Introduction:Shanghai’s Qingpu Police recently cracked a tea beverage franchise fraud case involving over 100 million yuan, exposing how scammers lure entrepreneurs with promises of “low barriers and high returns,” only to drain their franchise fees through expensive supplies and breach-of-contract clauses. This article details the key elements of the scam and warns aspiring coffee or tea franchise investors to avoid common pitfalls by choosing trustworthy and reputable brands.

A tea beverage franchise fraud case has surfaced in Shanghai, where Qingpu police dismantled a fraudulent group posing as a legitimate third-party recruiter for a well-known brand. The scam involved over 100 million yuan. The group exploited entrepreneurs’ expectations of low investment and high returns by posing as a third-party recruiter for a famous brand, using tactics such as “low barriers and quick returns” to attract franchisees. Later, they extorted more funds through expensive supplies and threats of breach, leaving most franchises struggling or going out of business.

Police carried out a cross-provincial operation and eventually arrested 34 suspects, eight of whom have been formally indicted. This case serves as a wake-up call for those planning to invest in coffee or tea franchises, reminding them to carefully evaluate brands to avoid similar traps. Truly product-focused and reputation-driven brands are the reliable choices for sustainable collaboration.

The case began when an investor planned to open a bubble tea shop and, while searching online for franchise information, contacted a company claiming to be a third-party recruiter for a well-known tea brand. The company claimed that the official brand had high barriers to entry and required significant initial investment, then recommended their so-called “low-barrier, high-return” in-house sub-brand, emphasizing advantages such as “one-click store setup, quick returns, and comprehensive after-sales service.”

During an invited on-site inspection, the investor was swayed by verbal promises and signed a franchise contract without conducting detailed due diligence, paying an 80,000-yuan franchise fee. After the store opened, the company demanded over 100,000 yuan more for supplies and threatened to confiscate the already paid franchise fee and offer no refund if payment wasn’t made, citing breach of contract.

Even after paying the extra fees, the company ignored the franchisee and refused to provide the previously promised operational support. The supplies provided were priced at more than double the market rate. Due to the brand’s lack of market recognition and excessively high operating costs, the store quickly closed down due to ongoing losses.

When the franchisee tried to contact the company for recourse, they found that the original salesperson had gone off the radar and the company headquarters was completely abandoned—nearly all invested funds were lost. After receiving multiple similar reports, Qingpu police launched an in-depth investigation and gradually uncovered the operational model of a “pre-set franchise” fraud ring hidden in other provinces.

The investigation revealed that since 2019, the group had set up multiple franchise companies and used self-media and websites to run paid ads, attracting potential customers interested in franchising. Pretending to be third-party agents for well-known brands, they deliberately emphasized the high barriers and large investments required by legitimate brands, gradually steering clients toward their own brands. They falsely promised quick returns and comprehensive after-sales services to induce contract signing and franchise fee payments.

Once the fees were collected, the group would demand franchisees pay more than double the market price for supplies under the pretext of breach, then provide no real support, leading most franchises to fail due to operational difficulties. To evade investigation and legal liability, the group registered companies under nominee legal representatives, changed business addresses every 6–9 months, and repeated the same scam under new brand names.

Before being shut down by police, the gang had defrauded over 100 million yuan in franchise fees and related payments under nearly 10 different brand names. Currently, eight suspects have been approved for arrest by the Qingpu District People’s Procuratorate on charges of contract fraud, while another 26 have been placed under criminal coercive measures. The case is still under further investigation.

The above content is compiled by CoffeeHunters, a coffee news website.