Hi everyone,
I will be opening a bubble tea business and thinking of one or the other. Gong Cha Franchise I enquired was about $300k to start a franchise.
Or I can open my own branding and use that 300k to establish my own branding.
The pros of a franchise is marketing is already done and everything is set up.
Con would be the start up cost and the profit margin they get for each cup.
What do you guys think?
Naw, Boba is life!!
Definitely is!
For $300k why open up donet kingor subway?
Bubble tea is already over crowded.
Subway is over crowded too, I've seen two in my area close down!
Agreed! Subway closed down where I am.
Donut King? Geez haven't seen one of those around Melbourne for a while!
Bubble tea isn't big enough to warrant a franchise the way that Subway, KFC, Burger Jack's, Dominos, McDonald's does.
Where its most useful is in the legal department, if you everso happen to need it.
I don't see much instances, especially in Australia's small market to warrant that.
You're better off just keeping that $300k as a rainy day fund. But then again, this seems like the concerns of a multimillionaire, and of that I am not.
Depends if you have experience in running a business and your creativity?
$300k seems a bit high for it.
I think about 10 years ago, my uncle was looking into an Oporto franchise, and that was about $400k at that time.
Oporto at that time had a lot more brand recognition than Gong Cha does now, plus a higher marketing budget etc.
I guess for you, it depends on the area and if its in a shopping centre.
Also, I notice online that most Gong Cha outlets have very long opening hours (like 11 hrs a day, 7 days a week). You may have to do same if going with them.
Very true, that is why I was looking into the second option.
I was at Gong Cha yesterday. My local outlet is combined with a Hotstar chicken outlet right next door (they even share a kitchen).
Anyway, yesterday, they were advertising actual Chinese meals alongside their standard bubble tea offerings. It was weird.
And mick123 is correct. My local one usually opens at 9am and close at 9pm.
They're owned by the same company in Sydney at the very least
But its a business, you just open the doors and the money flows in? Right!? :)
In this case I think it bubbles up.
Lol it's even hilarious he thanks the person who advises him not to go into a franchise business.
Yet here we are.
You can work normal hours with some other employees and have employees for the later shifts.
You can work normal hours with some other employees and have employees for the later shifts.
No, you can't. Those flakey, casual employees who call in sick? Guess who covers them… the owner.
If you want to make profit out of any small business, you're on the ground 6+ days per week, generally 7 days per week during the first year or so until it finds it's feet, and you know you can trust your staff while you're not there. You can't just trust them from day 1 to do the right thing.
You really need to do more research just based on that 1 reply alone.
Thanks for your input. Definitely agree with what you are saying. What I meant was in the long term. Short term I will undoubtedly be working a lot more hours until the franchise lifts up a steady pace.
@MrNice: you can only sit back and relax if you own 10 established stores and so you have budget to hire manager, etc to do works for you.
Pretty sure you could supervise your staff with security cameras in a small bubble tea outlet. Remote management is much harder to do with some other businesses like convenience stores because of the complex layout of the store and number of hidden corners. As long as your staff are properly vetted, know their jobs well, and have fallback person if they are sick, etc. you shouldn't have any serious issues. Modern food retail is run with digital registers and many now epayment only, so theft ought to be non-existent.
Wait… Hold up.
You want to be a business owner so you get to work normal hours and have the more attractive shifts?
Yeah sure. That's what being the boss is all about.
(All you bosses out there, don't burst that bubble).
My friend owns one with his partner. A chatime franchise. He's definitely kicking back, has employees and his own partner works there 4-5 days a week (not crazy hours), he comes in once/twice a week and works at CBA the other 3 days of the week.
He was earning over 120k/yr at CBA f/t and got the franchise to "chill out and not work as much". Not sure how it's going but he's had it for over 3 years and does not seem stressed so I guess it's going well.
Not sure how it's happening, I'm guessing he'll start to actually profit much slower than people who give it their all for the first few years.
This is vague so I'm hoping it doesn't egg you on too much, just putting it out there that it's not impossible to chill out a bit with it.
However, starting own franchise sounds much better value wise for something like bubble tea, just perfect your formula. Then promote promote promote and work out a good marketing strategy.
@Bargainbeth: I'm glad it is working out for your mate.
I have friends who are franchisors and franchisees.
The franchisors have told me to be cautious. One has recently closed several of their stores. A very popular SEA brand. The business also allegedly relies heavily on underpaying foreign students, a claim that can be backed by recent news reports.
A friend who ran a popular pie franchise closed his doors a couple of years ago. He paid $200k+ to renovate a small space in the shopping mall (one of those kiosk like things but with seating), was expected to be fully staffed during all night shopping events which he hardly had customers yet paid penalty rates, and committed to keep buying stock even though sales are terrible. Fortunately, he could afford to call it an amusing experience.
