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How to Start a Boba Business Step-by-step Guide

How to Start a Boba Business Step-by-step Guide

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Wondering how to start a Boba business? You’re not alone! 

The bubble tea industry is a fast-growing one. Incredibly popular in Asia for decades now, bubble tea is finally gaining steam this side of the Pacific. Indeed, Bubble tea (otherwise known as Boba) is in high demand globally.

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The bubble tea business is also an increasingly coveted one. Thanks to its high acceptance level amongst college age millennials, it is a very attractive and profitable business. It’s low-cost of entry, high margins, and easy to operate nature make it even more attractive. 

However, as with all businesses, starting a bubble tea business requires careful thought and planning. You want to get everything from your setup to your equipment, supplies, and personnel, just right.

Having built at least 10 bubble tea shops myself, in this article I’m going to be sharing with you 8 practical steps to help you start your own Boba shop.

1. Identify Your Customers

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Who are you trying to serve? The answer to this question dictates your entire business approach – including your menu items! – and must be taken seriously.

Someone looking to serve Caucasians, for example, must recognize that they have more of a sweet palate. Whereas, the Asian demographic is more interested in tea-based flavors and less sweet. This difference in taste buds must be accounted for before planning your entire menu and style.

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I have, in fact, successfully noticed this difference in the past. When operating out of the Richmond Night Market (with its huge mix of Caucasian and Asian visitors), some of our most popular items were the regular bubble tea and the taro and mango flavors. 

At our standalone location at 720 Sweets which targeted an Asian demographic, we enjoyed more success with tea-based flavors like oolong tea and pu’er tea. Because of their better taste for tea, our Asian demographic were less interested in the more sweetened flavors.

Knowing your customer is also key to your marketing strategy. It tells you exactly who you’re targeting, and allows you tailor your approach to that audience.

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Similarly, knowing your customers will help you properly align your brand values with those of your customers. If, for instance, your customers value sustainability, using glass jars is an important way to demonstrate that your values align.

Aligning with your customers this way draws them closer to your brand. It helps them connect with you more personally, and turns them into raving fans who’d always support you. The result? An explosion in revenue!

This system of intentional alignment is the key to the ACE (align, connect, explode) growth method which has proven successful amongst many business owners.


Start Your Boba Business The Right Way

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Want to start your boba business the right way and avoid a bunch of costly mistakes? Well the truth is, there are many traps when it comes to starting a food business. The wrong equipment, the wrong hire, the wrong menu, or the wrong location can mean $100,000 down the drain.

And I had to go through those costly mistakes because there wasn’t anyone out there to help me years ago. But I want to make sure you avoid those costly mistakes.

Learn my 3 step formula in building a popular and profitable food business in my free masterclass below!


2. Choose Your Boba Concept

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Choosing your concept is the next part of your planning process.

Basically, you want to identify the styling of your bubble tea shop. Will it be a grab-and-go location or a dine-in location? Would you be purchasing a franchise, or building your own brand? 

These are the questions you want to answer at this stage; this is extremely important as it defines your entire business direction and expenses. 

If you choose to go with a franchise, for instance, you get to enjoy the perks of an established brand name. You’d no longer need to worry about the menu, demographic, or location, as the franchise will do all the work for you. 

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Chatime franchise costs and fees

But franchises are expensive. Setting up a franchise could cost you anywhere between $30-50,000 in licensing rights alone. After this initial fee, you’d still be required to pay between 6% and 8% of revenue in monthly royalties.

Building your personal brand eliminates all of these fees. However, it’s now up to you to have the business acumen to create an attractive brand.

You’d need to identify the overall theme of your shop, sort out your menu items, and design an interior that’s good enough for your target customers. 

The earlier you decide on the concept you want to follow, the easier it’ll be for you to build the business of your dreams and start raking in the profits.

3. Choose Your Location

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The next step on your way to starting a successful Boba shop is deciding on your location.

In the bubble tea business, profit is a game of volume. No volume, No profit. The End!

The reason is simple: bubble tea is a very “low ticket item.” Its prices are extremely low, and profit margins per cup is modest. Therefore, you’d have to sell a ton of it daily to be profitable.

This makes the location a crucial part of your bubble tea business. You want your location to be somewhere open and busy.

A location filled with high rises makes for an ideal location in this sense. However, you want to be careful with office buildings at this time, as most people continue to work from their homes.

This leaves you with residential high rises. 

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People in their homes always need a treat, especially when they’re stuck at home all day. They buy food when they’re hungry, but also to make themselves happy. They may choose to step out to get this treat, or they could simply employ third-party apps to place their orders.

Whichever the case, you want to be located around these high-density residential areas. 

You also want a location with more of an Asian demographic, if possible. Why so?

Well, bubble tea is still very much an Asian cultural drink. Although young millennials are fast adopting it, your best bet for the volume you require is still the Asian demographic. 

Of course, if your target customer (identified in step 1) is Caucasian, and not Asian, and your concept tends to that target audience, you’d be best served identifying a high-density location populated by your target.

