Bubble tea – also known as boba tea – is insanely popular. Created in Taiwan in the 1980s, bubble tea has become a huge industry, valued at approximately $2.3 billion dollars. This drink features a base of milk tea or juice with sweet, chewy tapioca balls (the bubbles or boba) and a wide straw.
Boba shop owners can turn a tidy profit, particularly if they are located in an area with a lot of younger customers. This can make it an attractive business opportunity for entrepreneurs looking to break into or expand into the market. However, prospective business owners should be aware that it can cost anywhere from $75,000 to $500,000 to open a bubble tea shop.
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Average Cost to Open a Bubble Tea Shop
When you are thinking about starting your own business, one of the first steps that you will need to take is to draft a business plan. This document sets out your vision and goals for your company, and should be backed by hard numbers and research. Having this data is critical if you hope to attract investors or otherwise gain funding, or simply to plan your own budget. That being said, it can be hard to estimate the average cost to open a boba tea shop. Much of the cost depends on factors like location, the cost of living, and how much equipment you will need to purchase. For example, if you lease a space inside of a college student union building, then your rent will likely be high. For this reason, the cost to open a bubble tea shop may be as little as $75,000 – or as high as $500,00. Most entrepreneurs can expect to spend around $100,000 to $150,000 to start their own boba tea café. The single biggest cost for most bubble tea shops will likely be real estate. Whether you are buying an existing store, building a new shop, or leasing a space, you will need to put down a significant amount of cash to secure your location. When you are developing your business plan, you should consult with a real estate agent to get a good idea of the price per square foot for commercial spaces in your area. The most profitable boba tea shops are typically in walkable areas that have a high concentration of younger people. A recent survey found that bubble tea is most popular with Millennials and Gen Z. As such, you will probably have more success as a boba tea shop owner if you buy, build, or rent a store that is near shops, restaurants, and other businesses favored by young people. Ideal locations for bubble tea shops include near schools, college campuses, shopping malls, and airports. The cost per square foot for a commercial space can vary wildly based on where you are located. The average cost per square foot for a retail property is $18. However, this number can be two to three times higher in New York City, Chicago, Washington, D.C., Los Angeles, and other major metro areas. Of course, there are a number of other expenses associated with opening up a bubble tea shop. You will need to take a close look at how much it will cost to run your business to get a true sense of how much capital you will need to open your own business.Typical Boba Tea Shop Expenses
Each bubble tea shop is unique. That being said, all boba tea cafes need certain material and equipment to get started. Each of these costs should be factored into your business plan to determine the necessary start-up capital. These expenses include:- Bubble tea machines to streamline the drink-making process. Depending on your shop, you may choose to purchase a bubble tea fructose dispenser to more accurately dispense whatever sweetener you use to ensure consistency, a bubble tea shaking machine to combine ingredients more effectively, and a bubble tea sealing machine to use a plastic film to seal the top of the cup.
- Kitchen equipment to cook and store your boba and other ingredients. This may include an automatic tea brewer for perfect tea in large quantities, a blender for smoothies, a range, and a refrigerator.
- Bubble tea ingredients to make the drink. Typical boba tea ingredients are:
- A variety of teas, including black, oolong, matcha, and herbal tea
- Bubble tea powers that include creamer and sugar.
- Bubble tea syrups to bring flavor and sweetness to the drink.
- Bubble tea creamer in powdered form that can be stored at room temperature.
- Tapioca starch or pearls for the boba itself.
- Pre-made boba is less cost-effective than making the bubbles yourself, but can ensure a more consistent final product.
- Popping boba for a fun alternative to traditional boba.
- Jelly toppings, sweetened with flavored syrups.
- Smoothie paste made of real fruit pulp to create thick smoothies.
- Boba tea disposable products to serve the tea in, such as custom clear plastic cups (so customers can see the pearls), a wide boba tea straw that allows patrons to suck up the boba, dome lids, and/or sealing film.
- Miscellaneous supplies for making boba tea, which make include shaker cups (if you don’t have a shaker machine), a large stock pot for cooking the tapioca pearls, a strainer, measuring cups, mixing bowls, food storage containers, syrup pumps, a food thermometer, a food scale, and a water filtration system.
- Rent or mortgage payments: whether you lease a commercial space or buy one, you will have a significant up-front cost that must be accounted for as part of your budget. When looking for a location, try to balance the cost with the potential for profit. In other words, you might save a few hundred dollars a month if you rent an out-of-the-way spot – but your business may not be profitable without foot traffic.
- Utilities: any business will need to have basic utilities, such as electricity, gas, water, sewage, garbage service, and Internet service. Depending on your usage, this may cost $1,000 or more per month.
- Marketing: you can have the best boba tea in town and your shop may still fail if no one knows about it. Your business plan should include funding for a website, branding (including a logo and/or slogan), social media marketing, traditional advertising, online advertising, and email marketing.
- Labor costs: even if your boba tea shop is relatively small, you will almost certainly need to hire staff to help you run it. You should account for training costs, wages, taxes, unemployment insurance, and benefits.
- Furniture: seating is not required in all bubble tea shops. In fact, you may open up a food truck or have a to-go only business model. However, drinking bubble tea – like coffee – is often a social event. If you have the space for it, consider purchasing chairs, tables, and couches for your customers. If you have outdoor space, you should also consider purchasing furniture for use outside as well.
- Decorations: at a minimum, you will likely need to paint your interior and add signs. You may also want to add other decor to play up your brand or make your space more inviting.
- Technology: using a Point of Sale (PoS) system is the easiest way to not only take orders but to track your sales, purchases, and inventory. You will likely need at least one tablet, a landline phone, and a security system.
- Professional services: any start-up will need the help of professionals to deal with licensing and other issues. You should be sure to set aside money for paying a lawyer, accountant and other professionals (like a marketing expert).
