How Much do Boba Shops Make?

How Much Do Boba Shops Make? (Boba Shop Profit Margin)

While coffee is still king for most Americans, younger people are increasingly gravitating towards bubble tea. In fact, a 2021 boba market analysis found that 94% of those aged between 20 and 29 had bought boba tea in the last three months.

Given that younger demographics can’t seem to get enough of the tapioca pearl drink, it could be the perfect time to launch a bubble tea business and achieve long-term success.

However, is it worth it? How much do boba shops make? And what types of revenue, profits, and expenses can you expect?

Well, in this article, we’ll answer all these questions and more. We’ll start by talking about bubble tea shop revenue and profits before jumping into a breakdown of monthly costs. Lastly, we’ll look at a few effective strategies for increasing your boba shop’s revenue.

Key takeaways

• Boba shops can be profitable, but you'll need to effectively manage costs while maximizing revenue.

• Because they typically have lower overhead costs than full-service restaurants, boba shops can achieve impressive net profit margins. While 15% is typical, your margins will typically fall anywhere from 3% to 20%.

• The three biggest expenses for bubble tea shops are typically cost of goods sold (COGS), labor, and rent.

• Great strategies for increasing your boba shop revenue include expanding your product offerings, refining your marketing, improving customer experience, incorporating technology, and running events and promotions.

Are boba shops profitable?

Running a bubble tea shop can certainly be a profitable business venture. In fact, they often benefit from lower overhead costs compared to full-service restaurants.

However, in order to reach profitability, you'll need to maximize revenue while minimizing expenses.

Additionally, your profitability depends on several other key factors, such as:

• Effective cost management

• Choice of location

• Size of your shop

• Overall business model

• Quality of products

• Marketing strategies

• Target market and demographics

Ultimately, if you’re able to optimize each of the elements above, there’s a great chance you can run a profitable business.

One analysis on TikTok found that Omomo Tea Shoppe in California sells each of their drinks for an average of $7, making about $4 in profit. If they sell 700 drinks per day, it means their gross profit margin is about $2,800 per day, $84,000 per month, and over a million dollars per year.

However, keep in mind that this is before accounting for expenses like labor and rent. We explore net profit margins in further depth below.

How much revenue do boba shops make?

While boba shops can drive significant levels of revenue, the amount you'll be able to generate is dependent on several factors, including:

• Location: Selecting high-traffic areas, such as business districts, college campuses, and shopping centers, can significantly boost sales.

• Product Quality: Offering high-quality bubble tea with fresh ingredients can justify higher prices and attract more regular customers.

• Menu Diversity: A diverse menu with options like fruit teas, smoothies, and snacks can appeal to a broader customer base.

• Marketing and Branding: Effective marketing and a strong brand presence can attract more customers and encourage repeat business.

• Seasonality: Warmer months often drive increased foot traffic, leading to higher sales.

• Pricing Strategy: Balancing competitive pricing with profitability is crucial for long-term success.

Unfortunately, there’s limited public data available regarding the average revenue specifically for boba shops. However, we can make some estimates based on similar industries..

For example, according to Sharp Sheets, a 1,500 square foot coffee shop can expect to generate $450,000 to $1.2 million in revenue each year. Meanwhile, a 2,000 square foot shop should expect to generate between $600,000 and $1.6 million per year in revenue.

To generate $450,000 in profit per year, you’d need to make about $37,500 per month, or about $1,400 per day. Given that the average cost of a boba tea is just under $6 in the United States, you’d need to sell about 230 drinks per day to reach this level of revenue.

However, keep in mind that these figures can vary significantly based on the factors mentioned above. For example, a boba shop in a small town will likely generate less revenue compared to one located in a bustling city business district.

How much profit do boba shops make?

Like revenue, boba shop profit margins can vary significantly from business to business. Fortunately, bubble tea shops generally have lower operating expenses compared to full-service restaurants, which typically have profit margins of 3-5%.

According to the Michigan Journal of Economics, the reported annual profit margin from a single Gong Cha, a boba shop franchise, was $45,000, or about 15% of revenue.

This aligns well with Sharp Sheets data mentioned in the last section, which indicates that coffee shops have an average profit margin of about 15% after accounting for all expenses. However, this number can typically range anywhere from 3% to 20%.

So, imagine your boba shop generates $40,000 per month, or about $1,400 per day, in revenue. Generally speaking, this is equal to selling about 230 drinks each day. With a 15% net profit margin, you could earn about $6,000 per month, or $72,000 per year.

