If you are a fan of milk tea or bubble tea shops, you may have heard of Ding Tea. Ding Tea has risen in recent years to levels of wild popularity, especially in the United States. Starting in Taiwan, the franchise beverage business has sprouted from starting in just 2004 to over 1,000 stores in 2023.
As an international franchise, Ding Tea is looking for franchisees to expand the business and help the brand grow. You might be interested in starting a tea beverage business of your own in the USA or Canada but want the expertise of an established tea beverage shop player. Look no further! Ding Tea is certainly a popular franchise option in the beverage shop industry.
Yet, you might have some concerns about the cost and profitability of owning a Ding Tea location. This logic makes sense, as you should fully consider the plusses and minuses of each investment you are considering making as well as the potential return on investment. There is no need to worry. You can find all the information about the costs and investment of a Ding Tea franchise in this post. In this article, we’ll cover the following topics in detail:
Ding Tea is a bubble tea franchise business originally founded by Xu Wei-Xiang in Taiwan in 2004. The franchise was founded in order to expand Taiwanese tea culture and export it to the world. It has had rapid growth and in less than 20 years, has reached a total of more than 1,000 stores. Clearly, this franchise model has something to say in the way of growth and expansion.
Generally, Ding Tea plays in the beverage space. As a tea house primarily, the franchise could be said to play in the tea industry. Yet, a franchise of Ding Tea offers quite a variety of drinks to its customers. These include boba tea, which is tea with tapioca, smoothies, various tea drinks like green tea, and hot coffee. The variety of beverage options seems to provide a drink choice for everyone.
Excitingly, their offerings also include more than just beverages. Ding Tea offers a variety of snacks at its locations, including French fries and traditional Taiwanese dishes. Dessert items are offered as well, including cakes and frozen yogurt. This allows people who are hungry to also eat at a Ding Tea location and not be forced to go elsewhere. This allows the shop to operate as a sort of cafe.
In any case, the brand offers a wide variety of products in its business model. It styles itself as a sort of tea cafe for those interested in getting boba, hot drinks, or food.
Advantages of Owning a Ding Tea Franchise
If you are interested in learning more about the Ding Tea franchise, you might want to know what the specific advantages there are to owning a franchise of the brand. Indeed, there are many advantages to owning a location that support the rapid expansion of the brand.
One of the first advantages of owning a Ding Tea franchise is being able to distinguish your franchise location as being a part of the Ding Tea brand and reputation. Ding Tea has strived to make its teas affordable and high quality. They have managed to do so and much of their customer base is due to people interested in affordable Taiwanese-style teas of good quality. By buying into the franchise, your business will be a part of this reputation. You will have an existing group of customers who know and appreciate the brand for its strategy. Moreover, this reputation helps to distinguish Ding Tea from other bubble tea brands like the Kung Fu Tea franchise, Sharetea franchise, or Gong Cha.
A further advantage of Ding Tea was mentioned earlier in the variety of beverage and snack options they provide. When you drink and eat at a Ding Tea location, you can get a Taiwanese tea house-like experience. Rather than other boba shops not offering food or a good selection of food, Ding Tea offers a host of snacks and desserts. In this sense, it helps them rise above their competition in being a one-stop shop for some interested in both tea and snacking.
Ding Tea is also relatively cheap to open up. Since the space required for a Ding Tea franchise is smaller than that of a restaurant or store, for example, it may be a good option for your potential franchise. The initial fees paid to corporate are smaller than others in the industry and the ongoing costs may be more affordable.
Overall, Ding Tea has a lot of financial, logistical, and reputational advantages in its brand as compared to its competitors. It is certainly a great brand to consider franchising with.
Disadvantages of Owning a Ding Tea Franchise
As part of your due diligence, however, you might be rightly interested in the disadvantages of owning a Ding Tea franchise.
One of the first disadvantages of owning a Ding Tea franchise is the sheer amount of competition in the space. At the most general level, cafes and coffee shops compete with Ding Tea in the coffee and tea markets. Many stores and restaurants now offer boba tea as well, so the uniqueness of a specialized tea store is less important than it was at the founding of Ding Tea.
On this same note, there are also other brands of tea franchises styling themselves as Taiwanese tea houses or providing Taiwanese-style tea products. In any case, the smaller market for these drinks is competitive. The main selling point of Ding Tea is that its products are cheap while simultaneously high quality. This might indicate some theoretical problems. If the products need to be sold for a low cost while the cost of ingredients is high, that could put pressure on the brand and the franchisee, especially as competition increases.
It should be mentioned, however, that the angle of providing snacks and desserts may help to distinguish itself from other competitors in the Taiwanese-style tea space.
Another disadvantage of the Ding Tea franchise may be the costs involved in franchising a business in the boba tea industry itself. Since there are many branded and non-branded Taiwanese tea places popping up, you might ask yourself if franchising is necessary. While franchising certainly makes marketing, operations, and supply chain tasks more simple and manageable, it also entails costs. Whether those costs are worth it should be evaluated by you as well as what the value of the brand is. You might consider the uniqueness of the Ding Tea brand and whether it is worth the cost.
