TH International(THCH 3.61%) released results for the second quarter ended June 30, 2024, on August 29, 2024, highlighting system sales growth of 1.4% year over year, profits from other revenues up 110.3% year over year, and a return to positive adjusted corporate EBITDA. The call discusses a significant strategic pivot toward subfranchising, robust growth in loyalty club membership, and improved operational efficiencies amid continued competitive pressures in China's beverage market.
TH International expands subfranchising to over 400 stores
Since launching its targeted franchisee program in December 2023, TH International received more than 8,100 franchise applications and successfully transitioned over 400 stores to subfranchisee status by the end of the second quarter. The number of franchised stores increased from 333 as of June 30, 2023, to 449 as of June 30, 2024, and management is targeting approximately 200 new franchise stores on a gross basis in 2025.
"Since we launched our individual franchisee programs in December 2023, we have received over 8,100 applications and successfully converted over 400 stores by the end of the second quarter, showcasing market confidence in our franchisee model. We have established attractive and desirable store unit economics for subfranchises with a reasonable two to three-year payback period on average and have a target to open on a gross base around 200 franchise stores in 2025."
-- Yongchen Lu, CEO and Director
This rapid franchise expansion signals broad acceptance of TH International's model while supporting management’s focus on capital efficiency and profitability.
TH International achieves positive adjusted EBITDA and reduces net loss
During the second quarter ended June 30, 2024, TH International returned to positive adjusted corporate EBITDA, matching similar achievements from two prior quarters, and cut adjusted net losses by 16.2%. These financial improvements occurred alongside a 12.5% year-over-year decline in company-owned and operated store revenues, primarily from strategic closures of underperforming locations and a 3.6% decrease in same-store sales.
"At the same time, we returned to positive adjusted corporate EBITDA and reduced adjusted net losses by 16.2% during the quarter. These achievements underscore TH International Limited's successful disciplined execution and our unwavering commitment to achieving sustainable long-term profitable growth."
-- Yongchen Lu, CEO and Director
Restoration of adjusted profitability and narrowing losses position TH International closer to operating self-sufficiency.
Loyalty membership and digital orders reach new highs
Loyalty membership grew 22.4% year over year to 26.2 million as of June 30, 2024. Simultaneously, digital orders reached an all-time high, accounting for 90.4% of total orders in the second quarter, up from 86.5% in the prior-year period.
"As of 06/30/2025, our registered loyalty club members reached 26.2 million, reflecting a remarkable 22.4% year-over-year growth. The average number of members per store is now close to 26,000, serving as a strong catalyst for our future growth."
-- Yongchen Lu, CEO and Director
Digital engagement and loyalty penetration strengthen the brand’s differentiated value proposition amid fierce market competition.
Looking ahead
Management is targeting approximately 200 new gross franchise store openings in 2025, with 200 to 300 new store openings anticipated annually over the next few years. They forecast positive same-store sales growth in the third quarter and the second half of 2024. Management reports good progress in refinancing convertible debt, along with ongoing efforts to secure additional bank loans. Explicit quantitative guidance is otherwise limited to store opening targets and the stated expectation of approaching full-year adjusted corporate EBITDA breakeven.