Evidently, selecting a location isn’t as simple as looking for the cheapest nice store you can find around town. It’s a deliberate process that requires a lot of attention, and can often be the decider in your profitability.

Be sure to take your time to consider everything – from your target customer demographic to your concept, town/city setup, etc. – when deciding on the best location for your Boba shop.

4. Craft Your Menu

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Figuring out your menu might seem like one of the most straightforward parts of starting a bubble tea shop. And while that may be so on the surface, getting the menu right does require some effort.

When crafting your menu and selecting your menu items, you NEED to think back to your customer demographic. You must understand exactly who it is you’re trying to serve.

If your targets are highly sophisticated tea drinkers, for example, you want to offer them different types of tea. These could be black teas like pu’er, jasmine, long, or roasted tea.

However, if your target is one who enjoys bubble tea as a dessert, they’re more likely to enjoy flavors like mango and taro, or even milk tea slushies.

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Clearly, these are two very different types of demographics. Whichever of these groups you cater to, you want to be careful to ensure your menu is tailored to their needs.

Your menu is also the key to your desired income levels, and must be treated as such.

As a low-ticket item, selling bubble tea alone puts you at a financial disadvantage. To make profit without having to chase too many sales, you need to get creative with your menu.

Craft your menu in a fashion that allows you to increase your average order value (AOV). 

This can be done by adding snacks such as waffles to your menu. A very culturally accepted partner to bubble tea, it increases your average order value by giving the average customer something extra to buy.

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People who come in may also be looking for a quick bite. Adding items like Paninis to your menu could also help you satisfy their needs, while considerably raising your AOV.

Ultimately, the higher your AOV, the more profitable your business is likely to be. And, your crafting the right menu is key.

5. Create Your Systems

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One of the most critical aspects of your business planning process is the building of systems. Indeed, having the right system is critical to the proper functioning of your business. How so?

For starters, a system ensures quality assurance within your business. It ensures that anyone who steps into your operations knows exactly how to make a drink to your standards.

It is because of proper systems that I can walk into your shop every day, expecting the same flavor profile to hit the spot I crave. Should there be a discrepancy in flavor every time I walk through your doors, I’m unlikely to hang around your business for too long. 

Proper and universal systems are amongst the most vital ingredients to have kept McDonald’s as the world’s top franchise for so long. Regardless of the country or city you find yourself, you can expect the same cheeseburger taste from the McDonald’s shop around you. 

This should be your goal for your bubble tea shop.

So, what is a system?

Simply put, it is a set of tools, processes, strategies and people that work together to achieve a set goal, or tackle a problem.

A system could be complicated (like how to prepare a burger so it tastes the same every single time, regardless of who’s in the kitchen), or it could be very simple (e.g. how to greet the customer that walks in your doors).

Systems ensure the cashier does the same thing each time you have a walk-in. They ensure your customers are greeted the same way, and that drinks are made and served the same way to every customer.

Once you have a set way of doing a particular thing, you have a system. But that system could be good or bad. Your goal is to ensure the latter rather than the former.

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For your bubble tea business, creating the right systems allows you to hire less people. It also allows you to serve as many people as possible at any given time.

At a point with our bubble tea business, we were serving over 100 bubble teas every single hour. That meant we were serving almost 2 bubble teas per minute. This was only possible through the systems and processes we created.

Because we had taken out every unnecessary friction in our processes, we were very efficient with the processes, and could serve as many as possible each minute.

But, how can you create the right systems for your shop?

The first step is always to break down the different steps your staff goes through when fulfilling an order. Break them down into the most minute of steps, and look for inefficiencies in the process.

A crucial part of building the right system is identifying the person responsible for every step in the system. Once that’s done, you want to help improve their efficiency, and reduce any friction they may face.

Once you create a system, lock it down, and constantly look to improve it. In time, you’d have a system that works perfectly for your shop.

6. Determine Labor

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Labor brings together everything you’ve put in place for your Boba shop.

Just as when targeting and looking to connect with your customers, you MUST hire based on values. You must be wondering why that’s important…

The reason is simple, if people who work for you don’t share your values, they’d bring with them a lot of friction. Eventually, you might end up hiring so many and letting them go due to this friction.

Constantly having to rehire is expensive. It means your investment in training and development is wasted each time, and a new investment is required. Likewise, it’d cost your business its efficiency as each new hire takes some time to acclimatize to your system. 

When you hire persons who share the same values as yourself, however, you get employees who care for your business as if it were theirs. 

Also note that the systems mentioned in step 5 above can be very helpful in labor management. First off, having the right employment system as discussed here can help you get long-term hires early on.

Systems also increase the efficiency of your labor, allowing two people (for instance) to do the job of four. This efficiency results in reduced labor costs for your business, which further improves your profitability.

7. Calculate Start Up Costs

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One of the beauties of the bubble tea business is its low barrier to entry. A primary reason for its low cost of entry is the need for very minimal equipment. 

