Will Bubble Tea Franchises Make Money? 7 Risks That You Must Know

In such a competitive bubble tea market, is bubble tea franchises profitable? According to statistics from the Ministry of Economic Affairs, as of June 2024, the total revenue of bubble tea shops in Taiwan has exceeded 66 billion NTD. This not only reflects the Taiwanese people's love for bubble tea but also demonstrates the enormous market potential. As brands continuously launch new products and collaborate with others, they attract consumers eager to try new flavors, significantly boosting the overall purchasing power of bubble tea. Therefore, bubble tea franchises has become a new option for many entrepreneurs. But before deciding bubble tea franchises, what key factors do you need to understand? This article will provide you with a comprehensive overview!
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Types of Bubble Tea Franchising: Franchise Chain, License Chain, Voluntary Chain

There are three main types of franchise models in the market: Franchise Chain, License Chain, and Voluntary Chain. These three franchise systems differ based on investment ratios and management methods. Next, I will briefly introduce the characteristics of each franchise model to help you find the most suitable entrepreneurial option for yourself.

1.Franchise Chain

It refers to the joint sharing of startup costs between the franchisee and the headquarters. Typically, the franchisee will cover the rent and decoration costs, while the headquarters will cover the cost of operational materials. Overall business decisions are planned and executed uniformly by the headquarters. Since the franchisee also invests corresponding costs, the profits are relatively higher, making this a more common franchising method.
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2. License Chain

It is mainly operated by franchisees commissioned by the headquarters, and all operational techniques, equipment, and store rentals are usually provided by the headquarters. Therefore, franchisees pay lower fees, and in some cases, they do not need to invest any capital. Franchisees can only participate in part of the decision-making process and, in most cases, must follow the decisions made by headquarters. Due to the lower investment, the profits are also relatively lower.

3. Voluntary Chain

Franchisees pay a fixed amount for technology transfer and brand licensing fees, while all store rent and equipment costs are borne by the franchisees themselves. The headquarters provides operational knowledge and offers regular guidance. Franchisees have greater autonomy, and all profits belong to them, although they are required to pay a fixed brand licensing fee to the headquarters each year.

These three types of franchise models each have their own advantages based on the franchisee's experience and needs. In terms of flexibility, voluntary franchises offer higher autonomy while still enjoying the benefits of the brand. For newcomers starting a business, a franchised model is a good choice, as the headquarters provide relevant industry knowledge, reducing the learning curve for new entrepreneurs.

Will a Bubble Tea Franchise be Profitable? How to Choose a  Bubble Tea  Franchise Brand?

In the highly competitive bubble tea market, we can still see many new bubble tea shops opening, which indicates the vast business opportunities in this market, attracting many entrepreneurs who want to join in. However, to quickly achieve profitability and reach a break-even point in such a competitive environment, choosing bubble tea franchises is a shortcut, and selecting a well-established bubble tea brand for franchising provides even more security.

Established bubble tea brands have market experience and unique characteristics that allow them to stand firm in competition, and they have accumulated rich operational knowledge. For many entrepreneurs, franchising can leverage the brand's recognition to quickly attract consumers, speeding up cost recovery and revenue generation. 
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7 Important Considerations for Joining a Bubble Tea Franchises

The bubble tea shops in the market are numerous and varied, with many businesses opening up for franchising. For newcomers to entrepreneurship, choosing to franchise is a great way to get started. However, how should one choose? Here, we will provide important considerations for franchising regarding location, brand awareness, benefits, support, and risks. It is essential to conduct a risk assessment in advance to avoid subsequent operations and fundamental revenue issues.

1. Location Assessment

Since you have decided to open a bubble tea shop, location assessment is a very important aspect for the bubble tea shop, as it directly affects revenue. Therefore, before you choose bubble tea franchises, it is advisable to conduct market research, consider the area you want to serve, observe the flow of people and traffic, and decide whether to choose a commercial area, a school district, or a night market, as well as whether to be located on a main road or at an alley entrance. Additionally, analyze the demographic composition, consumer behavior, and the competitive situation of nearby beverage shops. Besides the importance of foot traffic, it is also essential to consider whether the rent is affordable and whether the location can provide long-term stable benefits in the future. It is recommended to look at several locations for comparison to find a more suitable spot.

2. Understanding Bubble Tea Brand Image

There are many popular bubble tea brands in the market. When considering bubble tea franchises, in addition to the franchisee's personal preferences, it is important to assess consumer awareness of the brand. A strong brand image can enhance consumer recognition and serve as a basis for converting that recognition into purchasing behavior. Therefore, by observing consumers' positive and negative evaluations of the brand, one can assess the brand image of the bubble tea franchises.

