Overview: Franchisee Alarm Over Early 2022 Assumptions
Leaders in the bubble tea sector are sounding alarms about a high-stakes business model that underpins a popular chain. In early 2022, discussions between a prospective franchisee, known here as Ben, and Chatime executives, including long-time chief executive Carlos Antonius, raised questions about the assumptions baked into the company’s expansion plan. A benchmark of 150 cups per day was set as a target, a figure that Ben later realized was unrealistically aggressive for a new shop in several markets. This disclosure highlights a broader debate within the fast-growing bubble tea space: can rapid outlet expansion be sustainable when average sales per unit don’t consistently meet optimistic projections?
Origins of the Concern
The matter centers on a due diligence process common to franchising: the business model, unit economics, and the path to profitability. Franchisees typically purchase a license, invest in store fit-outs, and rely on a steady stream of customers to meet financial targets. When the benchmark of 150 cups per day was introduced, it suggested a high-volume trajectory that might require heavy marketing, premium locations, or aggressive pricing. Several industry observers note that daily cup targets in excess of 100 can be challenging to sustain, especially for first-year operators entering competitive markets with established local chains.
Implications for Unit Economics
Unit economics—covering costs such as lease, labor, ingredients, and royalties—rely on predictable sales. If a flagship expectation proves overly optimistic,break-even timelines extend, and franchisees bear a greater portion of risk. Critics argue that early-stage targets should factor regional variations, supply chain volatility, and consumer seasonality. In markets where labor costs rise or rent inflation bites, a 150-cup-per-day target could compress margins and slow growth momentum for the chain as a whole.
What Franchisees Want to See
From a franchisee perspective, transparency is paramount. Operators want clear disclosures about how targets were determined, what pilot programs showed in real-world settings, and the range of performance among existing stores. They also seek flexible guidance on opening assistance, training, and ongoing support that reflects diverse market conditions. A sustainable model, many argue, should include stepwise targets and profitability milestones that align with regional differences rather than a one-size-fits-all benchmark.
Recommended Revisions for a Safer Path Forward
Experts suggest several practical revisions to strengthen the model:
- Adopt tiered sales targets by market tier and location type (mature hubs vs. emerging areas).
- Incorporate explicit break-even timelines and contingency plans for slower growth periods.
- Increase transparency around initial capex, supply chain costs, and ongoing royalties.
- Enhance support for store operators, including marketing, product innovation, and staff training programs.
Industry Context and Next Steps
The bubble tea boom has accelerated globally, with many brands pursuing rapid franchising to capitalize on a wave of consumer demand for customized drinks. However, the episodes of franchisee pushback underscore a broader tension between growth ambitions and sustainable profitability. For potential investors and aspiring operators, the key takeaway is to scrutinize the underlying assumptions, demand robust disclosures, and demand practical, market-specific roadmaps before committing capital.
Conclusion: Balancing Growth with Responsibility
As the market matures, responsible franchising will hinge on the ability of brands to balance aggressive expansion with rigorous financial discipline. If the industry can refine targets, provide transparent data, and tailor expectations to local realities, it will reduce risk for franchisees and strengthen brand resilience in a competitive landscape.