Clearly, while driving revenue is incredibly important, so is maximizing your net profit margin by carefully managing your costs. To accomplish this, it’s vital to take note of key factors, such as:

• Operational efficiency

• Cost of goods sold (COGS)

• Rent and location costs

• Labor expenses

• Marketing spend

Additionally, profit margins may be lower in the initial years of operation as the business establishes itself and builds a customer base.

Breakdown of boba shop expenses

As we just mentioned, to run a profitable business, it's vital that you manage your expenses well. 

So, let's take a look at the costs you'll need to consider when budgeting for your boba shop.

1. Rent and utilities

One of the most significant monthly expenses for a boba shop is rent. Fortunately, most bubble tea shops don’t need a ton of space to operate. 

Generally, a store measuring about 500 to 1,000 square feet should be suitable.According to Statista, the average asking rent price for retail real estate in the United States in 2023 was $22.95. For a 500 square foot shop, this would equate to $11,475 per year, or $956 per month. Meanwhile, a 1,000 square foot shop would cost $22,950 per year, or $1,912 per month.

However, the cost of rent can vary greatly depending on several factors, including:

• Your location

• Size of the space

• Local real estate market

For example, asking rent in Manhattan's retail corridors is a staggering $638 per square foot, while in Tulsa, OK the average is just $13.07 per square foot.

Lastly, remember that utilities, including electricity, water, and gas, typically add another 5-10% to your monthly occupancy costs.

• Average Monthly Cost of Rent and Utilities: 5% to 15% of total revenue

2. Equipment and maintenance

Next, it’s important to consider the cost of your equipment. Essential equipment for a boba shop includes:

• Tea brewers

• Blenders

• Shakers

• Sealing machines

• Refrigerators

• POS system

The upfront cost for this gearcan range from $20,000 to $50,000, depending on the quality and capacity of the machines.

So,  if you finance your equipment with a 5-year, 6% interest loan, you would have monthly payments of about $380 to $970 per month. Meanwhile, if you finance the equipment with a 5-year, 12% interest loan, you would have monthly payments of $450 to $1,110.

Finally, don’t forget to budget for regular maintenance to keep your equipment in good working order. This can help you avoid more costly breakdowns in the long-term.

• Average Monthly Cost of Equipment and Maintenance: 3% to 7% of total revenue

3. Cost of goods sold (COGS)

Your cost of goods sold includes all the direct costs associated with making your bubble tea, such as:

• Tea leaves

• Tapioca pearls

• Milk

• Fruit purees

• Syrups and sweeteners

• Cups, lids, and straws

While there are no guidelines specifically for bubble tea shops, a good COGS percentage for coffee shops is generally 30% to 40%. This means that for every dollar of sales, $0.30 to $0.40 goes towards ingredients and packaging.

• Average Monthly Boba Shop COGS: 30% to 40% of total revenue

4. Labor

Labor is often one of the largest expenses for any food service business. For a boba shop, you'll need staff to prepare drinks, serve customers, and manage the store.

Labor costs can vary depending on your location, hours of operation, and staffing needs. Coffee shops generally aim for a 35% to 45% labor cost percentage, so it’s a good idea to try to stay within this range..

Remember, while you want to minimize expenses, you shouldn’t compromise on the quality of your service. After all, this could hurt customer retention, ultimately leading to decreased revenue over time.

• Average Monthly Boba Shop Labor Costs: 35% to 45% of total revenue

5. Marketing and advertising

Effective marketing is crucial for attracting customers and building your brand. This is especially important in the competitive bubble tea market.

For example, your marketing budget might include:

• Social media advertising

• Local print or online ads

• Promotional events

• Loyalty programs

As a general rule, businesses often allocate 5-10% of their revenue to marketing. However, you might need to spend more in the early stages of your business to establish your brand.

• Average Monthly Boba Shop Marketing Costs: 5-10% of total revenue

6. Insurance and licenses

You'll need several types of insurance to protect your business, including:

• General Liability Insurance: $24 to $72 per month

• Property Insurance: $31 to $103

• Workers' Compensation Insurance: $30 to $100 per month

You may also want to look into securing other types of insurance or consulting with a professional. 

Altogether, though, the coverage types above are the most essential ones, and will likely cost anywhere from $85 to $275 per month. However, keep in mind that these costs depend on several factors, including your location and claims history.

