Bubble tea: stock market fever, franchise boom and the “size vs. profit” dilemma

From an investor’s perspective, bubble tea is a sector less exposed to tariffs: the impact of U.S. duties is limited, while domestic, youth-driven consumption appears more stable. This explains why global funds are keen to take exposure here.

By the end of 2024, Mixue operated over 46,000 stores worldwide, surpassing McDonald’s, Starbucks, and Subway in store count. The model is built on:

• ultra-low pricing,

• high volume,

• aggressive franchise expansion.

The market shows an annual new-store growth rate of about 22%. Most large bubble tea chains do not operate their outlets directly: headquarters profit from supplying ingredients, equipment, and collecting fees, while franchisees bear rent, labor, and utility costs.

The price of rapid network expansion is the rising risk of quality control and market cannibalization. Field experience indicates:

• payback period typically ranges from 18–24 months,

• store closure rates are estimated around 20% by the market.

For franchisors, growth is “easier” as part of the risk is absorbed by partners; however, preserving brand value requires consistent quality, disciplined store density, and data-driven location selection.

Abroad: not a copy-paste model

Exporting the Chinese success formula requires extra effort:

• supply chains: harder and more expensive to control abroad,

• taste profiles: vary city by city, region by region, requiring localized menus and diverse store formats,

• cost base: rents and labor costs are higher in many markets, making the “low-cost” strategy harder to scale.

What to watch in the region?

• Pricing: sustained low prices require a stable, high-volume supplier base.

• Location: strong shopping streets, malls, and university areas – direct access to the target group is key.

• Product development: sugar- and calorie-conscious options, local flavors (e.g., milk alternatives, seasonal specials).

• Unit economics: before entry, account for the rent / labor / marketing trio; the 18–24 month ROI is only realistic with disciplined operations.

Outlook: fad or lasting category?

Domestic saturation, rising costs, and price wars are testing the resilience of major brands. The long-term valuation depends on whether chains can:

1. turn economies of scale into genuine profitability,

2. convert “hype” into repeat purchases and loyalty,

3. consistently maintain quality.

Bottom line: the bubble tea industry’s express train is still running, but the final destination will not be store count—it will be sustainable unit-level profit and quality. Those who grasp this firmly will win. Those who only chase numbers may easily fall behind.