Kung Fu Tea Franchise Cost, Profit & Failure Rate 2024

The bubble tea market is booming, with a global market size of $2.17 billion in 2021 and estimated to grow at a CAGR of 7.40% between 2021 and 2029. As an entrepreneur, it might be the perfect time to consider opening a Kung Fu Tea franchise.

Kung Fu Tea is America’s largest bubble tea brand, with hundreds of locations across the country. Each location serves over 70 flavors of bubble tea, plus snacks and slushies. Kung Fu Tea uses premium ingredients, like real fruit puree, cane sugar, and whole-leaf teas, to make their drinks, thus setting them apart from other bubble tea brands.

It is one of the 10 best bubble tea franchises that you must own.

If you’re considering opening a Kung Fu Tea franchise, this guide is for you. We’ll cover everything you need to know about becoming a Kung Fu Tea franchisee, including the costs of opening the franchise, requirements, and more.

Kung Fu Tea Franchise

About Kung Fu Tea Franchise

Kung Fu Tea is a bubble tea franchise with locations across the United States and Canada. The brand offers over 70 flavors of a bubble tea made from real fruit purees and whole-leaf teas, as well as snacks and slushies.

Kung Fu Tea uses its unique ‘3T’ method for brewing the perfect cup of bubble tea: selecting the best quality tea leaves, brewing at the optimal temperature, and steeping for just the right amount of time.

The company prides itself on its freshness guarantee; customers can be sure that all teas are freshly brewed every 3 hours, while standard bubbles are cooked every 2 hours and punch drinks are made with freshly squeezed juices. In Canada, they operate under the name KF Tea.

Kung Fu Tea has become synonymous with high-quality bubble teas and flavorful drinks, offering an unparalleled experience for both loyal customers and first-time visitors alike. By opening a Kung Fu Tea franchise, you can bring this unique experience to your community.


Kung Fu Tea Franchise History

Kung Fu Tea Franchise History

In 2009, three New Yorkers – Allen, Michael, and Ray – had just returned from a trip to Taiwan and were desperate for the bubble tea they had enjoyed as children. After searching for a place to get their fix in Queens, New York, the trio stumbled upon an unsuspecting local tea spot and ordered a cup of bubble tea each.

But after taking one sip, the trio put down the drink in disgust; it was a poor knockoff of their beloved childhood drink.

Little did they know, however, that this experience would inspire what would become one of America’s leading bubble tea franchises. The trio noticed a long line of customers at the shop and realized there was an untapped demand for quality bubble teas in the US. It was then that they decided to pursue their own business venture — and luckily enough, Allen had a friend in Taiwan named Sean who owned his own chain of successful bubble tea stores there.

The trio called Sean and got him on board, and with his experience in the industry, they began researching different recipes, ingredients, and brewing methods. After months of product research and development, the first Kung Fu Tea store opened in Queens on April 30th, 2010.

After finding success with this location, they began offering franchises in 2013, which is how Kung Fu Tea has spread across 350+ locations all over the United States today.


Franchise Model Table

Cost Or FeeAmount
Initial Investment$123,000–$422,000
FranchiseYES
Franchise Fee$37,000
Royalty Fee3%
LiquidityN/A
Estimated Outlets350+

How Much Does It Cost To Open A Kung Fu Tea Franchise

The total cost of opening a Kung Fu Tea franchise can vary depending on your business model and location. The standard franchise fee is $37,000, with additional expenses for initial capital and ongoing royalties.

Initial capital costs for traditional Kung Fu Tea franchises range from $140,000 to $422,000. This fee covers the cost of equipment, building renovations, inventory, and other startup costs. For non-traditional franchises (located in airports or shopping malls), the estimated initial capital outlay is between $123,000 and $275,000.

Kung Fu Tea also collects a royalty fee of 3%, which is paid by the franchisee every month. Additionally, 2% of sales are set aside for advertising and marketing fees. This fee goes towards regional campaigns that aim to promote brand awareness in local markets.


How much do Kung Fu Tea Franchise Owners Make?

