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Note from Titanium Media: This article comes from the WeChat public account China Entrepreneur Magazine (ID: iceo-com-cn), author | Li Yanyan, editor | Zhou Chunlin, published by Titanium Media with permission.
The pictures posted on the Internet show that one banner reads ” I love my listed company for refusing to pay employees’ wages, refusing to pay employee insurance, and returning my hard-earned money”, while another reads “…the content is not honored, the franchisee loses…”. The scene attracted many onlookers, and a 120 ambulance was parked. Allegedly, the incident took place at the headquarters of my company in Beijing.
On June 17, the aforementioned pictures circulated on the Internet. On June 18, I Love My Home confirmed the authenticity of the photo, and responded to the media that the content of “refusal to pay wages and social security” was not true. The dispute stemmed from the company’s decision to terminate due to the epidemic and strategic adjustments. Hefei franchise business, and individual franchisees are dissatisfied with the settlement fees after the company withdraws from the Hefei market and cause trouble.
On June 20, I Love My Home issued an announcement saying: The company adjusted its business layout according to the changes in the epidemic situation and the actual situation of the urban real estate market, and decided to terminate the franchise business in Hefei, Yantai and Changsha cities. Adhering to the principle of compliance and legality, there are plans and plans. Steps to advance the termination of the contract with the franchisee. In the future, the company will focus on direct business in key cities and vigorously develop the leasing business.
The franchise business was once regarded as an important starting point for I Love My Family to diversify and expand its scale and gain market share. In 2020, I Love My Family started the franchise model. As of the end of the third quarter of that year, there were more than 1,300 franchise stores. However, such expansion has not brought effective performance. When the double pressure of the repeated impact of the epidemic and the sluggish demand of the property market hit together, the development of I Love My Home fell into a “passive”.
The financial report shows that in the past two years, I Love My Family (000560.SZ) has increased its income but not its profit, and its net profit has declined one after another. In the first quarter of this year, the performance turned from profit to loss. Talking about the reasons, I love my family explained in the financial report: In order to reduce the adverse impact, the company decided to adopt a focus strategy, optimize and adjust the business in non-key cities, and concentrate resources on key cities.
The official response said that “payment” is a franchisee dispute
“Our company has set up a special working group to supervise on the spot to ensure that the interests of consumers are not infringed and the rights and interests of franchise owners are protected. Through friendly negotiation, we have reached a consensus with most franchisees in Hefei, Yantai and Changsha to terminate the contract. ” I love my family explained in the June 20 announcement.
It is understood that in the early days of starting the franchise business, I Love My Home provided franchisees with a discount of exemption from platform fees for up to two years, and provided subsidies for franchise owners to replace the door and decoration. “Now withdrawing from the market, the company will properly negotiate based on the contract and advance the termination of the contract in an orderly manner.” I love my family said.
This “salary” dispute is one aspect of the shrinking of I Love My Family’s franchise strategy. People close to I Love My Family said that at the end of 2021, due to the impact of the epidemic and the overall sluggish demand for the property market, I Love My Family has decided to completely withdraw from the Hefei market, which is difficult to make profits.
Not long ago, on the investor interaction platform, an investor posted that all the franchisees of I Love My Family in Nanjing were shut down and suspended overnight. On June 10, I Love My Family responded that there was no authorized franchisee development in Nanjing. Only in 2021 as an innovative exploration, the company conducted a pilot partnership model in Nanjing.
“This year, on the basis of summarizing the operation of the pilot, in order to improve the quality of operation and strengthen the internal control and compliance management, the Group put forward rectification opinions on the pilot model of Nanjing Company, so as to further improve the business model, improve the operation level and improve the service quality. The company will Under this principle, continue to explore innovative models that are conducive to win-win for all parties.” I love my family continued.
As the second largest real estate agency giant in China after Lianjia, in 2018, I Love My Family successfully backdoored Kunbai University and completed the A-share curve listing. Xie Yong, the helm of the group, ushered in a highlight moment.
In 2019, Shell Search was born out of Lianjia, and I love my family also started digital transformation, and launched the franchise business in the following year, with a view to the “two-wheel drive” of the self-operated and franchised model, and the rapid expansion of the scale. By the end of 2021, I love my family business has spread over more than 40 cities including Beijing, Shanghai, Hangzhou, Nanjing, Suzhou, Nanchang, etc., with a total of more than 4,600 stores.
In the third quarter of 2020, I Love My Family Group accelerated the establishment of a franchise business line, and carried out due diligence, signing contracts, and urban landing. A large number of store owners joined I Love My Family . According to the financial report, as of the end of the third quarter of 2020, there were more than 1,300 franchised stores nationwide.
“(The franchise business) not only expanded the market share in the existing business cities, but also expanded the group’s business map to Shandong, Shanxi, Anhui, Inner Mongolia and other places.” I love my family said in the third quarter financial report of 2020. However, under the background of the epidemic and the sluggish demand for real estate, the follow-up progress of my love my family franchise business is not smooth.