In addition to consumer evaluations, franchisees should also gain a better understanding of the industry's reputation regarding the brand, gather information from various franchise headquarters, and understand the conditions set forth by the franchise brand. It is recommended to actively participate in information sessions or request the headquarters to provide the current status of the brand. The information obtained should be evaluated using the same criteria to filter out the franchise brands that best meet the needs. 

3. Product Quality

The deliciousness of bubble tea is the key to attracting customers, and product quality is the core competitive advantage of the brand. High-quality products can help franchisees maintain a stable customer base and ensure long-term operations and profitability. Therefore, understanding the franchise brand's selection and inspection standards for raw materials is helpful in avoiding future food safety issues.

4. Product Uniqueness

In addition to being delicious bubble tea, the unique features and trending topics of bubble tea brands are also very important. Whether the franchise bubble tea shop regularly launches new products and can create buzz and engage in social media are factors that attract customers. Nowadays, many people pay attention to which bubble tea brand is currently being discussed the most and whether the overall aesthetic is appealing when choosing a bubble tea. These factors can stimulate the desire to purchase. Therefore, franchisees should inquire more about the brand's ability to lead discussions.

5. Market Segmentation

The bubble tea market is highly competitive, and each brand typically has its own signature items. Some brands focus on fresh milk tea or exclusive tea drink, while others differentiate themselves in the market with fresh fruits or special toppings like Hun Kue or BOLU. Franchisees can evaluate the market positioning of the franchise brand to ensure it aligns with the target consumer group for future store operations.
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6. Cost Assessment

Bubble tea shop franchise can leverage the brand's reputation, resources, and rich operational experience to shorten the initial preparation and development phase, reducing the chances of making mistakes. However, in addition to the franchise fee, one must also consider costs such as rent, decoration, equipment, working capital, and initial inventory. Before deciding to invest, it is important to assess whether the overall costs are manageable and to effectively control costs and funds, while also considering the return on investment for the brand.
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7. Contract Review

Carefully read the content of the contract before signing to avoid hasty decisions. If there are unclear areas, you should actively ask for clarification. Typically, there will be a review period before signing the contract, during which you should pay special attention to details such as the cost ratio of raw material supply, market protection, non-compete clauses, educational training, and liquidated damages. If you need further understanding, you can consult professionals or lawyers for assistance to avoid issues after signing the contract.

Is Bubble Tea Franchises More Profitable Than to Start One From Scratch?

When preparing to enter the bubble tea market for entrepreneurship, choosing between bubble tea franchises or creating your own brand is a crucial decision. Opening a store requires an investment ranging from hundreds of thousands to millions, so a more comprehensive evaluation is needed before starting. The two business models operate differently, each with its own advantages and disadvantages. Understanding these differences between the two is essential to choosing the business model that suits you best.

Advantages of Bubble Tea Franchising

The biggest advantage of joining a bubble tea franchises is that it saves time for those with no experience, allowing them to quickly grasp the overall operational procedures and reduce the trial-and-error process of figuring things out on their own. The franchise brand has already established a complete set of standard operating procedures (SOP) for opening a store and provides comprehensive training for newcomers to learn. Additionally, the store's decor style, brand identity, supply channels, and equipment will also be planned and provided by the headquarters.

There will also be resources to assist with marketing activities, and with the brand's reputation, consumer trust is high, making it more likely for the invested capital to yield results. Therefore, for newcomers, joining a beverage store franchise not only reduces risks but also allows professional guidance step by step in opening the store, acting like a guiding light to lead you forward.
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Advantages of Starting Your Own Bubble Tea Business

The advantage of starting your own business lies in the high degree of freedom. You can choose your own raw materials for procurement, reducing the issue of profit margins taken by the headquarters. If you choose to start independently, the initial setup—from selecting a location, store decoration style, and brand image design to personnel management and operations—requires you to explore on your own, and there are no relevant experiences to refer to. Additionally, starting your own business requires you to establish your own brand image and gradually build brand awareness to attract consumers, which demands more effort in promotion, making it difficult to estimate the time needed to break even.

Bubble Tea Franchising vs. Bubble Tea Entrepreneurship

What Are the Benefits of Joining a Bubble Tea Franchise?

