How A lot Will it Actually Value to Open a Kung Fu Tea Franchise?

Kung Fu Tea is an American beverage model with headquarters in New York Metropolis that was established in 2010 with the purpose of fostering a extra specialised bubble tea tradition. With greater than 350 websites nationwide, they’ve change into the most important bubble or boba tea model within the nation.

How a lot will it value to open a Kung Fu Tea franchise? You must count on to speculate $123,000 – $422,000 to open a Kung Fu Tea franchise, together with the franchise price of $37,000.

Nonetheless inquisitive about becoming a member of forces with this bubble workforce model? I break down the monetary necessities you might want to begin and whether or not or not the idea is well worth the funding. Take our 7-minute franchise quiz to seek out out if that is the best choice for you. 

Monetary Necessities and Charges

Right here’s a snapshot of the monetary necessities and costs related to opening a Kung Fu Tea franchise location.

Monetary Necessities

So as to acquire a franchise from Kung Fu Tea, you’ll want to fulfill or exceed the minimal monetary necessities.

You want to make investments a minimal of $123,000 to start working this franchise. As well as, you could account for the prices of actual property, furnishings, renovations, uniforms, insurance coverage, and different bills. In different phrases, count on to pay considerably greater than the minimal funding quantity earlier than opening day.

Earlier than submitting an software for this franchise for a bubble tea retailer, assess your business expertise and monetary scenario. After that, you would want to contemplate the franchise’s potential market earlier than shifting ahead with the franchise software. This isn’t an idea that might be viable in lots of components of america, particularly the agricultural Midwest.

Subsequent, the Kung Fu Tea workforce will consider the submitted software. Anticipate to obtain an e mail with a validation receipt. If the appliance meets the businesses necessities, they may attain out for an introductory name. Assuming the decision goes properly, you’ll received by customary background and monetary checks to substantiate you might have the funds required to start out the enterprise.

How A lot Revenue Does Kung Fu Tea Franchisees Make Per 12 months?

Firm income / gross sales per 12 months: In 2020, Kung Fu Tea generated $2,513,157 in gross sales. In 2019, the bubble tea franchise made $2,467,310 in gross sales.

Variety of items: Kung Fu Tea operates greater than 250 places throughout the U.S., in a variety of conventional shops and non-traditional places working inside motels, malls, campuses, airports, and prepare stations.

Common Gross Income Per Retailer: $335,688 (That is primarily based on income from the 2020 fiscal 12 months.)

Trade Common Revenue Margin: The best locations to start out a bubble tea enterprise embrace faculty campuses. The associated fee to brew a cup of bubble tea in a retailer is about 75 cents, but customers pays between $5.00 – $6.00 per cup. You means you might have the chance to mark up the beverage by 350 p.c or extra, albeit all of it depends in your competitors, value sensitivity, and market.

Through the first six months of opening a store, you shouldn’t anticipate turning a revenue. However by 12 months two, it’s best to have the ability to hit a gross margin of round 56% on gross sales. Some homeowners of bubble tea outlets declare that their internet revenue margins are within the 20%–30% vary yearly.

How a lot do Boba Tea franchises generate in income on common?

Generally, if the everyday bubble tea store bought 100 cups every day at a median value of $5.00 – $6.00, you could possibly count on to earn $500 – $600 per day. Multiply this by 350 days being open per 12 months, you could possibly count on to make $175,000 – $210,000 yearly. After all, you’ll nonetheless have to subtract the store’s yearly bills to get the web annual revenue. Ensure you perceive the associated fee for a month-to-month lease, mortgage cost, royalty price of three%, advertising price of two% and taxes so you possibly can decide what you would want to make to interrupt even with this idea.

Normal bills for a bubble tea store embrace hire or lease of the shop area, advertising prices, substances, insurance coverage, franchise charges, tools prices, and naturally worker salaries. Let’s say all these bills quantity to $100,000 then we subtract this out of your gross annual income: $175,000 – $210,000. You’ll find yourself with $75,0000 – $110,000 earlier than taxes and franchise charges.

What’s the common proprietor wage for a Kung Fu Tea Franchise?

