How to Start a Bubble Tea Business

Part 1 - How to start a Bubble Tea business - Background

In operating a bubble tea business, you’ll bring the Taiwanese drink to the attention of customers in a retail environment. The drink is incredibly popular throughout much of Asia, but still in the introductory stage in America. Here, it’s finding increasing acceptance with a trend-seeking millennial audience, particularly in university settings. Among its many other names, bubble tea is sometimes called boba tea or boba juice, pearl milk, or bobi.

Our guide is in 3 parts:

• Part 1 - How to start a Bubble Tea business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a bubble tea business?

Depending on your location, and the product mix involved, you could spend as little as $15,000 or as much as six figures on startup costs. The low cost can involve adding used equipment to a section of an existing store that might sell pastries, cookies, smoothies, coffee, books, gifts and souvenirs, etc. Here’s how your costs might break down.

Rent — $50,000 a year, or more – Remember, you’ll want to find a location where your audience hangs out. That might be a college campus environment or a similar young and vibrant setting. Rent tends to be pricey in such locations. Do you want a kiosk or a pick-up or sit-down setting? Will you be serving other foods or beverages? All of this will impact your rent.

Equipment — $10,000 or more – The basics include gas or electric stove, blender, stirrers, shaker cups, sealer machine, refrigerator and ice maker. Most of this equipment can be bought online at sites such as Boba Tea Direct. Or search online for used equipment.

Ingredients — $2,000 or more for a starter supply – This includes tea, milk and fruit and flavor powders. You’ll pay additionally for whatever ingredients or supplies are necessary for sale alongside bubble tea, if any.

Logo development, signage and marketing materials — Up to $10,000 or more – This might include everything from creating your logo to buying store signage and producing business cards, fliers and other sales and marketing literature.

Licensure, certification and liability insurance — $750 or more, est. – Depending on your location and products sold, you’ll probably have to have a business license and a health permit at the very least. Visit the U.S. Small Business Administration (SBA) website to find out the licensing requirements in your state.

Staffing — $25,000 or more – Initially, this might simply reflect what you — as your sole employee — need to take out of the business. You’ll spend less than this if you have a working mate, savings or second source of income. And you’ll spend more as your staffing needs increase.

It’s also possible to buy a bubble tea franchise and get most of your startup needs supplied as a package. However, you could spend well into six figures in franchising fees and costs. You’ll find examples of such opportunities here and here.

What are the ongoing expenses for a bubble tea business?

Once you’ve established your presence, your ongoing costs will include ingredients and store staffing and operational costs. These variable costs will follow and reflect the amount of business you do at your store.

Who is the target market?

Depending on your location, one major segment of your audience is likely to include early adopters. These are people willing to try new products or experiences. Their word of mouth could be very valuable to you. If you’re establishing your business in a location where most prospects will be familiar with bubble tea, your customer base might consist of people who want to judge your tea and overall product mix against the competition.

Regardless of your location, customers will expect a pleasing and relatively low-cost break from their day.

How does a bubble tea business make money?

You’ll make a bubble tea drink for a cost of roughly 75 cents and sell the drink for a few dollars. Depending on your competition and pricing sensitivity, you could make a markup of 350 percent or better on the drink. Additional revenue might be derived from the other foods, drinks, or merchandise you sell.

How much can you charge customers?

What do the coffee houses in your geographic location generally charge for premium drinks? This is a good indication of what you might be able to charge It’s likely to be in the range of $3 to $5. Set a price point and see what the response is. And be sure to keep an eye on the pricing of direct (other bubble tea retailers) or indirect (coffee houses, smoothie shops, etc.) competitors.

How much profit can a bubble tea business make?

A 350 percent markup on a beverage is not unreasonable. Gross profit margins in the 75-80 percent range are not rare in the food and beverage retail industry.

How can you make your business more profitable?

Think what else you can make with the same or similar equipment purchased for bubble tea. You might also consider adding smoothies, coffee or ice cream to your menu. Or buy cookies, pastries or other dessert items for resell from nearby vendors. How about adding t-shirts, mugs, posters, music or other merchandise that might appeal to your same customer base? Try additional products for a while and see if they sell. If they don’t, adjust your mix.

Day-to-Day and Growth

What happens during a typical day at a bubble tea business?

Your typical workday could consist of a range of activities including:

• Taking orders and payments

• Crafting bubble tea drinks for your customers

• Cleaning your business

• Promoting and marketing your business in the community

• Meeting and serving customers and cross-selling other food or non-food items in your store

What are some skills and experiences that will help you build a successful bubble tea business?

You must find a location with ample foot traffic and a young, educated population. It’s also important to find competitively priced ingredient vendors so you can maintain the highest possible margins. You should also have a strong customer service outlook. Your customers will return for you and the atmosphere you provide as much as for the bubble tea you sell.

What is the growth potential for a bubble tea business?

As of this writing, the bubble tea business is still in its youth in America. It’s particularly popular in young-adult setting such as Austin, Texas and parts of California and the Southeast, but it’s unknown in significant portions of the nation. As word gets around on social media, your audience will find you if you’re based in a location where millennials are predominant. College campuses are among the best locations to open a bubble tea business. 

What are some insider tips for jump starting a bubble tea business?

Get the word out. Especially if your market is relatively unaware of bubble tea. Let people learn what the beverage is, how it’s made, and how great it tastes. Also, try to pair bubble tea with at least one other complementary product. This will help you bring customers in the door and cross-sell.

How and when to build a team

While you’ll probably start as a sole employee or with family and friends, you’ll see the need to hire as soon as you can. The last thing you want is for customers to warn others away because of long lines or order mixups due to understaffed operations. Begin by hiring part-time crew members and addinig hours to meet traffic flow and revenue gain.

Part 2 - Is a Bubble Tea business the right fit for you?

Part 3 - Action plan to launch your Bubble Tea business in 90 days