After understanding the differences between bubble tea franchises and starting a brand from scratch, there are relatively more benefits for entrepreneurs entering the market for the first time when choosing bubble tea franchises. In particular, there are some hidden advantages that can be obtained immediately, without the need to wait or gradually build them up. Below are five benefits of bubble tea franchises.
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1. Brand Influence 

The most valuable aspect of joining a bubble tea franchises is brand recognition. The bubble tea market is highly competitive; without recognition, it is difficult to attract the public's attention, making it challenging to draw consumers in for purchases. Therefore, if one chooses to start from scratch to build recognition and cultivate trust, it not only requires a significant investment of time but also incurs high costs, which extends the time needed to achieve profitability and reach a break-even point.

2. Marketing Capability 

From a marketing perspective, franchise headquarters typically have more marketing resources. As a chain brand, promoting products and advertising are more powerful, making it easier to gain significant exposure. This allows franchisees to benefit from the promotions conducted by the headquarters, reducing the pressure of self-promotion and enabling them to focus more on store operations and customer service.

3. Education and Training 

Typically, when signing a franchise agreement, it is confirmed whether the franchisor provides comprehensive operational support. This allows new entrepreneurs to receive formal education and training, maintaining a consistent process for the brand. Additionally, franchisees can quickly acquire industry knowledge, operational know-how, and learn how to train employees to expedite their onboarding. These soft skills are very helpful for subsequent store management and improving performance.

4. New Product Development 

In managing a bubble tea shop, new product development is essential. Regularly launching new products not only stabilizes the customer base and adds a sense of freshness but also helps attract new customers and gain different types of consumers. The development of new products involves numerous tests and adjustments based on seasonal ingredients and variations and may even require market research to confirm alignment with consumer preferences. This process can incur significant costs. Therefore, through the development provided by the franchise headquarters, it is possible to ensure market demand and quality as well as offer beverages that better meet consumer needs, thereby attracting purchases.
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5. Headquarters Support

In addition to the various guidance needed from headquarters during the initial setup phase, there will also be many operational issues and unknown challenges and risks once the business starts. At different stages, headquarters can provide support, not only helping franchisees eliminate uncontrollable management problems but also continuously evolving in a rapidly changing business environment. They also work hand in hand with franchisees to create a win-win situation.

What Are the Risks of Joining a Bubble Tea Franchises?

Although joining a bubble tea franchises has a lower entry barrier compared to other industries, it still requires a significant investment of effort and capital. As a result, many people overlook the potential risks involved, leading to various issues later on. Here are some common risks associated with bubble tea franchises, including concerns about cost transparency, expenses beyond the contract, and other potential problems, so you can be informed before joining.

1. Lack of Transparency in Costs

Before signing a contract with a franchise vendor, it is important to confirm all the necessary fees that need to be paid, such as the franchise fee and operational costs, especially the raw materials required for daily operations, which are usually provided through channels coordinated by the headquarters. If the costs are not transparent, it will increase the operational costs in the future. Therefore, understanding the actual expenses incurred is crucial to avoid influence profits later on.
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2. Additional Charges

Some franchise companies may state in their contracts that any matters not covered will be based on the headquarters' regulations. This part needs to be confirmed again, as it may hide different costs, such as advertising expenses or whether training costs are included in the franchise fee. These could lead the franchisee to need to pay more money.

3. Brand Image 

Brand image is an important aspect for franchisees when selecting a franchise headquarters. Consumers also develop a sense of trust based on brand image. However, brand image is like a double-edged sword; both positive and negative perceptions can deeply affect purchasing power. If the headquarters encounters issues, even if the franchisee has not engaged in any actions that affect the brand, it will still impact on the overall revenue.

4. Technical Risks 

Typically, franchisees rely on the systems provided by the franchisor for store opening and operations. If the technical support for these systems is inadequate, it can lead to operational issues later on, such as problems with the ordering system, promotional activities, and other backend management systems. If the facilities at the headquarters are not sufficiently developed, it will affect the smoothness of business operations. Understanding these aspects clearly in the initial stages can help reduce risks.

Conclusion 

If you want to open a store and start a business, a bubble tea shop is indeed a good choice for beginners in entrepreneurship. Not only is the market large with many opportunities, but the entry barrier is also relatively low. However, whether you choose to franchise or create your own brand, having high-quality products is the key to ultimately attracting consumers. Therefore, selecting the right raw material manufacturer is very important.

SKYAURANT International Food offers a variety of high-quality raw materials for bubble tea, including syrups, fruit purees, and various toppings. All products are safe and stable, making us the best partner for opening a bubble tea shop. Additionally, if you need assistance with bubble tea shop menu development, our brands "Chew Fun" and "Fruta Island" have extensive experience and can provide resources to support you. For any questions regarding beverage procurement or opening a store, feel free to contact us at any time.
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