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Written by: Carolyn Young
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 Lepeska
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.
Published on March 31, 2022
Updated on May 7, 2024
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 to nearly $5.5 billion by 2032. 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.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
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Starting a bubble tea business has pros and cons to consider before deciding if it’s right for you.
Trends
Challenges
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:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| 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 |
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 an annual revenue of $1,100,000, you’d make a tidy profit of $220,000.
There are a few barriers to entry for a bubble tea business. Your biggest challenges will be:
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.
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.
When creating your menu for bubble tea flavors, consider including a variety of options such as classic milk tea, fruit-flavored teas, and unique combinations like matcha or taro.
Additionally, incorporating a selection of snacks or light meals like dumplings, spring rolls, or sandwiches can provide a more comprehensive experience for your customers.
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 markup and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be broad but tend toward a younger demographic. You should market on sites like TikTok and Instagram.
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.
Here are some ideas for brainstorming your business name:
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, 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.
Here are the key components of 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.
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!
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 that it’s relatively easy to transfer your business to another state.
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:
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.
Choose Your State
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/fax. Visit the IRS website to learn more. Keep in mind that, 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.
Securing financing is your next step and there are plenty of ways to raise capital:
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.
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:
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.
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.
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:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
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.
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.
However, people are unlikely to find your website 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.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Today, customers 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:
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.
You will likely need workers to fill various roles. Potential positions for a bubble tea business include:
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.
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!
Yes, a bubble tea business can be profitable. The key is to create interesting and unique flavors that will keep customers coming back.
Milk tea is generally the most popular. Other popular flavors include green tea and oolong 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.
Kung Fu Tea is the largest bubble tea brand in the United States. They have more than 350 locations across the country.
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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