If you are thinking of starting a highly profitable business with less competition, then bubble tea fits the bill. Bubble tea is a popular drink in certain locations around the world and it is gradually becoming popular in the United States of America.
To venture into the bubble tea business, you need to be creative in making a base for your tea and mixing blends. This drink offers a lot of potential for profit and it comes in typical milkshake flavors. It is a drink that has a unique and pleasant taste, and it consists of chewy tapioca pearls saturated with the sweet flavors of the drink.
However as this business is not yet popular, you will need to consult a business consultant to help you do market research on the viability of this business in your area.
What is a Bubble Tea or Boba Tea?
Bubble tea is a sweet and refreshing tea that originated in the early 1980s in Taiwan. Bubble tea is called different names like boba tea, pearl milk tea, and Zhen Zhu Nai Cha. It is called bubble tea because of the bubbles that is produced during the shaking process when making the tea. Another reason for the name is that the bottom of the cup is shaped like a dome.
This Asian drink usually has squishy little balls (tapioca pearls) that go through the drinker’s straw. This is a very comprehensive article that covers all the areas that you would need to start off on a great footing. As such, find all the information you need to start a bubble tea business from below.
Steps to Starting a Bubble Tea Shop Business
1. Understand the Industry
Even though coffee is widely taken among the American population, bubble tea is also fighting to grab the attention of the American population by making them switch to drinking bubble teas. With the introduction of this tea in the early 1980s, people who are conscious about their health have preferred drinking it.
A report has it that the bubble tea business has increased in popularity as more people visited bubble tea stores in 2015 to either drink bubble tea or buy the ingredients to make their own bubble tea at home.
However, bubble tea is yet to reach the scale of some giant coffee stores in the united states of America even though most people are switching to it. The coffee store has the largest market share in the U.S. Most of the existing tea stores in the United States sell non-bubble tea which makes it hard for bubble tea to displace the coffee and grab a stronghold of the market.
Statistics also show that Americans are more of a coffee than tea people. Averagely, Americans drink 8 fluid oz. of coffee per day, while they drink only one-third of tea. This fact leaves bubble tea’s future on a level of uncertainty, as it would be very difficult to break the American coffee tradition.
However, there is good news for bubble tea as most beverage drinkers point out that bubble tea offers them a refreshing variety as it can be taken as either tea or smoothie. Another interesting selling point of bubble tea is that there is no caffeine in it which makes it a favorite for those who don’t want caffeine in their beverages.
Bubble tea stores in the United States of America are located mainly on the West Coast due to a large Asian and Asian-American population. For instance, bubble tea is often sold in most Asian restaurants in Los Angeles.
Even though most of the growths recorded in the bubble tea industry are mainly concentrated in a few regions, there is still room for growth, especially as it is gaining more attention from the media.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who drink bubble tea and its allied products are as follows:
- Students
- Young professionals
- Households
- Young adults
- Corporate Executives
- Business people
- Sports men and women
- Celebrities
So, if you are looking toward defining the demographics for your bubble tea business, then you should ensure it cuts across various age groups and professions.
3. Decide What Niche to Concentrate On
Bubble tea is a niche in the beverage industry which also includes a lot of niches you can specialize in to improve your revenue and profit margin. These niche ideas are products and services closely related to the bubble tea business.
The products also contribute to giving your customers a wonderful taste and experience. Some of the niche ideas to specialize in the bubble tea business are as follows;
- Consultancy services
- Training
- Tapioca pearls
- Powder
- Syrups
- Jellies and juice balls
- Bubble tea equipment and machinery
- Bubble tea recipes
The Level of Competition in the Industry
You are bound to face some competition in the course of this business. This is peculiar to any type of business you intend to start. However, the bubble tea business also experiences some level of competition due to the fact that it is not widely found in most tea shops.
Therefore, the few bubble tea shops available need to compete vigorously to dominate the market share in that particular area it is situated. While you might find it so easy competing with smaller bubble tea businesses, you might find it difficult doing so with larger bubble tea companies.
As a small and start-up bubble tea Company, you will benefit immensely from this business by building a strong relationship with your local customers who are going to be the ones to patronize you more and refer other people to your shop.
The level of competition in the bubble tea industry does not depend on the location of the business since you can operate your bubble tea shop from any part of the world and still effectively compete in the global market.
4. Know the Major Competitors in the Industry
Every industry has some brands that are well known because they perform better than others. These brands are often the most patronized by the general public. Some of these brands have been in the industry for a long while and some are known for quality, while others are best known for their customer service.
