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How to Start a Bubble Tea Business

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start a Bubble Tea Business

Fast Facts

Investment range

$21,550 - $45,100

Revenue potential

$220,000 - $1,100,000 p.a.

Time to build

1 – 3 months

Profit potential

$44,000 - $220,000 p.a.

Industry trend

Growing

Commitment

Full-time

Bubble tea is the latest hot trend in US soft drinks, although it’s been popular in Asia for ages. Also known as boba tea, bubble tea is a tea-based drink with milk and other flavors, and chewy tapioca pearls. Most bubble tea bases are black tea, green tea, or oolong tea. The market is booming and expected to grow nearly 80% by 2027. You could join the craze and get a share of that market by starting your own bubble tea business.

But before you jump in, you need to brew up some business knowledge. Fortunately, you’ll find all the business insights you need in this step-by-step guide, designed to put you on a path to bubble tea success.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a bubble tea business has pros and cons to consider before deciding if it’s right for you. 

Pros

  • Trending Market – Demand for bubble tea is growing rapidly
  • Ingenuity – Create your own unique flavors
  • Easy Entry – You might buy a Kung Fu Tea or Gong Cha Tea franchise to get started

Cons

  • High Startup Costs – Opening a bubble tea shop costs $$$
  • Crowded Market – Bubble tea shops are popping up everywhere

Bubble tea industry trends

Industry size and growth

bubble tea industry size and growth

Trends and challenges

Trends in the bubble tea industry include:

  • Increased health consciousness is driving demand for bubble tea, as it is thought to have many health benefits.
  • Bubble tea is extremely popular with Millennials and Gen Zers. A 2021 survey showed that 94% of those aged 20-29 had purchased it in the past month.

Challenges in the bubble tea industry include:

  • The growing prevalence of bubble tea shops is making the market very competitive.
  • Rising prices for ingredients are cutting into the profit margins of bubble tea businesses.
bubble tea industry Trends and Challenges

How much does it cost to start a bubble tea business?

Startup costs for a bubble tea business range from $21,000 to $45,000. Costs include a shop space rental deposit, space preparation, equipment, and ingredients. 

You’ll need a handful of items to successfully launch your bubble tea business, including: 

  • Bubble tea machines
  • Automatic tea brewers
  • Automatic tapioca pearl makers
  • Automatic tapioca pearl cookers
  • Refrigerator
  • Sealing film
Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Business licenses and permits$100 - $300$200
Insurance$100-$300$200
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Shop rental deposit$3,000 - $7,000$5,000
Shop preparation and equipment$15,000 - $30,000$22,500
Ingredients inventory$2,000 - $4,000$3,000
Total$21,550 - $45,100$33,325

How much can you earn from a bubble tea business?

The average price for bubble tea is $6. Your profit margin after rent, overhead, labor, and ingredients will be about 20%.

In your first year or two, you could sell 100 bubble teas per day, bringing in $220,000 in annual revenue. This would mean $44,000 in profit, assuming that 20% margin. As your brand gains recognition and your shop grows in popularity, sales could climb to 500 teas per day. With annual revenue of $1,100,000, you’d make a tidy profit of $220,000.

bubble tea business earnings forecast

What barriers to entry are there?

There are a few barriers to entry for a bubble tea business. Your biggest challenges will be:

  • The startup costs of opening a shop
  • Coming up with unique flavors that draw customers

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Step 2: Hone Your Idea

develop a business idea

Now that you know what’s involved in starting a bubble tea business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research bubble tea businesses in your area to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing a bubble tea shop that uses popping boba or a bubble tea shop that also offers snacks.

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as green tea-based bubble tea or dessert-flavored boba tea.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

You’ll need to come up with a menu of bubble tea flavors. You could also offer food items. 

How much should you charge for bubble tea?

The average price of a bubble tea is $6. Your ongoing expenses will be for rent, overhead, labor, and ingredients. You should aim for a profit margin of about 20%.

Once you know your costs, you can use our profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be broad but tend toward a younger demographic. You should market on sites like TikTok and Instagram. 

Where? Choose your bubble tea location

Selecting the right location for your bubble tea business is essential for its success. Look for a spot in a high-traffic area with a strong youth culture, such as a college campus, a trendy shopping district, or a bustling downtown area.

Consider accessibility and convenience, ensuring that the location has ample foot traffic and is easily reachable by public transportation. By strategically choosing the right location, you can establish a profitable and popular bubble tea business that caters to a wide range of customers and sets you apart from the competition.

