The domestic skincare brand Dr.Plant is charging toward an IPO. While its franchise model once fueled rapid expansion, it now presents mounting challenges. Can going public become its breakthrough solution?

Dr.Plant, a "homegrown skincare brand," aims to become the first single-brand cosmetics retailer listed on China's A-share market. On June 27, the Shenzhen Stock Exchange disclosed that Beijing Dr.Plant Cosmetics Co., Ltd. ("Dr.Plant") had its mainboard IPO application accepted, with CITIC Securities as its sponsor.

After 31 years in the cosmetics industry, Dr.Plant has carved a unique path, operating over 4,000 stores nationwide. Yet behind this scale lie hidden risks. Its IPO prospectus reveals overreliance on offline franchising, insufficient R&D investment, franchisee violations, quality control issues, and distribution loopholes—all now plaguing the company.

The result? Stagnant growth over the past three years, rising store closures, and diminishing advantages of its once-successful model. While an IPO could bring funding and attention, whether it can resolve these challenges remains uncertain.

**Franchise Model Hits a Wall** Dr.Plant’s approach stands out among skincare brands. Unlike peers like Proya Cosmetics Co.,Ltd. (603605.SH) and Yunnan Botanee Bio-Technology Group Co.,Ltd. (300957.SZ), which derive over 50% of revenue from direct sales, Dr.Plant relies heavily on franchising, with authorized stores accounting for 88.5% of its 4,328 outlets by end-2024.

Its low barriers—no franchise fees, just a ¥10,000 deposit and ¥80,000–90,000 initial inventory—attracted small investors, especially in lower-tier cities where 73% of its stores operate. The "buy products, get free treatments" strategy also boosted appeal, with customers recouping costs after 10 sessions.

However, growth has stalled. Revenue inched up just 1.6% and 0.2% in 2022–2024, while rivals like Lin Qingxuan (targeting a Hong Kong IPO) saw 32.5% CAGR. Worse, 802 franchise stores closed in 2024 alone, with average annual revenue per store below ¥430,000—hardly enough to cover urban rents and labor.

**Control Gaps Exposed** Dr.Plant’s "light-touch" franchising—dealers operate independently—has led to compliance breakdowns. Over three years, it received 16 penalties for issues like false advertising, banned ingredients, and expired products. Thirty-two direct stores still lack required hygiene permits as of May 2025.

Quality scandals, including a bacteria-laden cleanser sold post-recall, and 290 consumer complaints on platforms like HeiMa, further dented trust. These woes delayed its IPO filing by 19 months, with CITIC citing "franchisee violations and supply-chain gaps" as key hurdles.

**Can IPO Fix the Model?** Dr.Plant plans to raise ¥998 million, allocating over half to marketing/branding and 26% to R&D/headquarters. Yet its R&D spending fell to 3.08% of revenue in 2024, with shrinking teams and heavy reliance on outsourced innovation (25% patents were acquired). Core products like its Dendrobium line haven’t been upgraded in seven years.

Meanwhile, its late pivot online—just 13% of revenue—lags rivals like Winona (under Botanee), which leveraged e-commerce to double sales to ¥5 billion by 2023. Dr.Plant’s price-driven online push (e.g., ¥39面膜 bundles) eroded margins but failed to spur significant growth.

With China’s skincare market now dominated by online leaders (top three brands hold 50% share), Dr.Plant’s franchise-heavy model looks increasingly outdated. Even with IPO funds, breaking this cycle won’t be easy.