These are some of the leading bubble tea shops in the United States of America;
- Kung Fu Tea
- Gong Cha
- Boba Guys
- Coco Fresh Tea and Juice
- Chatime
Economic Analysis
You need to carry out feasibility studies to know how profitable this business will be for you. You also need to take a critical look at the beverage industry to know if bubble tea is a great niche for you to go into. This will make you certain of the growth of your business in this market.
You would also need to draft out strategies to enable you to get a market share for your business by focusing on some specific areas of specialization. You also need to ensure that your unique selling point is attractive enough to entice your customers.
To achieve this, you would need to draft a business plan that would show you clearly if the bubble tea business is viable or not.
Another thing you would need to consider before starting your bubble tea business is your source of finance. This is quite important as most major financial institutions will likely lend to established and successful bubble tea businesses than start-ups. You need to make your business plan interesting enough to convince the lending institution.
5. Decide Whether to Buy a Franchise or Start from Scratch
You can either decide to make your bubble tea from scratch to give your customers a unique and truly authentic product, or you could decide to join a franchise that will readily give you products that you can use to promote your business locally.
Whatever choices you choose, you are going to have to face its pros and cons. For this kind of business, you might benefit from buying a bubble tea franchise as it would help you enjoy the prior works of others and their lessons learned.
But for this type of business, it would be better for you to start from scratch as it would help you grow and learn more as an entrepreneur, and it will also give you the kind of experience that a franchise would not give you. Starting from scratch helps you to establish what you want customers to know you for in the course of the business.
When you start the business from the scratch, you will need to do a lot to get consistent and loyal customers. You would also need to do a lot of advertisements. Whichever choice you later make, ensure you study your feasibility studies and cost implications well and ensure a good financial plan is in place to back it up.
6. Know the Possible Threats and Challenges You Will Face
Every business has its own ups and downs. One of the major threats and challenges you would face when starting or running your own bubble tea business is the presence of new competition around your location. Another threat and challenge are that people may claim to have health issues that may prevent them from taking your bubble tea.
Another factor is bad economy which often leads to lower disposable income and per capita income; this implies that only a few people would be patronizing your bubble tea shop day in and day out. You would also face the challenge of getting the required finance to start up or maintain the business.
As you rightly know that finance is a vital part of any business, and the lack of it can determine whether you start the business or not.
It can also be a yardstick to measure if your business will be a success or a failure. Also the location you site your bubble tea shop can also pose another challenge to the business, as siting it in a poor location would inconvenience your customers and it will likely affect your business.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Generally, you have three options of legal entities to choose from. You can either choose a limited liability company (LLC), a general partnership, or a sole proprietorship for a bubble tea business. Ideally, the general partnership should have been the best legal entity for your bubble tea business especially if you are just starting out on a low budget.
But if you intend to grow your bubble tea business beyond the United States to have both corporate and individual customers from all across the United States and other countries of the world, then you should consider choosing the Limited Liability Company, LLC instead of the general partnership.
One of the notable reasons why you should choose the LLC is if anything goes wrong in your business, the LLC will protect you from personal liability and it is only what you invest into the limited liability company that will be at risk. The same is not the case for sole proprietorships and general partnerships.
Limited liability companies are much easier and more flexible to operate than other legal entities and you don’t need a board of directors or other managerial formalities. Here are some of the factors to consider before you choose a legal entity for your bubble tea business; ease of transferability, limitation of personal liability, taxes, admission of new owners, and investors’ expectation.
With all these advantages you would rightly agree that the LLC is the most suitable for your type of business. You can even start your bubble tea business as an LLC and convert it to a ‘C’ corporation or an ‘S’ corporation in the future especially when you have the plans of going public.
Upgrading your business to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your business to enable it to compete with major bubble tea shops in the United States; it will also enable you to generate enough capital from venture capital firms, enjoy separate tax structure, and ease of company’s ownership transfer; you will also enjoy flexibility in ownership and management structures.
8. Choose a Catchy Business Name from the ideas Below
Generally, when the time comes for you to choose a name for your business, you are expected to be creative because whatever name you choose for your business will definitely create a perception of what your business entails. It is a norm for people to follow the industry trend when naming their business.
