Mixue Overtakes McDonald’s In Store Count With Rock-Bottom Prices And Small-Town Focus

Mixue, a Chinese soft-serve chain that sells cones for as little as 45 cents, now operates roughly 47,000 outlets worldwide — more than McDonald’s — after growing by putting tiny, low-cost shops where major brands stayed away and keeping prices extremely low.

The business began in 1997 when Zhang Hongchao set up a shaved-ice stall in Henan with about $950. He and his brother, Zhang Hongfu, deliberately chose locations that were overlooked by premium chains: workers’ dormitories, market squares in rural towns and campuses. Today about three in four of Mixue’s Chinese stores are in second- and third-tier cities, where competition is thinner and rents are lower.

Mixue’s expansion relied on a stripped-down approach: simple interiors, a narrow menu and aggressive pricing that drives volume. Retail analysts compare the strategy to an American discount chain that grew by filling gaps left by big-box retailers. “When you accept smaller sales per outlet but cut overhead sharply, you can build an enormous footprint quickly,” said a Beijing-based retail consultant who studies franchise models.

The brothers also discovered the limits of chasing higher-end customers. In 2009, Hongfu tried a more upscale concept near a Dairy Queen, upgrading décor and ingredients. The experiment failed to scale: it earned about $900 in profit over two and a half years and was shuttered, reinforcing the company’s low-cost model.

Mixue is listed in Hong Kong and, amid fierce domestic price wars, is valued at about $10 billion. That’s far below McDonald’s roughly $180 billion market value and Dollar General’s near $26 billion, but the chain’s sheer number of outlets gives it reach. Observers say the gap highlights different business models: one chases per-store profitability, the other bets on ubiquity and volume.