How Much Do Boba Shop Owners Make?

Boba tea, which started as a fun trend in Taiwan, has taken over the entire world. The sweet, creamy drinks are quite popular among younger customers, which is why boba shops are a lucrative business opportunity.

While it’s one of the hottest gen Z food trends today, it’s still important to understand if you can truly make money as a boba shop owner. Let’s explore how much these shops make, what affects their profit, and what type of store you should consider to attract the most customers.

How much profit do most boba shops make?

Boba shops are highly profitable, with some stores reaching a gross profit margin of 70% to 80%. Of course, factors like ingredient costs, pricing strategies, and operational efficiency affect your margins, so these percentages can vary.

Seasonal variations can also influence your restaurant profit margins. For instance, sales often dip during colder months since these drinks are typically served cold.

You can run seasonal drink promos with winter spices like cinnamon or cardamom. Options like hot jasmine milk tea, brown sugar boba lattes, or limited-edition holiday cups can help keep traffic steady when it’s cold out.

Owners of a single-location boba shop in a small town can potentially earn around $2,000 to $5,000, while a busy urban location or a franchise in a high-traffic area could generate profits of $10,000 to $20,000 or more. 

Factors that affect bubble tea shop profitability

Your shop’s location, target demographic, and menu strategy affect your revenue. These factors determine the number of people that come through your doors and how much they spend. Understanding these factors is important if you want to maximize your boba shop’s financial potential. 

1. Location and foot traffic

High-traffic areas such as those near schools, shopping malls, and downtown districts tend to attract more customers, leading to higher sales. However, these prime locations often come with higher rent, which can increase your operational costs.

The average asking rent for retail spaces is around $21.85 per square foot. In high-demand urban areas, this figure can be substantially higher. On the other hand, smaller cities or suburban areas may have more affordable rental rates but with potentially lower foot traffic.

Make sure you’re doing thorough research when you’re scouting for locations. However, if you’ve already set up shop, you should consider ways to attract more customers. This might include promoting on social media and partnering with local businesses and schools.

2. Target demographic

Students, particularly those in high school and college, are a significant segment of the bubble tea market. They’re attracted to boba shops that offer affordable prices and a variety of fun, customizable flavors. The social aspect of visiting a boba shop also appeals to this group, making it a popular hangout spot.

However, students don’t have a lot of spending power. They typically look for budget-friendly options and may visit in groups, sharing costs and enjoying social experiences.

To maximize revenue from this demographic, you can create combo deals, student discounts, and loyalty programs that encourage repeat visits. Additionally, offering study-friendly environments with free Wi-Fi and comfortable seating can attract more student customers and increase overall sales.

Then, there are office workers. These customers often look for quick service during lunch breaks or after work, and they appreciate options that cater to health-conscious choices.

Implement online ordering or a mobile app for quick pick-ups to get more sales from this demographic. You can also offer low-sugar or dairy-free alternatives to cater to health-aware customers.

3. Product and menu strategy

A well-thought-out menu can significantly enhance a boba shop’s profitability. It helps customers find what they want and order it easily.

Expand your menu with diverse tea bases, such as black, green, oolong, and fruit teas. It’s also a good idea to offer a range of toppings like tapioca pearls, jellies, and popping boba to increase the average transaction value.

By providing customization options, customers are more likely to add extras to their drinks, boosting overall sales. For instance, a basic milk tea priced at $4 can easily become a $6 or $7 purchase with added toppings and flavor enhancements.

Implementing combo deals that pair drinks with snacks can also effectively increase the average spend per customer. For example, offering a milk tea with a snack for $8 to $10 provides value to the customer and improves profit margins as well.

4. Ingredient costs

Monthly inventory costs for bubble tea cafes range between $2,000 and $5,000. While bubble tea ingredients like tea leaves, tapioca pearls, and flavorings are generally affordable, external factors can cause price fluctuations.

Recent U.S. tariffs on Chinese imports have led to a 104% increase in costs for some bubble tea ingredients and packaging materials. This has directly impacted businesses like Boba Guys, which operates a boba production facility in Hayward, California.

In light of the rising costs, boba shop owners must be smart about pricing and sourcing. Look for local suppliers and purchase ingredients in larger quantities for bigger savings.

You can also look for multiple suppliers to avoid shortages if one source faces issues. Consider implementing a small price increase or reducing portion sizes if necessary. 

