At present Boba shops are now increasing not only in Taiwan, where Bubble tea originates, but in other countries as well. Bubble Milk Tea drink is a popular Taiwanese drink that is generally sold in Boba Shops. Boba shops are cafes that serve chewy tapioca balls in different varieties of flavor. If you are planning to open your very own Boba shop, you have to do some feasibility studies regarding the costs before, during and after building Boba shops and how much is the ROI (return of investment). Read on this article to know more about how much do Boba shop owners make and what you need to know before opening your own Bubble tea Business.
How Much Do Boba Shop Owners Make
Many are asking if you own bubble tea business is a good investment and or/is a profitable business. Before you open a bubble tea business and to know how much tea shop owners make, you need to look and create a business plan from the following key points: first regarding the expenses, total revenue (total sales or gross receipts) and net profit margins of Boba shops.
Boba Shop Expenses
When opening a Bubble tea shop, there are startup costs expenses or how much does it cost to open a milk tea shop and that includes:
- Business space (rent or owned) – you need to consider the rental fee when opening a bubble tea store since this is considered to be a regular expense of a Bubble tea shop. If the business space is your own location , it can help lessen the expenses.
- Employee Salaries -the number of employee to hire should depend on several factors such as size of the business space, how much is the salary per employee, roles and tasks given to them.
- Bubble Tea Franchise cost- most of Bubble tea shop are usually franchised from other companies. Therefore, franchise fees should also be considered as part of the expense category.
- Ingredients – Since it is a Bubble tea shop, you will be constantly needing (before it runs out) ingredients such as Syrups, tapioca pearls and Tea.
- Cost of the Equipment – You will also be needing several equipment for a Boba shop to function such as Bubble tea machine, ice maker, Refrigerator, cooking equipment). Material costs is also an expense as well.
- Cost of Marketing – advertisement is a form of communication that is usually a paid service that helps promote your store, product and or brand name.
Profit for each cup of Bubble Tea
You also need to know how much profit can you get for each cup of Bubble tea that way you will be able to have an idea as to your profit margin. You will then be able to have an idea as to your total revenue and gross profit margins based on either daily or weekly sales of each Bubble tea cup.
The very first thing you need to know is how much is the cost per cup of your Tea. After identifying that, you can then add you expenses. Although, most of the expenses are considered to be fixed expenses which means it does not change monthly (example: rent fee).
Say for example, if the business space costs around $2,500 a month, then you can probably sell at least enough number of cups in a day. That way you can figure out that when the profit reaches the amount of the fixes costs of the shop, the succeeding sales will now be your extra profit.
The cost of each cup of Bubble tea should be based on the materials and ingredients used such as costs of : bubble tea straw, sealer, powder for Bubble tea, type of tea used, tapioca pearls and company logo (customized cup)
Since fixed costs was mentioned, there is also what we call as variable costs. These are expenses that change monthly (example: ingredients). This will depend on the number of Boba Tea you can sell. Basically, the more Boba cups you sell the more you will also be needing to replenish more ingredients to cover up the succeeding orders of your Bubble tea.
Always remember that make sure you get a profit for each Bubble tea cup you can sell.
Should you hire a manager
The main role of the Manager is to manage the tea shop. For first time Bubble tea shop owner, managing it on your own is recommended so that you will have an idea if the business is running smoothly. After a few months of managing on your own, you can now hire and train a manager that will help you manage the store and eventually run it for you. Though you should always check up on the manager for reports.
Franchise Bubble tea or Not
Bubble Tea Franchises cost can have an impact as to how much Boba shop owners make. Most Bubble tea franchises will definitely costs you as there are initial franchise fee that you need to shed out a required investment capital that is usually high although an advantage to franchising Bubble tea shop is an already established brand (marketing costs will be lessened). Franchise owners should also consider that factor.
On the other hand, opening your very own Bubble tea business also has its advantages. You will be in control of the brand as well as the decisions that owners need to make in the Boba store. But, it will be your role as Bubble tea owner to make your shop a success.
Mistakes to avoid that can be costly
There are several mistakes that you need to avoid when opening a Bubble tea business: expensive space, no marketing, bad customer service rating.
Business space (where, how much) should be first on the list on your business plan. It is advisable to go for a good location with reasonable price and the only way to do that is by starting small. Most of the time, business place for rent is calculated on the size of the space (per square foot) therefore when starting a small space the rent will also be lesser. A small Boba shop located in a perfect location is way better than a large locations with a location that is not good. A great location should be in populated cities, and with high traffic volume such as near school, restaurants and spaces inside the mall.
Marketing is important when you have a business. Marketing involves branding, logo of the store. customizing Boba cups and the products to sell. It also includes how Bubble tea tastes, store’s interior and exterior, as well as the store’s customer service. Advertising your own brand and your store greatly helps and that includes advertising with the advent of technology and tracking applications that includes social media and newspapers.
Losing customers is detrimental to one’s businesses. If your store is known to have a bad customer service rating, chances are you will lose old customers and most likely no new customers will come to your store too. To prevent this, make sure that employees are well-trained not just how they function and their roles but how they interact nicely with the customers as well as how to handle situations that needs their patience.
A few reasons why Bubble Tea stores fail
We also need to know the reason why some Bubble tea shops fails and closes permanently.
- Drink tastes poorly- since people want to indulge a delicious Bubble tea drink, if the drink tastes poorly customers will no longer go back to the Bubble tea shops.
- Drinks are inconsistent- if the taste of the drink is inconsistent (the taste is different each time), customers will not come back to the milk tea shop again.
- Tapioca pearls are not properly cooked – Boba pearls is perhaps the highlight to Bubble tea drinks. If the pearls are not properly cooked, it will taste horrible.
- Using Low quality products – there are some bubble tea shop owners prefer to use low quality products in trying to save and lessen expenses thereby profit margin is increased. This should not be the case as customers especially regular customers can definitely tell the difference.
- No Marketing Strategy – letting everyone know what’s new and what’s old and what’s not in your Bubble tea shops. That way customers will somehow try what is being offered to them.
- Not up-to-date to trends- overtime, bubble tea drinks developed in a way that new ingredients or new flavors are trending. Customers prefer to have a few choices of drinks presented to them.
- Poor Financial Planning – financial planning should be included in the business plan. You need to know details such as the price of each cup that will reach expenses, gaining profits after.
- Poor management – managers role is to observe and guide employees where products are not wasted or employees secretly giving free products without the knowledge of Bubble tea shop owners.
- Poor Store Location – as previously mentioned beforehand, the location of the shop is very important for the success of your Boba tea shops.
- Lacking of Business plan -Business plan should consists of goals, vision mission , competition (too much competition), marketing, budgeting and expenses or costs.
Homemade drink usually costs lesser than commercial Bubble tea drinks or store bought Boba.
The answer to that question depends on the market that you are catering to. If your shop is located in a trendy or affluent area, you will most likely profit more.
Bubble tea drinks is now increasing in popularity that many business minded individuals wants to earn from it. Therefore it is important to know how much profit do Boba shop owners make on their Bubble tea business. The only disadvantage to profiting on its popularity is that there will be more bubble tea shops that can result to too much competition. When that happens, the profit will lessen.
Bubble tea shop owners are claiming on a net profit margins range between 20% to 30%.