You must have the ability to pay your self an annual wage of $40,000 – $60,000 every year. This after all assumes that you’ll be appearing as the shop supervisor. If you wish to function this as a passive enterprise alternative, the leftover revenue might be eaten up by the wages of a full-time retailer supervisor. Is that this sufficient so that you can comfortably stay on for the primary couple years working the enterprise?

Kung Fu Tea SWOT Evaluation

Kung Fu Tea official web site.

Having an outline of what placing up a Kung Fu Tea franchise might help a person determine if deciding to open one is sensible. Right here we now have damaged down a number of the strengths and weaknesses, in addition to the alternatives and threats of the corporate as I see them.

Strengths

1. Distinctive Experience – Greater than ten years have handed since Kung Fu Tea first began hand-crafting their adventurous tea blends. Bringing the product from the place it originated greater than a decade in the past, Kung Fu Tea is taken into account a pioneer within the boba tea business. Straight using the bubble tea idea from Taiwan for the previous 12 years provides the corporate a wealthy and distinctive information of the best way to make that genuine Boba tea.

2. Authenticity – So as to create its beverage picks, Kung Fu Tea solely makes use of real Taiwanese substances. With this technique, the enterprise is ready to protect a real taste that drinkers discover distinctive. Kung Fu Tea provides that distinctive buyer expertise of the unadulterated style of bubble milk tea.

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3. Speedy Outlet Progress – Simply inside 12 years of existence and franchising, Kung Fu Tea has amassed a complete of greater than 250 shops throughout the U.S., albeit totaling 350 shops should you embrace the places exterior the U.S. corresponding to Canada, Singapore, and South Korea. The vast majority of the greater than 350 Kung Fu Tea places are discovered within the US. Due to this emphasis on large-scale operations, the company has been capable of obtain economies of scale and decrease prices per unit of output.

4. Consistency – The consistency of taste, beverage high quality, and repair dependability throughout all of Kung Fu Tea’s places has allowed the model to construct shopper loyalty regardless of franchising at an early stage of its improvement. Due to how unusual this accomplishment is amongst premium meals manufacturers, a number of companies keep away from utilizing franchising as a enterprise mannequin. That is the explanation why Kung Fu Tea shops continue to grow together with their buyer loyalty and demand.

5. Take out pleasant – Kung Fu Tea was largely unaffected by the pandemic shut downs. Kung Fu Tea stored increasing though numerous franchises whereas different meals and beverage sector closed their doorways. It is a idea that thrives in an atmosphere the place curbside pickup is required.

6. Inventive advertising – Kung Fu Tea established Nationwide Bubble Tea Day on April 30, 2018, the eighth anniversary of the enterprise to commemorate the rising quantity of people that love bubble tea. The enterprise teamed up with the Taiwanese restaurant model TKK Fried Hen on November thirtieth, 2018, to launch joint websites within the US. Kung Fu Tea was listed as one of many Nation’s Restaurant Information Prime 500 Restaurant Chains in 2021.

Weaknesses

1. Excessive Prices – It prices quite a bit to always brew the drinks and import the important thing substances from Taiwan. Due to this, Kung Fu Tea’s pricing is pricier than these of the vast majority of its rivals out there.

Kung Fu obtains all of its teas from Taiwan, the place tapioca is extra typically referred as “boba.” Jasmine inexperienced tea, black tea, and oolong are among the many loose-leaf teas provided by the corporate.

2. Restricted Product Portfolio – Kung Fu Tea now solely sells tea-based drinks, which restricts the corporate’s capability to develop its market. Increasing their product choices may give them an edge over their rivals. In case you check out somebody like Starbucks, they’ve been in a position so as to add meals objects to the menu together with breakfast sandwiches and baked items. If this boba store may add high-profit meals objects to the combination this enterprise would look much more interesting.

3. Not a recurring beverage. Espresso is a beverage that’s loved by customers each day. I for one don’t go a single day with out making a cup of espresso at residence or visiting a Starbucks location. However you don’t see this identical each day behavior of having fun with a boba tea drink every morning. Boba tea is extra of a particular deal with that’s loved much less continuously.