If you are considering starting your bubble tea company, here are some catchy names you could choose from;
- Peace Tea
- Heaven Delight
- Tea Turban
- City Tea house
- Take a Sip
- Cozy tea
- Saffron Sip
- Lady in Paris
- Best Friends Tea
- Rose and Lotus Tea
- Street Hut Sip
- Velvet Touch Tea
- Cup O tea
- Brew Splash
- Black Bubble
- Every spice Tea
- Morning Dew
- Whistle Sip
- Brew Fest
- Morning Fizz
- Ginger Blend
- Simple Moment Tea
9. Discuss With an Agent to Know the Best Insurance Policies for You
In most countries and also in the United States of America, you can’t operate any business without the basic insurance policy covers required by the industry you decide to operate from.
Tapioca, one of the major ingredients of bubble tea is a starchy product that can also lead to a possible food allergy resulting in a legal case. Being insured properly will help to protect you against unintended accidents or medical issues that may occur.
It is important that you create a budget that will cover your insurance and also you should consult an insurance broker for a guide on how to choose the best and appropriate insurance policies for your bubble tea business. Here are some of the basic insurance policies you ought to consider purchasing if you want to start your bubble tea business in the United States of America;
- Health insurance
- Liability insurance
- Business owner’s policy group insurance
- Payment protection insurance
- Workers Compensation
- Overhead expense disability insurance
- General insurance
- Employment Practices Liability Insurance.
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
Considering the high level of competition in this industry, coupled with the need to come up with something unique, one needs to trademark and protect one’s intellectual properties against theft.
Therefore, to thrive in this business you need to protect some of the intellectual property rights you have labored for in the past like your business logo, jingles, banners, and other things that people can make use of to impersonate your business and rip you off your profit.
To protect your intellectual properties, you need to file an application with the USPTO. Your trademark’s final approval will be approved based on the review from the attorneys as required by the USPTO.
11. Get the Necessary Professional Certification
For this kind of business, you don’t really need any professional certification to run it successfully. All you would need is to go for a professional bubble tea training course and get your food handler’s permit because you would be required to serve your customers’ food. You would also need a food handlers card too if you choose to sell pre-packaged bubble teas.
12. Get the Necessary Legal Documents You Need to Operate
In the United States of America, one cannot overemphasize the essence of having the necessary documentation in place before launching any business. These are some of the basic legal documents which are expected of you to have in order to legally run your bubble tea business in the United States of America;
- Business Plan
- Business Name and Logo
- Business License and Certification
- Certificate of Incorporation
- Operating Agreement for LLCs
- Non – disclosure Agreement
- Insurance Policy
- Employment Agreement (offer letters)
- VAT Registration
- Federal tax identification number
- Apostille (for those who want to operate their business beyond the United States of America)
Note: You should also check with your local and state governments to see the requirements of restaurants and coffee shops.
13. Raise the Needed Startup Capital
When it has to do with financing a business, one of the first things that you should do is to write a good business plan. With a good and workable business plan in place, you won’t have much to do to convince your bank, investors, and your friends to invest in your business.
Here are some of the options you can use to source for start-up capital for your bubble tea business;
- Raising money from personal savings
- Raising money from business partners
- Raising money from the sale of personal stocks and properties
- Selling shares to interested buyers
- Applying for loans from banks
- Pitching your business idea and applying for business grants
- Approaching donor organizations and angel investors for funding
- Getting soft loans from friends and family members
14. Choose a Suitable Location for your Business
The success of your bubble tea business largely depends on the location. Some of the factors to consider when getting a location for your business are its accessibility and visibility. You must also note that a bubble tea shop in a good location does not come cheap.
Therefore, you should allocate enough funds in your budget for leasing/renting. If you are not good at choosing a business location, you should talk to a business consultant or a realtor who would guide you in choosing the suitable location for your bubble tea company.
Some of the suggested locations for a bubble tea shop include:
- Shopping Malls
- Shopping Plazas
- Schools
- Office/Industrial Complex
15. Get the Necessary for your Technical Needs
To start up your bubble tea business, you would need some pretty specific equipment in order to be able to serve bubble tea in different varieties. You can get some special shakers and sealers to help your product have a more professional look.