Based on the available data from 2020, the estimated average franchise revenue is $335,688. Considering a 10% profit margin, the approximate profit would be $33,568.

This is how we calculated this amount:

Financial OverviewPercentage of RevenueAmount ($)
Individual Franchise Annual Revenue100%335688.00
Rent11.25%(37764.90)
Insurance5.63%(18882.45)
Salaries22.50%(75529.80)
Franchise Royalty Fees5.63%(18882.45)
Utilities2.25%(7552.98)
Cost of Goods Sold (COGS)28.13%(94412.25)
Labor (Variable)14.63%(49094.37)
Total (Expenses)90.00%(302119.20)
Net Profit10.00%33568.80

Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.


Kung Fu Tea Failure Rate

Franchised Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
2020213242+29
2021242285+43
2022285339+54

For the Franchised outlets:

  • In 2020, the growth rate was (29)/213×100≈13.61%
  • In 2021, the growth rate was (43)/242×100≈17.76%
  • In 2022, the growth rate was (54)/285×100≈18.94%

Company-Owned Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
202023+1
202132-1
202222 0

For the Company-Owned outlets:

  • In 2020, the growth rate was (1)/2×100≈50%
  • In 2021, the failure rate was (1)/3×100≈33.33%
  • In 2022, the failure rate was (0)/2×100≈0.00%

Total Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
2020215245+30
2021245287+42
2022287341+54

For Total outlets:

  • In 2020, the growth rate was (30)/215×100≈13.95%
  • In 2021, the growth rate was (42)/245×100≈17.14%
  • In 2022, the growth rate was (54)/287×100≈18.81%

According to the above-mentioned data, there is no failure rate for franchised outlets as the outlets at the end of the year increased during the span of 3 years.

We can see that the franchised outlets for Kung Fu Tea grew from 2020 to 2022, showing a growth rate between 13.61% and 18.94%.

On the other hand, for company-owned outlets, the failure rate of Kung Fu Tea was lying in the range between33.33% and 0.00% from 2021-2022 respectively. The company started with positive net change, showing a growth rate of 50%.

Overall, when we combine the data of franchise and company-owned outlets, we can see that the Kung Fu Tea franchise has expanded in the years 2020-2022 showing a total growth rate between 13.95% and 18.81%.


Payback Period Of Kung Fu Tea Franchise

With an investment of $422,000 and an estimated 10% profit margin, the yearly profit would be $33,568.

So, to find out how long it will take to earn back the initial investment:

Payback Period = Investment / Yearly Profit = $422,000 / $33,568 = 12.57 years

Based on these figures, it will take approximately 13 years to pay back the initial investment for Kung Fu Tea. This time period could be longer or shorter depending on your sales, revenue, and profit figures.


Kung Fu Tea Franchise Requirements

In order to open a Kung Fu Tea franchise, there are certain requirements that potential business owners must meet.

Primarily, entrepreneurs must have enough capital to cover the initial investment costs associated with opening the franchise, which ranges from $140,000 to $422,000. Additionally, they must also find a suitable space to operate their business – ideally one in a high-traffic area.

Experience is not necessarily required for opening a Kung Fu Tea franchise; however, having some background knowledge of the food industry will be beneficial when it comes to an understanding of the operations and processes associated with running a successful store.

On top of the financial requirements, prospective franchisees must also display a passionate commitment to the brand by undergoing training on all aspects of running a successful business — from customer service and marketing strategies to product development and store operations.


Kung Fu Tea Franchise Training and Support

Kung Fu Tea Franchise Training and Support

The Kung Fu Tea team provides an extensive training program for all franchisees to ensure success. Once a franchise has been officially signed, the franchisee must pay a $10,000 training fee for up to two people. This fee covers the cost of learning methods and materials that will help them master the brand’s standards and practices.

Kung Fu Tea’s training program usually takes three weeks and includes in-person and online sessions. During the initial onsite portion, new franchisees are expected to tour existing stores and attend lectures from experienced store owners. This part of the program also includes hands-on practice in making drinks, managing staff, and completing daily operations.

