(Yicai Global) March 27 -- Debt-laden Chinese bike sharer Ofo plans to shift its business model in third- and fourth-tier cities to a franchise program as it looks to slash operating costs.

Local agents will be responsible for maintenance and business operations in their region but Ofo will still own the bikes, online news outlet Sina Technology reported yesterday. The Beijing-based firm behind Ofo, Bikelock Technology, began piloting the program in Weihai, Taian and other cities in Shandong province last year.

"Ofo has entered a period of optimizing operations and the agency model enables it to effectively connect with local companies," said Zhou Weiguo, general manager of China operations. This "maximizes the use of local resources to achieve a win-win situation at minimal cost," he added.

Ofo began struggling to repay user security deposits in September last year, and at one point more than 11 million members were waiting for a refund while the company battled to pay off the CNY6 billion (USD894 million) that it owed to creditors and avoid bankruptcy.

The firm, founded in 2014, quickly became one of China's top bike sharers alongside rival Beijing Mobike Technology as the sector underwent explosive growth. But there have always been concerns over the profitability of the business model. Excessive expansion in a bid for market share led to chaotic management of bikes on city streets, and many of China's metropolises have banned the deployment of new bikes since 2017.

China's 'app for everything' Meituan Dianping purchased Mobike in April 2018 for USD2.7 billion, a move that many believed showed Ofo there are only two options to move forward in the sector: get bought or go bust. Ofo founder Dai Wei has always vowed that the company intends to remain independent.

Editor: James Boynton