I'm sure there are exceptions in every business and every type of business but as someone who has been through a few and are still running most of them, I don't consider being a boss to be a luxurious experience. The money can be good (if the business succeeds) but the stress of capital investment and unpaid unseen work is enormous.
@[Deactivated]: Good to hear you're making it work with your investments. Yeah, I agree with you. I just put my friends (somewhat incomplete) story out there as a different experience, I don't have much knowledge to debate with, business wise. Though bubble tea does sound highly profitable in terms of margin, compared to junk food franchises.
Your quoting reliance on international students sounds about right haha. Don't know why I never thought of it, I always thought they just hired international students as it went to the image of the store. Asian Haahhaha.
Wow, fully staffed during lie customer periods, that's so unfair. I've heard about the issues of having a franchise where it's part of a mall. Someone I know has to pay $180k recently too,to renovate with the malls upgrade :O.
Do you get a discount on supply of ingredients or maybe locked in to paying more for exclusive supply?
It's always more.
Franchisees are always looking at ways to source from elsewhere but the low volume places have minimum amounts to purchase and the high volume places are closely watched.
Consider a Michel's Patisserie. They seem to be getting a lot of publicity lately.
I've seen some close down.
he was trolling you, lol
Definitely don't get into small business or franchising if you don't understand the background of baysews comment.
So what's your ROI timeframe on 300k?
What are your monthly overheads going to be?
Are you going to staff it yourself or employ workers?
You might be better investing in a high yield motor vehicle?
Let me know once you open it, I would love to try
I bet you've been waiting for years for a post like this.
best day of my life
I wouldn t bet on gong cha in sydney. As they don't update the products they sell and people get tired of not havingthe one they look for available.
Have you thought about yifang or gotcha?! Their products is more appealing.
How about a different franchise altogether? I would dieeeee if Rotiboy came to Aust (but most likely wouldn't start in WA :( ) with reasonable pricing ofc. Everytime I walked past one in KL, I would buy a few. Wonder how much it costs to buy…
They sell rotiboy similar bread here, it's called coffee bread though haha the one with butter inside right?
What does the $300k cover? Is it the full fitout?
We've got to be close to Peak Bubble Tea. There are so many different brands with multple stores in Sydney & Melbourne. The demand is crazy, but you have to ask yourself if you think it'll keep growing.
It's gonna be like the frozen yogurt craze
Boom to bust
The frogurt is also cursed
Fro-yo is still an ongoing winner in warmer parts of Australia, but in Melbourne/Adelaide they only work inside large (climate-controlled shopping centres), because no-one wants to buy it for 6+ months of the year. Even in larger malls they struggle, unless they offer it as part of a range of products that gives them a year-round demand.
I think as long as there's Asian students (who miss Asian flavours and got money to spend) in the area, bubble tea won't die.
Though I wouldn't invest $300k into this.
This. 3 years ago Glenferrie Road Hawthorn went from 1 frozen yogurt shop to 8, then within the next year all but one shut down.
Prior to the start of the year there was a single Cha-Time on Glenferrie Rd, but four new shops have opened or are about to open.
I suspect tea shops and frozen yogurt shops have the same attraction to franchisees - they don't require a lot of real estate, raw materials or staffing.
Or cupcakes before that!
Speaking of which OP, I just remember there's this franchise called 'KungFu Tea'.
It seems that it's quite huge in USA.
Their milkteas are really great as well.
I beg to differ, it's yucks
i accept your beg
Don't do it.
How much profit do you expect to make per year from a 300k investment? Have you spoken with any other franchisee's to see what they really make? Have you worked in the industry previously?
Btw are you aware of the underpayments currently engulfing the industry? https://www.smh.com.au/business/workplace/bubble-bursts-for-…
It happened to another company. I have known a few people in the business and they can break even after the first year, after that it is pure profit.
$820/day, after rent/wages/insurance etc?
I call total BS on that one.
If you "know a few people in the business" why don't you ask them and get their real world perspective and experience?
FYI I agree with the others and think it is a terrible idea, but you seem to have your mind set on it for some reason…
Alot of 'people in the industry' meaning those who are running a loss-making business and deluding themselves they are killing it, either in denial or there is some MLM-aspect to that business. Either way, they may not be a unbiased/reliable/trustworthy source of information.
sugar and water make people fat
look at what coke has done to people.
Well I believe coke industry is the best to make fool out of people
And what a boy!
Homer, that's the umbilical cord
What are you doing in this part of the neighbourhood?
Start your own brand. I have no loyalty to bubble tea brands. It is sugary water with sago balls. Location of your store and proximity to foot traffic will help you get the sales you need
if there are two tea shops side by side, I will choose the one with known brand.