The 2021 annual report shows that the number of I Love My Family franchise stores operating during the period is 1,504, compared with the end of the third quarter of 2020, only an increase of more than 200, and the growth trend has slowed down significantly. In addition, the quick-start franchise model also exposed some management problems. Since the beginning of this year, I love my family has been bombarded with “misappropriation of house money” many times, and it was later discovered that it was the work of the franchisee.
Increase income but not profit, terminate the franchise business of Sancheng
In the past two years, with the economic downturn and the repeated impact of the new crown epidemic, superimposed on the in-depth adjustment of the real estate industry, the real estate brokerage industry, which is an important part of the industrial chain, has been declining all the way. According to public data, from January to May 2022, the sales area of commercial residential buildings nationwide decreased by 28.1%, and the sales volume of commercial residential buildings decreased by 34.5%.
For real estate agents, scale means market share and voice. However, in the context of the overall market downturn, the excessively large scale has become a drag on turning around, which also means that the prevailing market rules in the past are failing. Looking back now, under the pressure of revenue, I love that my family is paying for the “franchising business”.
I Love My Family said that under the current environment, the investment and income of the enterprise in the franchise business cannot be balanced, there is a serious mismatch between the business volume and the retention ratio, and the future profit space is very limited. In order to ensure that the company focuses on the core and develops steadily, I love my family decided to terminate the franchise business of Hefei, Yantai and Changsha.
I love my family also said that the termination of the franchise cooperation in some cities is a phased business adjustment made by the company. In the future, the company will focus on direct business in key cities. In addition, ” I love my family is also responding to the government’s call, focusing on leasing services, increasing investment in leasing business, and creating a new leasing model with leading service standards, full-process digitalization, and excellent operation.”
The franchise model was once regarded as an important means for I Love My Family to block Shell and Lianjia, and the competition between the two parties has always attracted much attention. Not long ago, an investor asked a question on the investor interactive platform: Has the company thought about how to compete with Shell (Lianjia)? Shell is already very large in scale. Have you considered introducing other Internet giants to invest in I Love My Home and build an Internet platform?
In this regard, I Love My Family said on the investor interaction platform on June 13 that first, from the perspective of industry development, the industry penetration rate and concentration are still very low, and they need to be standardized and upgraded urgently. I Love My Family and Shell are both industry leaders. All enterprises, whether it is commercial rationality or industrial responsibility, should further strengthen cooperation on the basis of healthy competition, jointly promote industrial upgrading, and expand the market cake.
Second, from the perspective of corporate business characteristics, I Love My Home pays more attention to community-oriented second-hand residential services. The simultaneous development of transaction and leasing, and close coordination are the core features of the business, as well as the “breakwater” of operating and the “moat” of competition. Therefore, the significant difference in the business direction of I Love My Home and Shell will make the business growth path of the two different.
Third, the Internet, as an important way to upgrade the industry and improve customer experience, has become an integral part of the company’s strategy. The company will actively promote business and equity cooperation with Internet giants on the basis of the results of the first stage of digital upgrading and transformation.
In the past two years, behind the rapid expansion and contraction of franchise business, increasing revenue without increasing profit has become an important portrayal of the performance of I Love My Family .
In 2020 and 2021, the total revenue of I Love My Family will be 9.6 billion yuan and 12 billion yuan respectively. But the net profit has dropped again and again. Among them, the net profit in 2020 will be 312 million yuan, a year-on-year decrease of more than 60%, and the non-net profit will be 320 million yuan, a year-on-year decrease of more than 50%; the net profit will be 166 million yuan in 2021, a year-on-year decrease of nearly half, and the non-net profit will be 122 million yuan, a year-on-year decrease of 61.87%.
Judging from the data in this year’s first quarterly report, I love my family from profit to loss. During the period, the company achieved revenue of 3.479 billion yuan, a year-on-year increase of 18.65%; net loss was 241 million yuan, which turned from profit to loss year-on-year; net loss after deduction was 239 million yuan, which turned from profit to loss year-on-year.
Regarding the reasons for the loss in the first quarter, I Love My Family said that the recovery of the residential buying and selling market after the holiday was not as fast as expected, and the outbreak of epidemics in major business cities such as Shanghai, Hangzhou, Suzhou, Wuxi, Tianjin, Nanchang, etc., led to offline business activities. Due to the adverse impact of restrictions or even the suspension of store operations, the company’s residential transaction business has experienced a reduction or even stagnation in business volume.
In addition to external factors, I love my family also said that the loss is also affected by the high base effect in the same period in 2021, and “the company’s operating income has dropped significantly year-on-year during the reporting period.” I love my family explained in the financial report that in order to reduce the adverse impact, the company decided to adopt a focus strategy, optimize and adjust the business in non-key cities, and concentrate resources on key cities.
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