Kung Fu Tea Franchise Costs $169K – $378K (+ 2024 Profits)

Kung Fu Tea, a renowned bubble tea franchise, embarked on its journey in 2010, founded by a group of four friends united by their passion for bubble tea and a desire to share it broadly. Drawing inspiration from the traditional Chinese martial art of kung fu, they infused the values of discipline, precision, and excellence into the foundation of their business. 

Headquartered in Queens, New York, the first store was established in Flushing, New York, and it wasn’t long before Kung Fu Tea saw a surge in popularity, prompting an expansion across the United States.

The franchise distinguishes itself through its commitment to high-quality ingredients, unique flavors, and the ability to customize drinks, catering to a wide customer base. This approach has enabled Kung Fu Tea to maintain a loyal and expanding clientele. The growing global demand for bubble tea has also led Kung Fu Tea to extend its footprint internationally, marking its presence in countries such as Canada, Australia, and Malaysia. 

Type of Expenditure	Amount
Initial franchise fee	$25,000 – $37,000
Training fee	$12,500
Equipment from our affiliate	$6,500 – $7,500
Other equipment, furniture, fixtures and signage	$30,000 – $40,000
Computers, printer, fax, and other hardware and business software	$2,500 – $5,000
Prepaid rent and security deposit	$5,000 – $40,000
Leasehold improvements and architectural costs	$40,000 – $150,000
Interior design (3D rendering of shop)	$3,500 – $5,000
Initial inventory of tea, coffee, cups, menu boards, and packaging materials	$15,000 – $25,000
Initial marketing program	$5,000
Insurance – liability and workers compensation – initial deposit	$5,000 – $20,000
Travel, living expenses and salaries during initial training	$4,000 – $5,000
Legal and accounting fees	$5,000 – $6,000
Additional funds – first month	$10,000 – $20,000
Total	$169,000 – $378,000

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Initial Franchise Fee

The initial franchise fee for a Kung Fu Tea franchise is $37,000. For existing franchise owners or for a non-traditional unit, this fee is reduced to $25,000.

Training Fee

Before the initial training begins, a fee of $12,500 is required to cover the costs of a three-week training program. For a dual-concept franchise, this fee increases to $15,000, covering both concepts.

Equipment Purchase

Franchisees must purchase specific equipment from Arms Global Inc., costing between $6,500 and $7,500.

Initial Supplies

An initial purchase of supplies from Arms Global Inc., including tea, coffee, and packaging materials, ranges from $15,000 to $25,000.

Royalty Fees

Franchisees are required to pay a royalty fee of 4% of Gross Sales monthly.

Technology Fee

A monthly technology fee ranges from $140 to $350, starting when royalty payments begin.

Marketing Fee

A marketing fee of 2% of Gross Sales is due monthly.

Promotions Fee

A fee of 7.25% is charged for each customer purchase using the LevelUp app.

Relocation Fee

For approved relocations, a fee of $5,000 plus expenses is applicable.

Franchise Pros and cons

Operating a Kung Fu Tea franchise has its pros and cons.

Pros

• Unique Brand: The Kung Fu Tea brand is known for its unique bubble tea made from natural ingredients. Franchisees can benefit from this uniqueness to attract a large group of customers who want this special taste of bubble tea.
• Authenticity: To make its unique bubble tea, the Kung Fu Tea franchise uses genuine ingredients from Taiwan. Therefore, they preserve the trademark and genuine flavor of their beverages. This differentiates their drinks from the competition, giving franchisees an upper hand in the market.
• Quality drinks: The Kung Fu Tea brand maintains high quality for its products. With a proven business model, they consistently offer quality tea with the right temperature and texture, which keeps customers coming back. New franchisees can effortlessly attract new customers and explore new markets.
• Growth opportunities: With changing lifestyles and many people preferring foods from natural ingredients and healthy eating, a Kung Fu Tea franchise stands to benefit due to its preference for natural ingredients. In addition, the demand for non-caffeine drinks is growing among populations. This means that there is a significant opportunity for growth and profitability.
• Support: The franchise provides its franchisees with a comprehensive franchise package. This is in the form of training, corporate support, and a business plan. Their simple and easy-to-follow recipes help franchisees with no or little experience master their procedure easily.
• Customer loyalty: In its locations, Kung Fu Tea has developed a strong following for its flavored, high-quality bubble tea. New franchisees benefit from this as customers will flock to any Kung Fu Tea restaurant to enjoy their trademark bubble tea.

Cons

• Costly: A Kung Fu Tea franchise is quite expensive compared to its rivals. The process of getting the ingredients from Taiwan can be hectic and unappealing to new franchisees.
• Competition: Nowadays, the Kung Fu Tea franchise faces a lot of competition from rivals like Starbucks. Additionally, there are many beverage modifications in the United States. This has left customers with many choices and makes a Kung Fu Tea franchise less attractive to invest in.
• Tea is not as habitual as coffee. Unlike coffee enthusiasts, who consume several cups per day, bubble tea has yet not become a popular daily beverage. Many tea lovers take it occasionally or as a treat. This trend may affect Kung Fu Tea franchise growth and profitability.
• Much effort is needed in preparation. Preparing the Kung Fu tea menu items can be very cumbersome. The brand advocates for the tea to be freshly prepared in their outlets every three hours to keep it fresh. This is costly and time-consuming.

How to apply

Opening a Kung Fu Tea franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a Kung Fu Tea franchise.

1. Research and Understand the Franchise

• Explore the brand: Familiarize yourself with Kung Fu Tea’s history, values, and product offerings to ensure alignment with your business goals.
• Franchise requirements: Review the franchise requirements, including experience in the food and beverages industry and financial prerequisites​​.

2. Assess Your Financial Readiness

• Initial Investment: Ensure you have the required liquid capital of $350,000 and can cover the total initial investment ranging from $140,000 to $422,000 for traditional units or $123,000 to $275,000 for non-traditional units​​.
• Ongoing Fees: Be prepared for ongoing costs, including a 3-4% royalty fee on net sales, a 2% marketing fee on gross sales, and a technology fee of $100 to $200 per month​​.

3. Submit an Inquiry

• Contact Kung Fu Tea: Visit the official Kung Fu Tea website and navigate to the franchising section to submit an inquiry or application form.
• Provide required information: Fill out the form with your details, such as name, phone number, email address, preferred location, available capital, and investment timeframe​​.

4. Attend Training and Site Evaluation

• Undergo Training: Participate in the comprehensive training program offered by Kung Fu Tea to get acquainted with their business model, products, and operational standards​.
• Site Evaluation: Work with the franchise team for a professional location evaluation to ensure the selected site meets the brand’s criteria and has the potential for high customer footfall​.

Disclaimer

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