In all, there are some more serious downsides to a Ding Tea franchise. If you are considering getting a Ding Tea beverage franchise, you should contemplate the challenges related to the costs of franchising and the competition you will face in the industry.
Requirements for Opening a Ding Tea Franchise
Before moving too far, you might be interested in knowing about the requirements for opening a Ding Tea franchise. While you can pursue a Ding Tea franchise opportunity, it is important to meet a few requirements before you go to apply for your franchise. This will help the likelihood of your application getting accepted.
Generally, when opening a franchise, there are two main requirements a franchisor will have for prospective franchisees. These are a net worth requirement and a liquid cash requirement. Unfortunately, Ding Tea does not publicly disclose this information, and the only way to ascertain this information is by going through the process and contacting them. There are still other requirements for their franchise, however.
One of them is that a franchisee needs to be at least 20 years old. For most reading this post, this should not be an issue. Moreover, Ding Tea looks for candidates with good credit scores. This means having a credit score which is 650 or higher.
Ding Tea also requires that their franchisees go through training. A training requirement is pretty standard in the franchising industry, so this should not be an issue.
Finally, they want someone who is enthusiastic about the tea industry and growing the brand. If you are a prospective franchisee, you should communicate this well and you are almost there!
From the publicly available information, the requirements of being a Ding Tea franchisee should not be that difficult. You should be able to meet the requirements of the application for becoming a franchisee. Yet, you might still need to take a look at the cost of starting a Ding Tea franchise.
Cost of Starting a Ding Tea Franchise
Starting any franchise business will come with a level of serious expenses. However, it is important to be sure that you can handle the upfront and ongoing fees of running a franchise business before you become an official business owner within the brand.
Starting with the costs you must pay to corporate Ding Tea, there is an initial franchise fee. The franchise fee is a lump sum fee you pay upfront to Ding Tea at the signing of the franchise agreement. For each new franchise, there will be a franchise fee that you owe them. This fee is used as revenue by corporations, but it theoretically also lays the groundwork for cooperation and marketing for your new location.
The initial franchise fee for a Ding Tea location is $20,000. While this might seem like a high initial investment, it is actually low by both franchise standards in the food and beverage industry as well as low among its tea shop competitors. If you are considering a Ding Tea franchise opportunity, it is quite cheap compared to similar options in terms of the initial franchise fee.
While the initial franchise fee remains the largest corporate fee you will pay at the time of starting your Ding Tea location, there are also ongoing costs that you will owe to Ding Tea each month. These are important to factor into your calculation of whether the investment is worth it for you since they affect the rate at which you will be paid back on the investment that you make. Moreover, even though your ongoing fees will not affect your immediate startup cost, the time for recuperating that cost and your initial ability to afford expenses through working capital will be affected.
One of these fees is known as the royalty fee. The royalty fee is a fee that is usually a percentage of gross sales owed monthly to corporate. This helps to fund the operations of the franchisor and continue the business relationship. The royalty fee for Ding Tea ranges between 2% to 5%, which ranges from very low for the industry to a normal royalty fee. This could be a positive sign to getting involved in starting a Ding Tea franchise.
The second of these typical ongoing fees is the advertising fee or marketing fee. This is a fee that is usually a percentage of gross sales paid monthly as well. However, Ding Tea does not publicly disclose this information. If you are interested in this information, it will be available in the franchise disclosure document (FDD).
While these costs represent the known information on the costs of opening a Ding Tea franchise, there are also estimates of the total investment you will need to make. Understanding the total investment is also important because franchises will have expenses other than fees paid to corporate. This includes real estate, equipment, inventory, and other related expenses to starting a franchise location.
The estimated total investment for a Ding Tea location ranges from approximately $120,000 to $420,000. These investment numbers are actually somewhat small compared to what one might expect. This makes the prospect of starting and owning a Ding Tea franchise quite attractive. You do not need to deploy a lot of capital to be able to establish a Ding Tea franchise.
To comment on the earlier unknowns about the net worth and liquid capital requirements, we might be able to use the total investment cost to estimate the general range of net worth and liquid capital requirements. For many franchises, these net worth and liquid capital requirements are generally correlated to the amount of money the franchisor expects the franchisee to spend in opening and operating a location. Thus, you might be able to get a rough idea of the net worth and liquid capital requirements just by looking at the total investment numbers. If you have that range in assets, you might be close to meeting the requirements. In any case, this is just an estimate based on other franchise requirements and investment estimates data, so it is always best to check the FDD.
How Profitable is a Ding Tea Franchise?
Now that you have reviewed the costs of starting a Ding Tea franchise, the next step is to understand the potential profitability of your Ding Tea location as a potential franchise owner. It is important to do so when evaluating the worthiness of an investment. For an investment to be good, it will need to make up its costs in profit.
There is, unfortunately, another challenge to assessing the average profitability of a Ding Tea franchise. Ding Tea does not make statements about the general profitability of its locations or its master franchise locations. As a result, it is nearly impossible to make even general predictions about the profitability of its locations. In order to find out, you would likely need to have specific communication with the company about starting a franchise location.
