The China Consumers Association on Wednesday cautioned domestic buyers about being tricked by prepaid private education companies - especially those claiming to offer attractive discounts while actually charging higher fees.
The authority said Youwin Education, a 21-year-old offline K12 education company, recently in trouble with a cash crush and consumer demands for refunds, was an example of "failing to operate a valid financial supervision system."
The Youwin Beijing headquarters office was reported to be vacant and many of its outlets nationwide have closed since the middle of this month. Employee salary payments reportedly have been delayed.
The company claimed to own 1,200 outlets across the nation. Most of them operate as brand franchisees.
"Today eight educational institutes agreed to take some of our students," said Youwin Education Founder Chen Hao via a livestreaming platform. Chen claimed it was a phase of the company's "self-rescue plan" and he promised the company wouldn't "runaway" with the money like others had done.
Webb International English and Great Stone Gridiron, an English-teaching American football training institute, closed most of their outlets in China last year without redeeming fees.
To prove the company will work to solve the problem, Chen said the company would hold daily livestreaming meetings from Oct. 21 to "report daily work to consumers, employees and brand franchisees."
A protest in Beijing's central business district Oct. 18 saw 200 parents gather outside Youwin Education's offices demanding the company to "return money."
A protesting parent told the South China Morning Post she had spent more than 100,000 yuan ($14,908) on prepaid courses for her middle-school child and so many families have been "fooled and entrapped."
Losing The Expansion Game
Consumers asked: "How come Youwin Education is out of cash with such high prepaid tuition fees?" Chen blamed the coronavirus pandemic, indicating the company should have laid off some of its 30,000 employees.
Experts, however, say the coronavirus pandemic was merely the last hit on an already troubled financial situation and "deceiving past."
Individual investors told Times Weekly that the company showed profits in its early few months only. Since then it has been downhill. In 2019, several Youwin outlets were exposed for lacking education qualifications - so tutors held classes in yoga studios, cafes or even fast food restaurants.
During Chen's livestreaming report Oct. 21, he admitted the company had accelerated expansion between 2018 and 2019 - which resulted in up to 50% of its education locations being unqualified by national standards. Relocation and renovation of these new institutes led to cash flow problems.
Additionally, the company recently has been under criticism after it was caught falsifying tutors' educational backgrounds.
Holding Out Or Holding On?
Beijing Marketing Supervision Bureau revealed up to 193 complaint cases aimed at Youwin Education and, as of Oct. 13, less than 4% of these cases were solved.
On Oct. 15, the legal representative of Youwin Education changed from Chen Hao to his mother, Tang Fangqiong. Meanwhile, Chen has registered several new companies, according to corporate data platform Tianyancha.
This move is seen by many consumers as a preparation to "runaway." In response, Chen vowed Friday that the company "didn't transfer money to any other companies."
Following the scandal, Jinzhou Cihang Group Co., Ltd., which operates in financial leasing and gold investment, made an urgent statement Monday that it was abandoning its plan for full-equity acquisition of Youwin Education owing to Youwin's "uncertain situation and worsening tendency."
Since Sunday, Chen hasn't updated his report on the "self-rescue plan" progress via the livestreaming platform.
Spending on education and entertainment fell 27.7% between January and September in China, according to the National Bureau of Statistics.