Boba tea, or Bubble tea, is the hottest trend in America right now and has been popular in Asia for ages.
With the growing demand for this delicious pearl-popping drink, you might be wondering how much boba shop owners make.
There are a lot of factors that define the profitability of a boba or bubble tea shop, and in this article, we are going to look at them closely so that you can make a prudent decision about whether you should invest in this business or not.
What is Bubble Tea?
Bubble Tea is a Taiwanese beverage that includes tapioca pearls, also known as “bubbles,” which are made from cassava starch or tapioca.
These pearls are added to a liquid base of any flavor to become what is known as Bubble Tea.
To make the tapioca pearls or bubbles, the cassava starch or tapioca is added to boiling water to form a dough, along with ingredients like caramel, vanilla, fruit pulp, etc., to add flavor.
Most bubble teas are traditionally made with green tea, black tea oolong tea, black tea being the most popular option.
Bubble tea is gaining popularity in all parts of the world because of its uniqueness and delicious flavor. If you are interested in opening your own Boba shop, then keep reading.
Why is Bubble Tea Popular?
Bubble Tea is a really popular drink in Asia, especially in Taiwan and China. However, recently it has started gaining popularity in the West also, especially in the United States.
According to GlobeNewswire, the bubble tea market is valued at $2.46 billion as of 2023 and is expected to grow to 4.08 billion by 2030.
Since bubble tea can be customized in terms of flavor, diet preferences, etc., it appeals to a huge chunk of people, especially Gen Z.
However, in the United States, the demand for bubble tea is driven by novelty more than anything and can be found in both cities and small towns in the United States.
How Much Does It Cost to Open a Boba Shop?
The startup for a boba shop or a bubble tea shop can range between $21,000 to $45,000 including the cost for space preparation, rental deposit, ingredients, etc.
The initial investment can vary, however, depending on your location, the size of your boba shop, etc.
The typical expenses for a boba tea shop include:
- Bubble tea machines
- Automatic tapioca pearl makers
- Automatic tea brewers
- Automatic tapioca pearl cookers
- Sealing film
- Refrigerator
Here’s is a complete breakdown of estimated investment required to open a small bubble tea shop:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 – $200 | $175 |
| Insurance | $100-$300 | $200 |
| Business licenses and permits | $100 – $300 | $200 |
| Business cards and brochures | $200 – $300 | $250 |
| Website setup | $1,000 – $3,000 | $2,000 |
| Shop preparation and equipment | $15,000 – $30,000 | $22,500 |
| Shop rental deposit | $3,000 – $7,000 | $5,000 |
| Ingredients inventory | $2,000 – $4,000 | $3,000 |
| Total | $21,550 – $45,100 | $33,325 |
How Much Do Boba Shop Owners make?
The average selling price for bubble tea is $5. So to find out the annual revenue you just have to:
Multiply the selling price of bubble tea X number of bubble teas you sell in a day x 350 days.
So in your first one or two years if you sell 100 bubble teas a day for 350 days costing $5 then your total revenue will come down to $175,000.
Assuming you have a profit margin of 20%, you total profit would be $35,000 annually.
As your bubble tea brand gains more recoginition, you can easily sell up to 500 bubble tea per day and make annual revenue of $1,100,000 or more.
So boba shop owners make a handsome amount of money right from their initial years. Here are the 10 best boba shop franchises you can own.
How Much Does a Bubble Tea Cost?
In the U.S., the price for a cup of bubble tea is between $3.50 to $7.50, with the average cost being $5.
However, for the bubble tea shop owner, each cup only costs $0.75. So even if the store owner charges $3.50 for a cup of bubble tea on the lower end, that means he is charging 350% markup.
Are Bubble Tea Shops Profitable?
As you can see from the above statement, a bubble tea owner can easily mark up 350% more than what is the actual cost of a glass of bubble tea.
Bubble Tea shop owners usually have a profit margin in the range of 20% – 30% and easily make as much as $30,000 a month on average in net profits. So yes, bubble tea shops are very profitable.
Pros & Cons of Opening a Boba Tea Shop
Pros of Opening a Boba Tea Shop
- The demand for boba tea is increasing rapidly.