However, equipment costs would still account for your largest expenses, and must be properly prepared for. To do this, you must consider what equipment you need for your shop. Amongst the must-haves are: 

  • A POS system
  • Cup sealers
  • Ice machine
  • Undercounter cooler
  • Sugar dispenser
  • Standup freezer
  • Tea brewers and blenders
  • Other utilities and utensils

Compared to starting up a restaurant or a coffee shop, this is far from a lot. And, this low equipment costs partially explains the increasing popularity of the Boba shop business model.

With equipment costs sorted, you want to account for inventory costs. You neither want to overstock nor understock on inventory. This makes the $2-3,000 mark a sweet spot for inventory expenses; just enough to stock up for about a month, but not more.

There are also other costs like your marketing costs (ideally $2,000 for initial launch awareness), rental costs (which mostly depends on your selected location), and franchise fees (should you opt for the franchise model). 

Finally, you must account for a “buffer” – additional expenses you haven’t quite budgeted for. This buffer for miscellaneous expenses should be put aside and only touched when absolutely necessary.

Having buffer funds is extremely important for a business in times of emergencies. In fact, when we first started the 720 Sweets brand, our buffer cash was critical to our survival.

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We originally budgeted for $100,000 on startup costs. However, two weeks into launch, with our business fast gaining traction, we found that our ice cream machine wasn’t the right model. It simply couldn’t create enough ice creams per hour for our needs.

Such a slow production level was not only going to hurt our efficiency and profitability, it would bite into our customer satisfaction levels. To fix this problem, we spent an additional $30,000 upgrading the machine to the right model.

This was only possible because we had untouched buffer cash which we could access at the time. 

Surely, you want to do everything in your power to properly account for any expenses you’d be making when starting up so you’re not taken by surprise. Still, be sure to set extra funds aside should anything go wrong.

8. Market Your Shop

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The final step in your process is to determine your marketing strategy. Essentially, you want to determine the best possible way to reach your customers and get them aware of your business. 

You simply can’t make profit if no one knows about your business. So, what systems/tactics can you use to market your bubble tea shop?

Instagram remains a top recommendation for its size and suitability to the food industry. Take quality pictures and share on your platform to attract people into your doors. Be sure to take advantage of the geo-tagging feature, too, to help customers pinpoint your location.

You also want to take advantage of TikTok. Create viral, engaging content that allows people to loop in 10 to 15 seconds. These kinds of content encourage other tiktokers to jump on your content and create theirs on top of it, further increasing your reach. 

Whichever platform you adopt, be sure to take advantage of user-generated content (UGC).

Customers who walk into your shop and love the ambience are very likely to take pictures and post them online. Be sure to save those pictures and repost them on your Instagram, TikTok, or website. For the first-time visitor to your page, UGC increases your credibility.

Next, be sure to register your business on the Google My Business platform. A highly underrated platform, Google My Business offers you the kind of visibility only Google can, thanks to its high ranking for location-based searches.

Finally, always consider third-party delivery apps as business allies. Sign up for all of them available to you. Utilize them.

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Third-party apps are a great way to reach your target customers right in their homes. But, be careful to view them as marketing platforms rather than business platforms. How so?

Third-party app fees can at times drain the life out of your business, eating deep into your margins and wrecking your profitability. It is your responsibility, therefore, to ensure customers who find you through these apps soon begin dealing with you off the apps.

One way to do this is by slipping them a coupon through the delivery package. This coupon could offer as much as 10% discount should they walk into your shop or purchase through your website.

You could also offer discounts in exchange for their emails for your newsletters or promotional campaigns. This brings them into your world, and allows you market to them directly.

If you succeed in directing these customers your way after the first or second purchase, you quickly cut off the 20-30% fees paid to third-party apps for using their platform – without losing the customer.

Final Thoughts

Clearly, you cannot start a bubble tea business with your eyes closed. Finding success in the business still requires a lot of work and intentional effort on your part.

This effort ranges from regular – marketing, customer targeting, location selection, and cost management, to the bubble-tea specific effort – deciding on a concept, defining your menu, and system building.

While some part of this planning process will be rather straightforward, some of it can be rather confusing. Marketing, for instance, can be tricky for a first-timer. 

Here, we have only scratched the surface of what you need to successfully start your bubble tea business. 

For a full roadmap and more in-depth training on the steps to take and mistakes to avoid on your way to success, be sure to check out the free masterclass linked below. 

Start Your Boba Business The Right Way

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Want to start your boba business the right way and avoid a bunch of costly mistakes? Well the truth is, there are many traps when it comes to starting a food business. The wrong equipment, the wrong hire, the wrong menu, or the wrong location can mean $100,000 down the drain.

And I had to go through those costly mistakes because there wasn’t anyone out there to help me years ago. But I want to make sure you avoid those costly mistakes.

Learn my 3 step formula in building a popular and profitable food business in my free masterclass below!

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