One of the ways we might otherwise be able to assess Ding Tea’s profitability among its franchisees would be to look at the failure rate of their locations. Among subfranchises, Ding Tea has sustained less than a 3% failure rate in various periods, including during the coronavirus pandemic. As a result, we might consider Ding Tea to be doing fairly well as a franchise brand.
Certainly, the expansion of Ding Tea to over 1,000 locations is impressive. However, with any bubble tea franchise opportunities you are considering, you would be rightly concerned about their profitability. You want the best bubble tea franchise capable of turning a great return on investment. Unfortunately for entrepreneurs such as yourself, you should be ready to enter conversations regarding starting a Ding Tea franchise with Ding Tea if you intend on getting more specificity on numbers due to the lack of comparable public information.
Training for Ding Tea
While you might be concerned about the Ding Tea franchise cost in starting your own location, you might also be interested in knowing more about the training they offer franchisees to succeed in recuperating that cost.
Especially if this will be your first Ding Tea franchise unit or even your first store as a franchisee, you will want your Ding Tea location to do well. Fortunately, Ding Tea offers a lot of training and materials to franchisees. You will receive extensive training on many aspects of running your franchise location from Ding Tea. This includes helping in understanding the operations of the business, building relationships with customers, and how to handle the tea and food safely.
Ding Tea has also established a wide variety of services they use in helping their franchisees. This includes support in helping their franchisees market their stores and products as well as maintaining the equipment they use to produce them.
Another cool thing about the constant training and information that Ding Tea provides to its franchisees is its newsletter. The newsletter contains information about the different launches of their products, promotions, and general tips for franchisees in running their franchises. This can help them reach success.
Overall, it appears that Ding Tea offers its franchisees a great training program. The advantage of the training that they offer is that they continue to care for the success of their franchises and franchisees long after they complete their training. It shows that the Ding Tea brand is committed to the repeated success of its brand.
Term of Agreement and Renewal for a Ding Tea Franchise
When you enter into a franchise agreement with Ding Tea, you will be signing a document related to the length of time you are able to license the franchise. For Ding Tea, this will be a period of three years. During this three-year time, you are expected to pay all the relevant expenses for your business and abide by all of the Ding Tea policies for running a franchise.
For you as a business owner, this might be good in the sense that it provides you with some flexibility to exit the franchise at the end of the three-year period. However, it is costly in the sense that you will be required to pay 50% of the franchise fee to renew your license for the Ding Tea franchise. Since the initial franchise fee is $20,000, the renewal fee is $10,000. This can be a serious expense.
The advantage of this renewal is three years down the road is that your franchise will likely have enough chance to recuperate some of the costs that you have spent in making your investment into the Ding Tea franchise to operate in your local market. Nevertheless, this is an expense that your franchise should be prepared to make if you intend on renewing. This means that you should factor this into your calculations on the overall cost to start a Ding Tea franchise location.
Process of Starting a Ding Tea Franchise
If you want to start a Ding Tea franchise, there are a few more steps to go through than just applying. If you are interested, you should initiate the process by contacting Ding Tea. The first step they will have you go through is a franchise consultation. This will be a conversation that allows you to express your desires, thoughts, and concerns about a potential Ding Tea franchise. It will also be where you learn more about the brand.
The next step is to continue with a short franchise introduction in order to learn more about the opportunities related to franchising with Ding Tea. A company inspection then happens to make sure that the franchisor and franchisee have a good fit. With these three steps, and after having read through the financial disclosure document, it comes time to sign the franchise agreement.
At this point, you will have been accepted by Ding Tea to become a franchisee. Once you have signed the agreement, you are legally ready to go and begin your franchise. Ding Tea now has a set of steps to set you up to correctly operate your franchise.
The first of these after the agreement is to get a consultation about the store you set up. This might be what your budget is, what you are looking for, or other aspects that involve designing the initial store setup, layout, and construction. There is not a lot to worry about at this stage because the next stage is working with a designer to examine your store location.
This can be very helpful. When you think about the potential for your Ding Tea location, you might need to factor in the furniture, counter, equipment, back room, and inventory that goes in. Imagining how all of this will fit correctly can be risky since any mistake can create unexpected costs later on. As a result, working with the corporate designer can help to reduce unexpected costs and help your business get off the ground more seamlessly.
This step, of course, filters into the seventh step of the overall process. This is an involved discussion of the store design with corporate. Ding Tea will help make sure your store location gets off the ground without problems.
Now that your store is planned out, it is time for the final step of the process. This is when you construct your store and train your employees. With the plans that corporate has helped you to construct, the construction phase of this step should hopefully go off without problems. Training is the next part of this. You should not worry, however, as Ding Tea will provide you with comprehensive training, as described earlier. Moreover, you can help use this training to recruit and train employees for the grand opening.
Together, this process is intended to vet you as a franchisee, help design your store, build your store, and help your opening go smoothly. You should be confident in this process as it is designed so that you can have a great chance at running a profitable bubble tea franchise. It is time for you to now make some fresh tea at your Ding Tea franchise. We hope you have found this information to be helpful!
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