If you start from scratch, you need a lot of marketing and product development and make sure your products taste better or at least the same as the competitor.
Still, I wouldn't invest 300K in this franchise.
This is true though word of mouth does spread well esp with young people, primarily with food. I don't think anyone knew that yifang or king t were or were not franchises the first time they tried them (it's often "there's this really good milk tea place with this drink we should try").
If they do try it and it's good, it's likely they'll be back. The problem then would be marketing wisely and good Formula. Perhaps they can afford lower prices as a non-franchisee as you're taking the surplus for yourself.
I live in an area with a million milk tea choices and have tried them all, going back to a few over and over.
GongCha does very well with the constant flow of discount/free offers via their mobile app, which young people are well-versed at exploting. That won't help the bottom line of these outlets, but to an outsider it may appear that their chain is doing incredibly well.
I aren't so brand loyal, I'll try both shops once or twice and stick with the better tasting option (they don't all taste exactly the same IMO); other aspects such as interior design, comfy seating, cute staff, good pricing, loyalty system helps too.
Do your due diligence… $300K is not your only cost. You will have to purchase all materials and stock from the franchisor… and you have no freedom to refuse promotions that are not in your favour.
Franchising in Australia has few protections, so check to see how the business will work and be profitable for you before committing to this business model.
Bubble tea is very niche… be brutal in your assessment of the business. Remove the emotion.
Personally, I’d stay away from any franchise business. Just read in the papers, watch Four Corners, Fin review and franchises are thwart with danger and massive pitfalls. You’ll be throwing in good money after bad if you don’t do your homework and research. Seriously seek independent advise from accountants, get a solicitor to review the contract, speak to other franchisees to understand and know what you’re getting into. Why don’t you set up a pop up shop somewhere and go it alone for 6 months and see how it goes first. The franchise business will be next in line for a Royal Commission….watch this space.
Some franchises brands are in the news. Already over regulated industry.
I don’t believe it’s over regulated at all, that’s why you have all these mum and dad investors going into these businesses with their eyes wide shut and then going broke within 1-2 years due to the controls the franchisees have over them. The government will eventually clamp down on these, at best shady operating structures/business models and hopefully turn it around to a more balanced ROI for the franchiser.
If you going into this business, you better be prepared to give up your life as you know it, just to make ends meet.
How about investing in Tatts lotto ??!
Shares? $4.61 at the moment
I know nothing about shares lol
I've invested similar sums in small businesses and am personally against franchises in general, the risks seem to greatly outweigh the benefits.
Having said that, an acquaintance opened a Gong Cha in Southport (high student traffic area) with what I presume are very good lease terms and seems to be doing very well. I never see him there whenever I walk past (I am in the area often for work). Interestingly, that particular retail area permanently has "for lease" signs, and it feels like most of the other businesses with a few exceptions are struggling.
As an aside one of my first jobs in high school was at an original brand bubble tea place in Brisbane Myer Centre. Ingredients like tea, creamer, tapioca etc were imported from Taiwan, along with containers, equipment, etc. My manager there was 19 and extremely competent, the owner less so. Just mentioning this as a non-franchise success story, because they sold it at a profit. To this date the retail space is still a bubble tea shop, though it has changed hands several times over the decade+.
Feel free to private message me to chat further, I've done some research on this exact issue and love to brainstorm. Happy to wechat/line/whatsapp as well.
Have you consider retail lease cost?
As with any food retail, lease cost will be a big profit killer
Bubble tea needs a high traffic area, as you are relying on volume sales.
An example, swanston street in melbourne or Melbourne central or emporium will charge you at least $100k per year with minimum lease of 3 or 5 years for a small box.
Commercial utilities rate are also alot higher than residential. Add insurance, fees, fit out, operational cost. The initial investment may go closer to $500k-$600k.
So if you assume profit per cup is $2, then you need to sell at least 250,000 cups just to break even.
Compare the opportunity cost if you were to put the money elsewhere.
It is still your money, just make sure to make an informed decision. Eg. Ask franchisor to show the profit and loss statement of a few franchisee. Or have a chat with 5 existing franchisee (make sure it is random and none are briefed by the franchisor) ask the good, bad and ugly
Thanks for the advice! Much appreciated!
Maybe you should work in a nearby bubble tea shop first to get a feel for how it operates and the demand. Dropping 300k on something g like this is foolish. RFG makes its money by selling franchises up front through the opening of a new store. They had every incentive for that store to fail because some other sucker would walk in and give them another 300k. Business failure is essential to RFGs financial success.
$300K is a lot either way.
Hope bubble tea isn't just a fad