- You get to create your own unique flavors.
- Profitable business.
- Easy entry with low start-up cost.
Cons of Opening a Boba Tea Shop
- Crowded market.
How Much Does Boba Tea Franchise Owner Make?
The revenue for a boba tea franchise owner can vary depending on many factors again.
Again, if a cup of boba tea costs you $0.75, you sell it for $3 and sell at least 500 cups a day. Then you will make a gross profit of $30,000 per month.
Additionally, you must also consider variable costs for running a franchise.
Some popular Boba Tea franchises that you can check out are:
- Gong Cha
- Sharetea
- Kung Fu Tea
- Bubbleology
- Ding Tea
- Bee & Tea
- HTeaO
Should You Buy a Boba Tea Franchise?
If you want to run a boba tea business but do not want to start the business from scratch, then you can buy a boba tea franchise.
However, a boba tea franchise can cost you more money than starting your own brand. Some boba tea franchises require as much as $100,000.
A franchise will give you an opportunity to benefit from an already-established brand name and customer base.
However, if you want complete control over your business, do not want to share any profit, and are willing to do the hard work required to open a business from scratch, then opening your own bubble tea shop is a much better option.
Additionally, the startup cost for opening a bubble tea is also less than $21,000 to $45,000, making it an ideal decision.
How To Start a Boba Tea Business?
Here is a detailed video for you that explains how you can start a successful boba tea business in the best possible manner:
Tips to Increase Profitability For Bubble Tea Shop
If you want to increase your bubble tea business profitability and grow your business rapidly, then here are some tips that can help you:
Location
Choose your bubble tea shop location wisely. Since bubble tea is most popular among Gen-Z, targeting areas around schools or colleges could be a great way to get more traction.
You should also avoid locations that already have a number of popular bubble tea shops.
Use quality products
Nothing ruins the taste of bubble tea like low-quality ingredients. Since bubble tea can be made from a handful of ingredients which doesn’t cost much, you should ensure that you source only quality ingredients.
Keep up with trends
Bubble tea is popular partly because of its cool or trendy factor. So make sure you do not stick to your boring menu and keep introducing new trending flavors to keep the customers coming in.
The best way to do this is to keep an eye on what popular boba tea shops in Asia are introducing, and you can follow the same.
Consistency is key
Not being consistent with flavor is one of the biggest reasons why the boba tea shop fails.
Ensure that all your ingredients are sourced from the same supplier throughout. Ensure that you use the same amount and size of the boba pearls to maintain consistency.
Invest in marketing
Boba tea market is rising continuously, with more and more shops opening each day.
To stay ahead in the game and attract customers to your boba shop, you must invest in marketing by coming up with a marketing plan.
Top Reasons Why Boba Tea Shops Fail
Here is a list of reasons why many boba tea shops fail:
- Using poor or low-quality ingredients.
- Using inconsistent quantity and size of boba pearls.
- Not cooking the boba pearls- which are the highlight of bubble tea- properly.
- Not doing marketing and advertising of the boba tea shop.
- Choosing a poor location or a location with too many competitors in the vicinity.
- Not keeping up with the trends and not introducing new flavors.
- Poor management.
- Lack of a business plan.
Wrap Up
Boba Tea, or Bubble Tea, is one of the most trending drinks that can be customized and made in endless flavours.
Now is an excellent time to open a boba tea shop. And especially if the market is not too saturated in your area, this could be a golden opportunity for you.
In this guide on how much do boba shop owners make, we gave you a complete overview of the profitability, investment, revenue, etc. We hope this was helpful to you.
FAQs
How many boba tea shops are there in the United States?
As of July 2023, there are 3,601 Bubble Tea Shops in the United States, showing an increase of 21.2% from the previous year.
What are the challenges in opening a boba tea shop?
The two of major challenges in opening a boba tea shop are:
- Rising prices of ingredients.
- The rising number of boba shops everywhere.
How Many Cups Boba Tea Owners Sell Per Day?
The number of cups that a Boba tea owner sells depends on many factors like the number of competitors around the area, diversity of menu, location, etc.
However, on average successful bubble tea shop owners sell 150-500 cups of bubble tea in a day.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.