How To Start A Bubble Tea Business

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Many people start their boba tea journey by stepping into a bubble tea shop. After one drink they instantly understand the hype and try to make the delicious drink at home. 

A great way for beginners to learn bubble tea creation is to use boba tea kits, after which you can start learning the ins and outs of bubble tea, including making boba from scratch. With these new skills acquired, you might as well make money from them.

Bubble tea shops are becoming increasingly popular, but the process can be overwhelming to new entrepreneurs. Use our guide as a map, to help you break down the process and start your own bubble tea business.

The upfront cost of opening a bubble tea business

Before you ask for a business loan, you need to know how much money you should ask for. 

How To Start A Bubble Tea Business

Generally speaking, that figure is around $100,000. However, depending on where you are, the size of your business and if you have access to second-hand equipment, this figure will change.

Here is a breakdown to help you narrow down the right price for you.

Rent

Renting a cafe space for your bubble tea shop can cost you around $50,000 a year. This figure will change based on the location and size of your business. Search for local listings to see how accurate our figure is.

Remember to consider seating areas or pick-up stations. A smaller shop that only allows for takeaways might be the best option as you start this business venture, as the space will be cheaper.

Equipment

As a minimum, you will need an ice maker, refrigerator, sealing machine, shaker cups, blenders, and stove. This can cost around $10,000. Ideally, you should buy second-hand machines where possible and upgrade once your business takes off.

Ingredients

Depending on how varied your tea shop will be, you can expect a cost of around $2,000. Make sure to network with suppliers to create deals. This can help you lower costs in the future.

Marketing

Marketing consists of logos and signs, as well as fliers and online adverts. This can cost you around $10,000. Although the price is high, without a good marketing strategy your shop will not get customers.

marketing for bubble tea business

Creating a website with a blog can also help you gain organic traffic; thereby creating awareness of your brand, while attracting potential customers to your shop.

Licenses and insurance

Depending on your state, insurance and licenses can cost you around $750. Use the SBA website to learn what licenses are required in your state.

Staff

Lastly, you will need staff for your business. Spending on how many people you want to employ, this figure may change. However, aim for $25,000 at first and allow the business income to pay for the remaining costs. 

Knowing your target audience

Now you know the rough price, you can consider the details of the business. Bubble tea is mostly enjoyed by students, schoolchildren, and the young adult. However, as popularity increases, office workers have started to jump on the trend.

Knowing this is your demographic, make sure to advertise to this group and find a store location in areas these people frequent. 

Setting prices and gauging profits

Making bubble tea will cost your business around 75 cents per drink, however, the average shop sells their boba beverages for $5.84.

If your business is surrounded by other bubble tea shops, you can reduce your prices and still make a profit - becoming the cheapest option for the demographic. 

If you sell your drinks for $3.50 you could be making a gross profit of 75% - 80%.

To increase your profits even further, you can sell non-perishables such as branded mugs and t-shirts. 

Create a legal entity

Now you have a price plan, a demographic plan, and a profit plan. Next, you need to create the business. 

Does the Name of Your LLC Matter How to Choose The Perfect Name

We suggest creating a limited liability company (LLC) as this protects you from becoming personally liable if someone sues the business. You can hire the right agencies such as GovDocFiling to make easy business registration.

Go on your official state government website and complete a “commercial search” for your business name. If nothing comes up, that means your name hasn’t been claimed yet. The website should offer you this name. Once purchased, your business becomes a legal entity.

Make sure to read the terms and conditions of your official state government website. 

Register for taxes

You will need an EIN or Employer Identification Number to apply for taxes. You can acquire this for free on the IRS website.

It can take two weeks for the EIN to be added to the IRS records, but once it has been updated, you can register your tax information and apply for business licenses and business bank accounts. 

Open a business bank account

With your EIN you can apply for a business bank account. This means applying for loans and credit cards to help set up your business.

Best Credit Card Affiliate Programs To Promote

A business bank account is essential to separate your personal finances from the company’s. This will also make accounting and filing your taxes smoother, as the data will not be tangled in your own finances. 

A business credit card is needed for the same reasons as a business bank account, however, there is one additional benefit. With a business credit card, you can start building a credit history for your company. This can give you access to larger loans.

Lastly, you should establish a Net 30 account. These are loans or credit cards which allow you to borrow money as long as you pay it back in 30 days. The idea is to increase your cash flow for a short amount of time, while also boosting your business's credit score.

If you already understand the details of business accounting, then you can use your own knowledge to manage your business finances. However, if this aspect is new to you, we recommend hiring a business accountant. You don’t need to acquire a full-time employee, instead, you can hire a business to handle your bookkeeping yearly or monthly. 

Acquire permits and licenses

Depending on your state there will be multiple permits and licenses needed to open up your bubble tea business. This process is mostly about paperwork and shouldn’t cost a lot of money.

These licenses are:

  • General Business License (state dependent),
  • EIN,
  • Business Name Registration,
  • Sales Tax Permit (state dependent),
  • Resale Certificate - needed when selling items that have been sold to you, for example, straws and cups. These items should be tax-free and the certificate permits it.
  • Certificate of Occupancy - this allows your business to operate in a building.
  • Food Service License - this is arguably the most important, as it helps you follow the updated and continuing food safety regulations.

The EIN and name registration we have already mentioned in detail. This is because they are required no matter which state you live in. However, the other certificates, permits, or licenses will have state-specific requirements.

Either head to your local government offices to ensure the correct licenses have been applied for, or use your local government website.

Obtain business insurance

Business insurance, just like licenses, is something you are legally required to obtain. The insurance will protect your business should you experience an unexpected loss.

Get the right insurance

For a bubble team business, you should also apply for general liability insurance and worker’s compensation insurance. 

General liability insurance will cover the following risks: 

  • Property damage,
  • Legal defense,
  • Bodily injury,
  • Medical payments,
  • Personal injury.

If a table falls onto a customer, and they sue you for bodily injury, your general liability insurance will be able to cover the costs. Not all states require this insurance by law, but because injuries aren’t completely avoidable, it would be risky to go without.

Workers' compensation insurance is a great perk for your employees and covers the following circumstances: 

  • Medical expenses for work-related injuries,

  • Replacement wages for work-related injuries that stop the employee from working,
  • A payout if the employee dies due to work-related injury.

Although working in a bubble tea business shouldn’t be dangerous, giving your employees this security will make the job seem worker focused and more attractive. These are key to keeping a happy workforce. 

Promote your brand and create a website

Lastly, you need to define your brand, promote it and create a website so new customers can find you online.

Check Their Website & Social Media Presence

Your band is how you want the public to perceive the business. Because bubble tea is still considered a new concept in the western world, you can use that novelty to your advantage. Simply making “bubble tea” your band could be enough.

Research your local area and see how many bubble tea shops already exist, if yours will be the only one, then branding will be simple. If there are multiple, figure out what makes your shop different or special.

Once you have that idea, design or hire a designer to put that concept into an image. This should be your logo.

If your business is the only bubble tea shop in the local area, contact local media and pay for advertisement of your business.

If there are multiple shops, then create fliers and start spreading them around your local area so everyone becomes aware of your new business. This is a great idea in general, as it will increase foot traffic.

Lastly, create a website, which looks modern and professional. A website will tell a customer exactly what to expect from your business. Paying for a website developer can help create the brand and aesthetic you are looking for. 

On the website, you should include opening times, the menu, and an “about us” page. 

Summary: how to start a bubble tea business

Starting a business can feel overwhelming, especially if you are venturing into a new concept like bubble tea. Use our guide as a map to help you navigate your next step in business creation.

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

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