You’ll need to rent out a shop space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

bubble tea business idea rating

Step 3: Brainstorm a Bubble Tea Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “bubble tea” or “boba tea”, boosts SEO
  • Name should allow for expansion, for ex: “The Bubble Tea Company” over “Matcha Bubble Tea”
  • Avoid location-based names that might hinder future expansion

Discover over 240 unique bubble tea business name ideas here. If you want your business name to include specific keywords, you can also use our bubble tea business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Bubble Tea Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: A brief summary outlining the core elements of the bubble tea business plan, including its mission, goals, and key highlights.
  • Business Overview: An overview of the bubble tea business, detailing its mission, vision, target market, and the unique value it brings to customers.
  • Product and Services: A concise description of the bubble tea products and services offered, highlighting key features and potential variations.
  • Market Analysis: An examination of the bubble tea market, including target demographics, trends, and potential growth opportunities.
  • Competitive Analysis: An evaluation of competitors in the bubble tea industry, outlining strengths, weaknesses, opportunities, and threats to the business.
  • Sales and Marketing: Strategies for promoting and selling bubble tea, encompassing marketing channels, pricing, and sales tactics.
  • Management Team: Introductions and brief bios of the key individuals responsible for managing and operating the bubble tea business.
  • Operations Plan: Detailed information on the day-to-day operations of the bubble tea business, covering suppliers, equipment, location, and logistics.
  • Financial Plan: A comprehensive financial projection for the bubble tea business, including startup costs, revenue forecasts, and profit margins.
  • Appendix: Additional supporting documents, data, or information that provides further context or details to enhance the overall business plan.
what to include in a business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running. 

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bubble tea businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your bubble tea business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
types of business structures

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a bubble tea business. You might also try crowdfunding if you have an innovative concept. 

types of business financing

Step 8: Apply for Bubble Tea Business Licenses and Permits

Business Licenses and Permits

Starting a bubble tea business requires obtaining a number of licenses and permits from local, state, and federal governments.

Depending on the requirements in your area, you may need:

  • Food service license
  • Food handler’s permit
  • Building health permit

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your bubble tea business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
types of business insurance

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Restaurant 365, lightspeed, and toast to manage your menu, inventory, scheduling, and payments.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

For your bubble tea business, aim to create a buzz and desire for your distinctive and delicious tea blends. The strategy should mix classic marketing methods with fresh, trendy approaches to appeal to various demographics, from younger generations to families looking for an enjoyable and cool drink option. Here are a few strategies to utilize to generate excitement and maintain customer engagement.

Digital Presence and Online Marketing

  • Vibrant Social Media Showcases: Utilize Instagram, Facebook, and TikTok to display colorful images and fun videos of your bubble tea offerings, tapping into the visual appeal of your drinks.
  • Localized SEO Strategies: Make sure to optimize your website so that your business pops up in local search results for bubble tea, tea shops, and refreshments in your area.
  • Engaging Online Menus: Have an interactive and up-to-date menu on your website, with appealing photos and descriptions of each flavor.

Kickstart Marketing

  • Eye-Catching Branding: Create a strong visual brand that can be easily recognized, from the shop design to the cup aesthetics.
  • Introductory Offers: Entice new customers with opening specials, like buy-one-get-one-free deals or discounts for first-time visits.
  • Email Campaigns: Build an email list to notify customers about new flavors, specials, and events at your bubble tea shop.

Content Marketing and Engagement

  • Flavorful Blogging: Create content about the origins of bubble tea, how-to guides for making it at home, and the latest trends in tea flavors.
  • Customer Spotlights and Reviews: Encourage customers to leave reviews and share their favorite bubble tea combinations on social media.

Experiential and In-Person Engagements

  • DIY Bubble Tea Stations: Set up a station where customers can mix their own bubble tea flavors, offering a personalized experience.
  • Local Market Stalls: Serve your bubble tea at local markets and festivals to reach a broader audience and generate buzz.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your bubble tea business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your bubble tea business could be:

  • Healthy, organic bubble teas in a variety of delicious flavors
  • Tasty, thirst-quenching bubble tea delivered to your door
  • Healthy boba tea specialists
unique selling proposition

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a bubble tea business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in bubble tea for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in bubble tea. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

Building a Team for a New Business

You will likely need workers to fill various roles. Potential positions for a bubble tea business include:

  • Shop Clerks – take orders, make bubble teas
  • General Manager – scheduling, ordering, accounting
  • Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Bubble Tea Business – Start Making Money!

Running a Business

Ready to get in on the bubble tea craze? It’s a booming market, so now could be the perfect time to start your bubble tea business. Whether you start from scratch or purchase a bubble tea franchise, you’ll have to make an investment, but you can make good money and have fun! You could become the go-to bubble tea shop in your area. 

Now you have the business expertise, so go ahead and start brewing your way to bubble tea success!

Bubble Tea Business FAQs

Can a bubble tea business be profitable?

Yes, a bubble tea business can be profitable. The key is to create interesting and unique flavors that will keep customers coming back.

What is the most popular flavor of bubble tea?

Milk tea is generally the most popular. Other popular flavors include green tea and oolong tea.

What is the healthiest bubble tea?

Green and black teas are full of antioxidants. You have to be careful about what you put in because adding unhealthy ingredients can take away from the health benefits.

What is the most successful bubble tea company?

Kung Fu Tea is the largest bubble tea brand in the United States. They have more than 350 locations across the country.

Can you start bubble tea business on the side?

A bubble tea business is really a full-time commitment. If you only have limited hours, you’re limiting your revenue. 

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How to Start a Bubble Tea Business