Kung Fu Tea also provides ongoing support after franchisees have finished their initial training. Additionally, the brand gives franchisees access to a wide range of online resources like marketing campaigns, store operations guidance, and more.


Kung Fu Tea Franchise Terms Of Agreement & Renewal

Kung Fu Tea’s terms of agreement and renewal are straightforward and easy to understand. The initial term for a Kung Fu Tea franchise is ten years, but it can be renewed for another ten years upon meeting certain requirements.

To renew a franchise for an additional ten years, Kung Fu Tea requires the franchisee to maintain good standing during the initial contract period. This means that all royalty fees and advertising commitments must have been met on time, and store operations must have been performed according to the brand’s standards.


Kung Fu Tea Franchise Obligations and Restrictions

When opening a Kung Fu Tea franchise, there are certain obligations and restrictions that must be adhered to.

First and foremost, all franchisees must commit to using the brand’s name, logo, decor, and menu items for the duration of their agreement. Additionally, they must also agree to use only approved suppliers for food ingredients and products. Before a franchisee is allowed to open their store, the Kung Fu Tea team will inspect it to ensure that all standards are met.


Kung Fu Tea Franchise Financial Assistance

Kung Fu Tea offers franchisees access to third-party sources that can provide financing assistance. However, the brand does not offer any direct or indirect financing options. Franchisees are expected to cover the initial investment cost of opening a Kung Fu Tea franchise, which generally ranges from $140,000 to $422,000.

The good news is that potential business owners have access to several financial assistance resources that can help them raise the necessary capital.

For example, the Small Business Administration (SBA) offers several loan programs to small business owners, including the 7(a) Loan Program and the 504 Loan Program. Additionally, many states also offer particular funding options for entrepreneurs.

For those looking to open a franchise in the beverage industry, possibilities include Smoothie King franchiseMilkshake FactoryTiger SugarHTeaO, and Ding Tea Franchise.


Kung Fu Tea Comparison

CompanyKung Fu TeaGong Cha Tea
Founded In20092006
Initial Investment$123,000 – $422,000$217,800 to $498,000  
Franchise-Fee$37,000$30,000  
Total Outlets2001,459
Annual Revenue$27.2 billion $576,575

Conclusion

Despite being a relatively new franchise, Kung Fu Tea has already established itself as one of the best bubble tea franchises to open. The brand offers an extensive training program, ongoing support, and access to financial assistance resources. However, potential franchisees must meet certain requirements in order to open a store and adhere to all obligations and restrictions.

If you’re looking to start a new business and want to be part of the exciting bubble tea industry, Kung Fu Tea could be the perfect franchise for you. Investing in this brand could provide you with an excellent opportunity for success.


Frequently Asked Questions 

Is it possible to make money selling bubble tea?

The sheer number of bubble tea outlets opening demonstrates that the bubble tea sector is one of the most lucrative industries in the food and beverage industry.

Is it profitable to own Kung Fu Tea franchise?

You should not expect a profit or loss within the first six months. The gross profit margin will steadily climb to 15% after one year. By year two, you’ll have an average gross margin of 56 percent.

Is Kung Fu Tea a Franchise?

Kung Fu is a fearless leading tea brand with over 200+ locations nationwide. They offer a variety of retail store franchises for oriental-style brew tea, bubble tea, Coffee, and so on.

Is Opening A Kung Fu Tea Franchise Worth It?

Yes, opening a Kung Fu Tea franchise can be a great investment. With a 20% profit margin, a loyal customer base, and access to financial assistance resources, this could be an excellent business opportunity.

How Many Kung Fu Tea Locations Are There?

There are currently 350+ Kung Fu Tea locations worldwide.

Where is Kung Fu Tea headquartered?

The headquarters of Kung Fu Tea is located in New York. They are operating in North America, Canada, and Australia.

Who founded Kung Fu Tea?

Kung Fu Tea is founded by Allen Wang. He is also a partner in Jung Fu Tea.

Leave a Comment