Luckin Coffee, the Chinese beverage brand once maligned by a sales fabrication scandal and bankruptcy, is powering through one of the fastest growth journeys in restaurant history. 

Based on updates from the company’s WeChat channel (a Chinese social media messaging app), the brand debuted 1,167 net new stores during Q1, placing it at nearly 9,400 units systemwide, according to KGR Ventures, an analyst with financial services company Seeking Alpha. That’s an average of 13 unit openings per day—a record high. In March alone, a net of 581 locations opened. 

For perspective, Luckin averaged 6.4 openings per day in 2022 and debuted a net of 2,190 restaurants. If Luckin keeps this current 2023 pace, it will surpass 10,000 stores in the second quarter after opening its first shop in October 2017. 

In March, the company opened two locations in Singapore, its first venture outside of China. 

Here’s how Luckin’s unit count has trended since 2020, alongside net growth in each quarter:

Q1 2020: 5,012 (+223)

Q2 2020: 5,091 (+79)

Q3 2020: 4,831 (–260)

Q4 2020: 4,803 (–28)

Q1 2021: 4,951 (+148)

Q2 2021: 5,259 (+308)

Q3 2021: 5,671 (+412)

Q4 2021: 6,024 (+353)

Q1 2022: 6,580 (+556)

Q2 2022: 7,195 (+615)

Q3 2022: 7,846 (+651)

Q4 2022: 8,214 (+368)

Q1 2023: 9,381 (+1,167)

KGR Ventures attributed Luckin’s rapid first-quarter growth to deferred openings from Q4, when several Chinese businesses were experiencing COVID disruptions. The analyst also linked it to better franchise recruitment, an effort that was relaunched at the end of 2022. As of Q4, 31 percent of Luckin’s footprint was operated by a franchisee, up from 10 percent in Q1 2020. 

The brand has soared past Starbucks in the Chinese market. Starbucks had 6,090 restaurants in the country as of January 1 and planned to reach up to 9,000 by 2025. The company oversees almost 16,000 units in the U.S. 

In the fourth quarter, Luckin earned $535.7 million in total net revenue, up 51.9 percent from the previous year. Company-owned same-store sales increased 9.2 percent in Q4, on top of 43.6 percent growth in the year-ago period. Store-level operating profit was $89.1 million with a margin of 23.6 percent, versus $55.68 million and a margin of 20 percent in 2021. Luckin achieved these numbers despite reaching a peak of 1,500 daily temporary store closures in Q4 due to COVID restrictions. At the beginning of March, the brand reported that shutdowns were in the single digits and that operations have mostly returned to normal. 

“Given the development potential of China’s coffee market as well as Luckin Coffee’s model advantages, we anticipate that our store number growth will continue to maintain a sustained and rapid rate, to further consolidate and expand our leading position in the industry,” said Dr. Jinyi Guo, Luckin’s chairman and CEO, during the brand’s Q4 and full-year earnings call. 

Luckin launched nearly 140 new SKUs in 2022, including more than 100 new drinks. The brand’s Cheese Flavored Latte was a hit, with 6.59 million cups sold in the first week. Menu innovation is supported by 48 workers in its R&D department who are Q-Grader certified by the Coffee Quality Institute, which Guo described as the best professional certification in the global coffee industry. 

Meanwhile, for Starbuck’s, China comparable store sales decreased 29 percent during the chain’s most recent financial quarter, driven by a 28 percent decline in comparable transactions and a 1 percent drop in average ticket.

Hedge-fund manager Sean Ma—who runs Beijing-based Snow Lake Capital, which acquired a minority stake in Luckin—told the Wall Street Journal in November that the coffee chain is witnessing a “miracle” turnaround. He estimated that Luckin should be valued at $15 billion based on $390 million profit in 2024 and a multiple of 35 times earnings. He told the Journal that he expects Luckin to overtake Starbucks in China.

The comeback is a complete 180 from three years ago. Luckin’s controversy began January 2020 when short seller Muddy Waters received a report alleging numerous fraud claims, including inflation of revenue and profit. The company eventually conducted an internal investigation and discovered its COO fabricated hundreds of millions of dollars over multiple financial quarters. The news cut more than $5 billion from Luckin’s valuation, or 75 percent of the company’s market value. The brand was delisted from Nasdaq and removed its COO, CEO, chairman, and several other employees.

The SEC handed down a $180 million fine and the coffee chain declared bankruptcy in early 2021. The Journal said Luckin emerged from bankruptcy in March and is now run by Chinese private equity firm Centurium Capital, which injected $240 million worth of capital in the spring of 2021.

Growth, Story, Luckin Coffee