a reason to buy tea later in the day without as much caffeine concern.
Morning tea lattes
New tea lattes, including Caramel and Long Jing, are aimed at the morning occasion to add another daypart for store traffic.
Gelato
Introduced recently and piloted in over 190 stores as of August 2026. This adds a dessert option to the menu.
Overseas teahouse menu
International stores give Chagee a second growth lane outside Greater China. The current overseas focus includes Southeast Asia, the United States, and South Korea.
Mostly Greater China stores
The mix below uses Q2 2026 teahouse count. Chagee had 7,240 teahouses in Greater China and 399 overseas at the end of June 2026.
What could still break
Recovery proves seasonal
High impact · Medium oddsManagement expects August 2026 same-store sales to turn positive. This could simply reflect summer seasonality or heavy product launch activity rather than a structural fix. If fall and winter sales slump, the recovery narrative will vanish.
Franchisee economics stall
High impact · Medium oddsChagee depends heavily on franchisees. The GMV-based revenue sharing model aligns incentives, but also means Chagee participates directly in weak store sales. If franchisees lose confidence, store health can suffer.
China price wars persist
Medium impact · Medium oddsManagement has pointed to delivery platform price wars as a pressure point. Chagee tries to hold premium pricing rather than chase heavy discounts. That can protect the brand, but it may cost traffic if rivals keep dropping prices.
Overseas growth outruns execution
Medium impact · Medium oddsThe overseas store base reached 399 stores by mid-2026, marking entry into eight markets including South Korea. Fast growth across varied countries brings new supply chains and customer habits. Mistakes can show up quickly in store performance.
In one breath
What does Chagee sell?
Chagee sells premium fresh-made tea drinks. Its menu centers on fresh-brewed tea, tea lattes, newer low-caffeine drinks, and gelato.
Why were investors worried about Chagee?
The key worry has been weak same-store sales. Sales dropped heavily in late 2025 and early 2026, though declines narrowed by mid-2026, signaling the worst may be over.
Where is Chagee growing fastest?
The fastest unit growth story is overseas. Chagee had 399 overseas stores at the end of Q2 2026, expanding across Southeast Asia, the United States, and South Korea.
What changed in Chagee's franchise model?
In late 2025, Chagee shifted to a GMV-based revenue sharing model. Chagee's revenue now moves directly with franchisee sales, sharing both risk and reward.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 30, 2026
- Score data
- September 6, 2026
- Reviewed by
- Shivam Bharuka
Comparable Restaurants companies
Companies near Chagee Holdings Limited American Depositary Shares in Finn's Restaurants industry ranking.