You will also need a source of heat like a gas stove or electric heater. Smaller equipment like cups, tea jugs, sugar dispensers, stirrers, and straws are also necessary. Here is a list of the needed equipment for starting a bubble tea business:
- Tea Brewing Machine
- Stove or Table Burner
- Cooking Pot
- Tapioca Container
- Blender
- Shaking Cups
- Water Dispenser
- Measuring Scoop
- Cup Sealing Machine
- Refrigerator
- Strainer
- Cash Register
16. Hire Employees to Cover your Manpower Needs
Though the bubble tea shop is seen by many as a small business, you would still need to employ competent staff to assist you in running the business. Getting the wrong person could lead to business failure. Apart from hiring the right persons, you also need to orientate and train them well. Some of the areas they would need training on include how to:
- Brew tea
- Cook and prepare the tapioca pearls
- Prepare the syrup and other ingredients
- Mix and prepare the drinks
- Perform an inventory of all the materials and supplies
- Deal with customers
- Use the sealer machine
- Operate the ice machine
- Operate the cash register, etc.
You would need about 8 key staff to effectively run a standard medium size bubble tea company. Here is a list of the key staff you need to hire for your bubble tea company.
- Chief Executive Officer (you can also fit into this role)
- Human Resources and Admin Manager
- Purchasing Manager
- Quality Assurance manager
- Inventory Manager
- Store Manager
- Accountant/Cashier
- Customer Service Executives
- Marketing and Sales Team
- Truck Drivers
- Cleaners
The Service Delivery Process of the business
The service delivery process of a bubble tea company has to do with delivering quality tea service to customers depending on their needs at a particular period of time. The various processes involved range from providing indoor and outdoor tea service to your esteemed customers, ensuring you satisfy your customers’ demands and providing other services.
17. Write a Marketing Plan Packed With ideas & Strategies
As a bubble tea company, you would have to prove to the public that you can consistently provide your customers with an excellent recipe for bubble tea which would give them a wonderful experience when they visit your bubble tea shop. People and organizations will hire your services if they are confident that they would get value for their money.
So, when drafting your marketing plans and strategies for your bubble tea company, ensure that you create a good and compelling personal and company profile. Here are some of the ways you could market your bubble tea business;
- Make use of referrals from your loyal customers (word of mouth marketing)
- Use direct marketing
- Make use of your official website to engage your customers, and give them the chance to carry out their bookings on your website
- Generate traffic to your website via your blog and social media platforms – Facebook, Twitter, Instagram, LinkedIn, etc.
- Advertise your business in relevant magazines and newspapers
- Advertise your business in online directories
- Ensure that your business is placed in local directories
- Paste notices of your business on boards and place them close to your target market
- Market your business directly by engaging marketing executives and business developers
18. Develop an Iron-clad Competitive Strategies to Help You Win
You will always have competitors in whatever business you choose to do. You shouldn’t expect less as an entrepreneur. Based on this fact, you should be creative in coming up with competitive strategies to have an edge above other competitors in the business.
Firstly you would need to make brief research and come up with packages you can offer to your customers at an affordable price. Also, look into producing different varieties of bubble tea which is professionally packaged. You also need to introduce an efficient and easy payment mode like the Point of Sale (POS) Machine for those that do not have cash at hand to pay.
Another competitive strategy is to develop a menu to accommodate different bubble tea flavors that will go in line with your customers’ wishes. You could start outdoor service and home deliveries. This will give you an edge over your competitors.
Also, ensure that you employ competent and experienced hands to help you manage your bubble tea business as this will give your customers confidence in your products and services.
19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you intend to start a bubble tea business that will grow and spread its tentacles beyond the city where you are going to start up your tea shop to make it a national and international brand, then you must be ready to spend more money on advertisement and promotion of your brand.
In promoting your brand and its corporate identity, you would need to leverage both the electronic and print media and also make use of the internet. Nowadays, you would save cost and reach more people by using the internet and social media platforms to promote your brand.
Another strategy is to sponsor TV and radio programs and advertise your business in relevant magazines and newspapers. Here are some platforms you can use to boost your brand in order to promote and advertise your business;
- Roll out adverts in local newspapers, and magazines as well as on radio and TV
- Engage in direct marketing and sales- the use of word of mouth publicity from customers you have satisfied in the past
- Leverage social media platforms such as; Facebook, Twitter, YouTube, Snapchat, Instagram, LinkedIn, Google+, and other social media platforms to promote your business.
- Ensure you position your banners and billboards in strategic areas and also distribute flyers and handbills.
- Throw a grand launching party when opening your shop
- Advertise your business on your official website. You are also expected to employ strategies that will help you pull traffic to the website
- List your business in offline and online directories
- Encourage your customers through discounts and incentives whenever they refer your business to others.