4. Excessive effort drink to supply. For every drink to be created utterly contemporary, Kung Fu Tea prepares the tea in its shops each three hours. Oolong Milk Tea, Taro Slush, and Ardour Fruit Inexperienced Tea are amongst its best-selling drinks, however they take hours of labor to make proper.

Alternatives

1. Altering Life-style – A rising variety of People are selecting meals comprised of pure substances because of the emphasis on wholesome consuming within the nation. Extra people are selecting meals comprised of pure substances because of the American emphasis on wholesome delicacies. With the assistance of this pattern, Kung Fu Tea is ready to increase the marketplace for its pure product-based product strains, significantly its inexperienced tea varieties.

2. Style Globalization – Extra clients than ever earlier than are ready to pattern new meals from many cultures due to the fusion motion that has taken maintain within the US. To extend its market share, Kung Fu Tea has the prospect to benefit from this pattern.

3. Declining Caffeine Consumption – Kung Fu Tea might be able to draw espresso drinkers seeking to swap to options with a lot fewer caffeine due to the shift favoring caffeine-free merchandise.

Threats

1. Rising Competitors – Due largely to its reputation on social media in current occasions in addition to its adaptability—greater than 200 taste combos and hundreds of drink modification choices—the beverage has grown tremendously in reputation in america. In a couple of years’ time, the bubble tea market has grown right into a $1 billion business. However with develop like this comes rising competitors.

2. Is that this a pattern? Bear in mind how huge the frozen yogurt pattern grew to become a couple of years in the past? Most froyo institutions went underneath after a pair years in enterprise. There certain appear to be numerous similarities with bubble tea outlets too. This beverage has the potential to go in after which out of fashion shortly. We don’t have longterm proof of idea for this beverage in america.

Is Kung Fu Tea Chinese language owned?

This isn’t a Chinese language owned firm. As said earlier, Kung Fu Tea is an American beverage model established in New York Metropolis. Founders Allen Wang and Michael Jiang are entrepreneurs from Queens who received their thought for a boba tea store upon coming back from their journey to Taiwan. Whereas in Taiwan, they had been flabbergasted by the variability bubble tea they had been ingesting from the one they got here to know and love. The founders had been additionally shocked to see the variety of individuals lined as much as take pleasure in a home made bubble tea.

This journey expertise gave the founders the light-bulb second they wanted to launch a boba tea enterprise. One in every of their pals, Sean, already had a bubble tea store in Taiwan. Allen, Michael, and Ray talked and satisfied their pal Ray to go on board with their new enterprise enterprise. Days glided by and Sean finally determined to come back on board along with his pal’s enterprise proposal, the remaining, as they are saying, was historical past.

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Is Kung Fu Tea Well worth the Value to Make investments?

The recognition of Kung Fu Tea have an thrilling product and are expertise fast development. Whereas the idea might by no means obtain the variety of places as quick meals or espresso franchises, the idea seems to be like they nonetheless have room to run. Additionally, Asian-American inhabitants continues to develop after 35% development over the previous decade that might end in long-term demand enhance for this drink.

With that being mentioned, listed below are a couple of questions it’s best to ask your self earlier than investing on this idea. Will you take pleasure in working a bubble tea store? You’ll be working face-to-face with most people. In case you don’t take pleasure in speaking and assembly with individuals, take into account a special kind of enterprise. As talked about earlier, how huge of an Asian group do you might have within the space? What number of youthful Millennials and Era Z residents do you might have within the space? These are the customers who perceive what bubble tea is and can buy the beverage.

Relying on profitability, it may take you as much as ten years to recuperate your funding should you create a Kung Fu Tea franchise, which is a really very long time however is typical for different companies within the section. Moreover, should you solely set up one location, your franchise might not generate sufficient income to cowl your preliminary funding if you promote it.

In the long run you’ll have to look inward to find out if a Kung Fu Tea franchise is best for you. Kung Fu Tea is a quick rising idea in a section of the beverage business that’s persevering with to develop. However the idea can also be unproven in america long-term and there may be rising competitors from comparable ideas popping up.