5. Labor management

Labor is one of the biggest costs for any boba shop. On average, payroll takes up around 31.6% of a shop’s monthly revenue. This includes wages, taxes, and benefits. If you don’t manage your restaurant labor cost percentage well, these costs can eat into your profits.

Having too many employees during slow hours means you’re paying for idle time. This increases expenses without boosting sales. On the other hand, understaffing during busy times can lead to slow service and unhappy customers.

Find restaurant payroll software that can help you schedule the right number of people for each shift while also allowing you to calculate and distribute wages automatically.

6. Rent and overhead expenses

Managing overhead expenses is important if you want your boba tea shop to stay afloat. Aside from rent, which is one of the largest fixed expenses for restaurants, you can expect to pay for utilities, insurance, permits, and maintenance.

Utilities such as electricity, water, and gas can average between $300 to $800 monthly. Insurance costs might range from $100 to $300 per month, depending on coverage.

Additionally, licenses and permits can add several hundred to over a thousand dollars to your opening cafe costs, which you might pay in monthly installments if you’ve taken out a business loan.

Starting with a smaller space can help control initial costs. A compact, well-utilized shop that’s consistently busy is better than a larger, underutilized location with high overhead.

Check the location carefully. Balance the benefits of high foot traffic against the higher rent costs. Sometimes, a slightly less central location with lower rent can be more profitable if the savings outweigh the reduced traffic.

Don’t be afraid to discuss favorable lease terms with property owners, such as reduced rent for longer lease commitments or rent-free periods during the initial months.

7. Marketing and advertising

No matter how good your location is, you still need to promote your boba tea shop to attract customers. Platforms such as TikTok and Instagram are the best because they focus on visual content.

You can create engaging short-form videos showcasing your unique drink creations, behind-the-scenes preparation, or fun staff interactions. Consider collaborating with local food influencers or micro-influencers who can help spread the word about your boba shop.

You should also encourage customers to share their experiences online to amplify your shop’s reach. User-generated content (UGC) not only builds community but also serves as authentic promotion. 

How to forecast sales in a boba shop

Forecasting sales is a critical aspect of running a successful boba tea business. Start by assessing foot traffic at your chosen location. For instance, if you anticipate serving 200 customers daily and each spends an average of $6, your monthly revenue would be approximately $36,000.

Knowing how many customers you can expect to serve helps in creating accurate financial projections. Meanwhile, having a sales estimate can help you manage inventory, staffing, and equipment needs.

Calculating the average order value also helps you understand potential revenue streams. Consider factors like peak hours, seasonal variations, and local events that might impact customer traffic.

Aim to keep your ingredient costs at or below 35% of your revenue to maintain healthy profit margins. This includes expenses for tea, tapioca pearls, milk, fruit purees, syrups, sweeteners, cups, lids, and straws.

Consider all operational expenses such as rent, payroll, marketing, insurance, and equipment maintenance. These costs can vary based on your shop’s location and size, so it’s crucial to account for them in your financial planning.

Next, calculate the number of drinks you need to sell monthly to cover your fixed costs. If your fixed costs are $3,000, and you make $2.50 profit per drink (selling price minus variable cost), you’d need to sell 1,200 drinks to break even.

Once you have your sales forecast, make sure to follow through by tracking your actual performance. Compare your projected sales with real-world results using your POS. Take a look at the data and adjust your strategies accordingly. 

What types of bubble tea shops get the most customers?

Franchises, custom boba bars, and shops with multiple locations tend to attract the most customers. These types of shops have their own advantages that contribute to their popularity. 

1. High-traffic urban franchises

Investing in a franchise is a surefire way to attract customers quickly. Franchise boba shops come with established brand recognition, which helps draw in customers who are already familiar with the brand.

These franchises also have proven business models and standardized operational procedures, which make it easier for new business owners to replicate their success. They provide comprehensive training programs that equip new franchisees with the knowledge of running a successful boba tea shop.

Additionally, these franchises often have established supply chains, which can help reduce ingredient costs and ensure consistent quality across different locations.

Gong Cha, Sharetea, and Chatime are some of the most successful boba tea chains in the world. Many franchisers have brought these Taiwanese brands to North America, including Chatime Canada.

2. Premium custom boba bars

Being able to customize your drink is one of the best things about boba. Premium boba bars lean into this concept and offer an extensive range of unique flavor combinations and high-quality ingredients.

If your customers are usually 18 to 34 year olds, 46% of that demographic say customization is an important factor when they’re choosing a place to buy boba.

