Dairy Queen has surpassed 2,000 stores in China, becoming the first ice cream-focused chain in the country to reach that scale as competition intensifies in a market increasingly shaped by franchising, localized products and lower barriers to expansion.
The milestone, however, is not simply a reflection of store growth. The brand's operator in China says expansion has been accompanied by improving store productivity and profitability, rather than relying solely on adding outlets.
DQ's China network operates under two models. CFB Group runs about 1,610 stores, while another 390 outlets are operated by partners in North China, where CFB does not hold franchise rights. As DQ's largest operator in the country, CFB has been the main driver behind the brand's expansion over the past decade.
Unlike many global restaurant chains that accelerate growth primarily through franchising, DQ has maintained a relatively high proportion of directly operated stores in China, giving the eatery greater control over operations, quality management and consumer experience.
Over the past five years, DQ in China has recorded double-digit growth in both revenue and profit, while same-store sales increased at a compound annual growth rate of about 7 percent. In the first half, same-store sales rose 5 percent year-on-year, following growth of more than 11 percent in the same period last year.
CFB has continued expanding its footprint in China, opening more than 100 new DQ stores so far this year. More than 90 percent of these new outlets became profitable within their first month of operation, while the average return-on-investment period has shortened from around two and a half years to less than two years.
Behind the growth is a shift in how ice cream brands understand consumer preferences.
DQ has segmented young consumers into seven major groups and 126 sub-segments, using social media monitoring to track changing preferences among younger customers. The strategy has helped increase the share of Generation Z consumers in its customer base from 40 percent in 2021 to more than 70 percent today.
Product localization has also become central to the strategy. All new products launched by DQ in China are developed specifically for local consumers, with nearly 160 new products introduced last year and more than 170 launches already recorded this year.
The expansion comes as China's freshly made ice cream sector attracts a new wave of competitors.
Among them is Ye Gelato, a domestic chain that has expanded rapidly through franchising. The company traces its origins to a Beijing store opened in 2011 by founder Cui Jianwei, who spent five years living in Italy before adapting the Italian gelato concept for Chinese consumers.
The company accelerated its expansion after opening franchise applications in 2024. It added 244 stores that year, followed by another 916 stores in 2025. By Sept 11, Ye Gelato had reached 1,712 stores across 237 cities, making it the second-largest domestic chain ice cream brand in China behind DQ.
One factor supporting the rapid expansion of gelato chains is the falling cost of core equipment.
Previously, imported Italian gelato machines could cost around 500,000 yuan ($74,450), creating a significant barrier for small operators. Domestic alternatives now cost around 50,000 to 60,000 yuan, making standardized expansion more accessible.
Ye Gelato has built its franchise model around tighter store location selection and economics. Its core proposition is "fresh daily, no overnight products". Stores use time-slot promotions, including discounts after 9 pm, to reduce waste while attracting late-night customers. The approach helps stores maintain gross margins above 60 percent, the company said.
The brand is also seeking differentiation through localization. In April, Ye Gelato opened its global flagship store in Shanghai and introduced its "Oriental Gelato" concept, incorporating local ingredients such as Wuchang rice, jasmine flowers, bayberries and kiwifruit into its products.
Founder Cui has described the strategy as "turning China's agricultural resources into gelato". Its Wuchang rice flavor, developed by the brand, has since been replicated by other players, highlighting its influence in shaping new product trends.
However, the next challenge for gelato chains may come from outside the ice cream industry.
China's large tea beverage chains are increasingly moving into the category. Chagee has launched its "Geelato" gelato line priced between 18 and 26 yuan, while Heytea has introduced gelato stores selling single scoops for around 19 yuan.
These players bring advantages that pure ice cream brands may struggle to match, including established store networks, membership ecosystems and supply chains.
As competition pushes prices lower and expands the category beyond traditional ice cream players, the next phase of China's frozen dessert market may depend less on store numbers and more on whether brands can build differentiated products, efficient operations and lasting consumer loyalty.
International Dairy Queen Inc (IDQ), based in Minneapolis, Minnesota, is the parent company of American Dairy Queen Corp and Dairy Queen Canada Inc. Through its subsidiaries, IDQ develops, licenses and services a system of more than 7,800 DQ restaurants in more than 20 countries. IDQ is a subsidiary of Berkshire Hathaway Inc.
Editor：Zhou Jinmiao
