Before I start, here are three big disclaimers:
- Whatever written in this blog post is based on my best guesstimate, there are no facts, articles, methodological researches, legitimate sources, white papers, to support what I am about to say. In a nutshell, your source is ‘Trust me bro’
- As much as I wish you well, I will not be responsible if you read this post and decide to open up a bubble tea shop and end up closing shop
- I will be responsible, however, if you open up a bubble tea shop and end up being rich. 5% of net profit sounds like a fair number, don’t you think?
As you may or may not know, there is currently a craze over bubble tea shops in Malaysia, specifically, ss15. One Taylor’s student epic rant about how these bubble tea shops are causing crazy bad jams in the surrounding areas even got viral.
The cousin gang has had our fair share of being part of the bubble tea craze too. Only a few weeks back, under the guise of letting our young ones socialise, we went to SS15 for a nice lunch and queued up and tried two brands of bubble tea. The queue was crazy! We queued for about 30 minutes and waited another 30 minutes just for our bubble tea. Although the wait was pretty long, I have to admit that bubble tea has come a long way from those little shops with red lanterns outside who used powdered flavourings and manual shakers. Even though every one had their individual preference, overall, we agreed that both bubble tea brands were good.
Then came the interesting discussion of how much money can these bubble tea shops make? Everyone had their own theories and calculations, and here’s my take:
There are a few things to consider when it comes to the profit of a business – production capacity, sales, rental costs, overhead, material costs, wastage, utility costs, accounting costs, and miscellaneous costs.
Gross sales
From my observation, it takes approximately 45 seconds to make a cup of bubble tea, this means that, assuming they are running at full capacity (which I highly feel they are), they can produce 80 cups of bubble tea / hour. Each cup of bubble tea is RM12.90, meaning gross sales per hour is RM1032
They are opened for 12 hours a day, with peak hours of (according to me) of about 8 hours a day. So RM1032 x 8 peak hours a day = RM8256, add on half capacity of the remaining 4 hours a day (RM1032 / 2 x 4 hours) = RM2064 which brings a total of RM10,320 a day
Open for 30 days a month, and you get a whopping gross sales of RM309,600!
Expenses
Rental
Now, assuming your are in a superb location (like a mall), rental will easily go for approximately RM10,000 a month
Overhead costs
There are 6 staffs that are working at any one time, say, with an average salary of RM2,500 / staff (averaged out between supervisor, normal staffs, and part-timers), and staffs for 2 shifts. Overhead costs is RM2500 x 6 x 2 shifts = RM30,000 a month
Material Costs
Material costs are usually 30% of sales, assuming these bubble tea shops use top notch ingredients and eco friendly cups and packaging and incur higher material costs of 40%; material costs is RM309,600 x 40% = RM123,840
Utilities
If you have 3 units of 3HP a/c units running for 12 hours a day, your electricity bill will run up to about RM2,800 a month, assuming all your staffs are hygiene freaks and bath 3 times a day in the shop, your water bill will be around RM200 a month. This brings the utility bill to RM3,000 a month
Accountant / Company secretary costs
How to run a business without other professionals helping you? RM2,500 a month
Miscellaneous Costs
Staples, paper, staff birthday, company outings – RM1,000 a month
Advertising Fees
Getting food bloggers to review your products, invitations to taste your products, online advertisements, flyers (which I doubt anyone does a lot of these nowadays) – RM3,000 a month
Franchisor Fees
If I have a money making idea, great brand, and efficient process, I’m not gonna let you use it for free. Franchisor fees are estimated at 5% of gross sales, RM309,600 x 5% = RM15,480
Total Expenses
RM10,000 (rent) + RM30,000 (overhead) + RM123,840 (materials) + RM3,000 (utilities) + RM2,500 (accountant) + RM1,000 (miscellaneous) + RM3,000 (advertising) + RM15,480 (franchisor fees) = RM187,820 / month
Kaching!
So, a gross sales of RM309,600 a month – total expenses of RM187,820 / month gives you a whopping profit before tax of RM121,780 a month! If we reduce this amount by another 20% to take into account that there are some items that I may have left out, that still gives you a profit before tax of RM97,424!
Now, before you run off to check your bank account balance or get a loan to open a bubble tea shop, there are a few words of caution.
Firstly, these are pretty optimistic assumptions, not all businesses will have 8 hours of full capacity a day and be able to sell bubble tea at a premium price of RM12.90 per cup.
Secondly, these are businesses that are currently running based on a fad, we don’t know how long these fads are here to stay (to be fair, there are some fads which are here to stay) and how long your cash machine can ring at the rate it is ringing now. Remember a time where hipster cafes suddenly mushroomed? Many of them are not around now.
Thirdly, not all businesses are created equal, these bubble tea shops happen to be opened at the right time, at the right place (and also to a big extent, due to the good business acumen and efforts of the respective business owners), and also partnered with the right brand, In business, ticking so many ‘right’ checkboxes is not a thing you come across very often.
Lastly, these are all ASSUMPTIONS, there are many, many unpredictable things that I might have not taken into consideration. Each business has its own unique challenges, and costings which external parties might not have the slightest idea about
Having said all these, we still enjoy a cup of expensive bubble tea from time to time
What are your thoughts? I would love to hear from you if you have any opinions or suggestions, or even if you disagree with my guesstimations!