Make the most of this concept by offering a wide variety of tea bases, milk options, sweetness levels, and toppings. Experiment with unique ingredients like lavender syrup, matcha powder, or seasonal fruit purees.

Aside from having unique flavors, focus on creating an Instagram-worthy aesthetic. Design an inviting shop with photogenic drink presentations and a trendy interior. Use visually appealing glassware, add colorful garnishes, and create a space that encourages customers to take and share photos.

Create signature drinks with eye-catching layered colors or unexpected ingredients that will spark curiosity and social media buzz, helping to organically market your boba shop.

3. Multi-location independents

Multi-location independent boba shops like Boba Guys found success by owning their brand and scaling wisely. Founded in San Francisco, Boba Guys has expanded to cities like New York and Los Angeles, maintaining control over their menu and sourcing high-quality ingredients such as organic milk and loose-leaf tea.

Having multiple locations enables faster brand recognition and customer trust. You can start with one location and gradually expand to nearby locations in the same city or state as your brand gains popularity.

Aside from expanding their reach, Boba Guy also invested in technology to enhance customer engagement. For instance, their blockchain-based loyalty program, “Passport,” led to a 244% increase in visit frequency and a 3.5x rise in spending per customer.

This unique take on loyalty programs, which have always been effective in encouraging repeat business, shows how well the Boba Guys know their target customers.

If you want to do the same thing with your loyalty programs, you can create a digital stamp card through your mobile app or run a tiered loyalty program where customers earn points for each purchase that can be redeemed for free drinks or exclusive merchandise.

Consider integrating social media challenges or referral bonuses to encourage word-of-mouth marketing and increase customer engagement while building a strong, loyal community around your boba shop brand.

Spilling the tea

Boba shops are a great business opportunity with strong margins, allowing owners to earn as much as $10,000 to $20,000 per month. As long as you choose a good location, manage your costs properly, and create a strong menu, you can grow your bubble tea shop with confidence.

As a cafe scheduling software, 7shifts lets you assign staff for each shift and manage labor costs. Features like smart scheduling, labor tracking, and sales forecasting help you stay within your labor budget while keeping service fast and customers happy.

Start your free trial today and see how 7shifts makes staffing easier and more efficient.

FAQs

Are boba businesses profitable?

Yes, boba businesses can be very profitable when managed well. Some high-performing shops have gross profit margins of 70% to 80%. Since ingredients like tea leaves, tapioca pearls, and syrups are fairly low-cost, shop owners can make good money if they control waste and manage other expenses like labor and rent.

How expensive is boba usually?

Boba drinks are affordable for most people. The price depends on your location and what’s in the drink, but most boba tea costs between $5 and $8. A regular milk tea without toppings might be around $4 to $5.

If a customer adds extras like tapioca pearls, jelly, or fruit-popping boba, the price can go up to $6, $7, or even more. Specialty drinks with seasonal flavors or premium ingredients can also cost more.

Some shops also offer combo deals that include a snack, like a pastry or egg puff, for $8 to $10. This kind of pricing is good for business because it increases the average sale per customer.

Is boba high in demand?

Yes, boba tea is in high demand, especially among young people. It started in Taiwan and has become super popular in places like the U.S., Canada, and many parts of Asia.

A big reason for its popularity is how fun and customizable the drinks are. People love choosing their tea base, milk type, sweetness level, and different toppings.

Shops that are Instagram-friendly often get more traffic because people want to share their drinks online. Social media plays a huge role in boba’s popularity, with colorful, creative drinks becoming engaging content.

How do I open my own boba shop?

Opening a boba shop starts with a solid plan. First, decide if you want to open an independent store or buy a franchise. Once you’ve chosen, look for a good location with strong foot traffic, like near schools, malls, or busy streets.

Then, figure out your budget, including rent, equipment, supplies, permits, and wages. You’ll need machines to brew tea, seal cups, and keep ingredients fresh. You’ll also need to hire and train a team.

Next, design your menu. Offer popular items like milk tea and fruit tea, and let people customize. Finally, promote your shop with social media and loyalty rewards.

Do you need a license to sell boba?

Yes, you need licenses to sell boba tea. The main license you’ll need is a business license from your city or county. You’ll also need a health permit from your local health department, which will inspect your kitchen and food handling practices.

If you plan to sell food or snacks with your drinks, you might need a food handler’s permit, too. Some states require a sales tax permit so you can charge tax on your drinks.

Make sure to check local laws because the rules can be different depending on where you live. It’s a good idea to talk to your city’s small business office or a local business advisor before opening.