Additionally, you'll need various licenses and permits to operate legally, such as:

• A business license

• A food service license

• Health department permits

Like insurance, the types of licenses and permits you need heavily depend on your specific location and local regulations. So, be sure to perform thorough research or consult with a professional to ensure you’re compliant.

• Average Monthly Cost of Insurance and Licenses: 2-5% of total revenue

7. Other operational expenses

Finally, it’s important to account for other miscellaneous expenses such as:

• Credit card processing fees

• Franchising costs

• Cleaning supplies

• Office supplies

• Professional services (accounting, legal, etc.)

• Staff uniforms

While some of these may seem like minor expenses, they can add up. So, it’s important that you budget for them accordingly.

• Average Monthly Other Operational Expenses: 5% to 12%% of total revenue

How to increase boba shop revenue

While managing your expenses is key to maximizing profitability, so is boosting revenue. So, to help your bubble tea business generate more sales, consider the following strategies.

Expand your product offerings

One effective way to increase revenue is by diversifying your menu. For example, you might consider adding:

• Seasonal specialty drinks

• Fruit teas and smoothies

• Light snacks or desserts that pair well with bubble tea

• Coffee-based drinks to attract a wider customer base

Likewise, it’s a good idea to cater to special dietary needs. By providing options for customers with dietary restrictions, you can tap into new marketing segments. For instance, you might include products like:

• Dairy-free milk alternatives

• Sugar-free or low-sugar options

• Vegan-friendly drinks and toppings

Ultimately, by offering a variety of options, you can appeal to more customers and encourage larger purchases.

Refine your marketing strategies

Marketing is crucial for attracting new customers and retaining existing ones. While there are tons of strategies you can implement, be sure to think about the following advice as you develop and refine your tactics::

• Leveraging social media platforms popular with your target demographics

• Collaborating with local influencers or food bloggers

• Hosting events or workshops related to bubble tea or Asian culture

• Implementing a referral program to encourage word-of-mouth marketing

Remember to track the performance of your marketing efforts and adjust your strategies accordingly. This will help you figure out what works best, allowing you to invest more in effective tactics and increase your return on investment (ROI).

Focus on customer experience

Providing an excellent customer experience can lead to positive reviews, repeat business, and word-of-mouth referrals. To foster an incredible and memorable customer experience, be sure to:

• Train your staff to provide friendly and efficient service

• Ensure consistent quality in your products

• Implement a loyalty program to reward repeat customers

• Create an inviting store atmosphere

Overall, prioritizing customer satisfaction is the best way to build a strong and loyal customer base that keeps your business thriving in the long-term.

As Allen Wang, co-founder of boba franchise Kung Fu Tea, said:

“At the end of the day, it is about people. Customers and baristas are all Kung Fu Masters because they believe in the Kung Fu spirit. We are a community that looks forward.”

Streamline operations with technology

Implementing the right technology can help you serve more customers efficiently and gather valuable data. For example, consider implementing tools like:

• A robust POS system for quick transactions and inventory management

• Online ordering and delivery options

• A mobile app for easy ordering and loyalty program management

Additionally, you can use the sales data from your POS system to make key business decisions. For instance, you can determine your peak business hours, which can help you with staffing decisions. This can also help you run promotions during periods that are typically slower.

Of course, you can also easily see your top-selling products, which can help you with marketing decisions and introducing new product lines.

Host events and run promotions

Lastly, regular events and promotions can drive traffic to your shop and create buzz. Some effective ideas might include:

• Student discounts

• Seasonal promotions

• Bubble tea making workshops

• Happy hour specials

Ultimately, promotions are a great way to drive more foot traffic to your store, while events are the perfect way to help build a community around your business.

Make more money with a comprehensive POS system for boba shops

As we've seen throughout this article, boba shops can certainly make a good amount of money. However, it's key that you provide high-quality products and create an excellent customer experience to achieve profitability.

Of course, it's also vital that you incorporate the right tools, allowing you to efficiently process transactions, offer loyalty programs, and provide online ordering options.

Fortunately, a comprehensive POS system designed for bubble tea shops, like Toast, can do all of this and much more! 

To discover all the ways Toast can help you run a better boba shop, be sure to check out all the awesome features.

Related Resources

• Boba Shop Business Plan
• Cost to Open a Boba Shop
• Boba Shop Equipment
• How to Open a Boba Shop
• Boba Shop Ideas and Concepts