Ding Tea Franchise – The Pros and Cons of Owning This Franchise (2023)
Written by: Shirley Cao
Last Updated by
María Fernández Amato: January 18, 2023
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This article is based on its 2022 FDD
Ding Tea is a tea drink franchise founded in 2007 in Taiwan. Since then, the owner aimed to promote the brand and Taiwanese tea culture to the world, creating a new mainstream of exclusive drinks made from various kinds of teas. No matter black tea or milk tea, Ding Tea is striving to launch new products periodically. For example, in addition to the popular tea option in the market, Ding Tea Franchise offers unique items like Cactus green tea, Hokkaido milk tea, and French ice tea.
What sets Ding Tea apart from other bubble tea brands is its commitment to quality. They use fresh ingredients to make all the teas, with no artificial flavors or preservatives. This dedication to quality has helped Ding Tea become one of the most popular bubble tea brands.
Contents
Currently, Ding Tea has over 1,000 stores operated globally in Asia, Europe, Australia, and Northern America. Specifically, there are approximately 100 stores in the United States. As Ding Tea does not report any master franchise location in the United States in its latest FDD, we are going to focus on the subfranchisor.
How is Ding Tea Positioned in the Food and Beverage Industry?
The Food and Beverage Industry is a significant contributor to regional economies and to the U.S. economy. It is a stable industry in terms of employment and labor income because of the consistent demand for food. The food and beverage sector accounts for about 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI). It has a total sales of $1.4 trillion, of which $164 billion in value-added is generated by the Food and Beverage industry alone.
Food and beverage franchises are often the first things people correlate with the franchise industry. Food & Beverage is certainly one of the most popular areas of franchising. Although food franchising is often associated with fast food, the industry also includes fast-casual, coffee, and pizza. As the food and beverage industry is competitive in every aspect, the general market for bubble tea and tea drinks is developing in the United States. Globally, the bubble tea industry is expected to register a compounded annual growth rate (CAGR) of 8.9% from 2020 to 2027. Ding Tea franchisees have to compete with businesses that offer tea drinks, blended juice drinks, smoothies, etc. Some examples include Starbucks, Peet’s Coffee and Tea, Chatime, and Coco Fresh Tea & Juice.
Of the food and beverage concepts we have reviewed, total investment amounts can start as low as $3,000 for smaller kiosk concepts all the way up to $6,732,615 for a full-service restaurant.
Ding Tea Franchise Cost
The total investment necessary to begin the operation of a Ding Tea master franchise business ranges from $833,000 to $895,000, which includes $800,000 to $820,000 that must get paid to the franchisor. The franchise fee is $700,000 per store. A large number of initial investments get paid to the franchisor. Once the operations begin, there’s the expectation that franchisees pay the company a service fee of 2.5% of gross revenues. In addition to other fees, the latest FDD reports that the payments and purchases to the franchisor, designated vendors, and suppliers will consist of 20% to 25% of your monthly expenditure.
The total investment necessary to begin the operation of a Ding Tea subfranchise business ranges from $195,240 to $324,170, which includes $58,500 that must get paid to the franchisor. The franchise fee is $30,000 per store. Once the operations begin, there’s an expectation that franchisees pay the company a service fee of $500 per month and 3% of gross monthly sales of marketing fee.
How Much do Ding Tea Franchise Owners Make?
Ding Tea Franchise does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing Ding Tea, the company may provide you with the actual records of that Ding Tea Franchise.
However, Ding Tea neither provides financial information about the master franchise nor charges a royalty fee from franchisees. Thus, we are unable to estimate the average sales of each individual franchisee solely from the FDD. Alternatively, we can refer to the average sales of other similar milk tea franchises.
For example, Gong Cha, one of the largest companies in the milk tea industry, has an average sales of $370,000. With an 18% profit margin and a midpoint initial investment of $864,000, a master Ding Tea franchise will need 13 years to recoup the initial investment. Similarly, a subfranchisor with a midpoint initial investment of $259,705 will need 4 years to recoup the initial investment.
How Many Ding Tea Subfranchise Units have Opened and Closed?
The number of subfranchise stores has been increasing rapidly in the past three years. During the COVID-19 pandemic, there were 26 stores opened and only 1 termination and 1 non-renewals. The failure rate during the pandemic was 2.1%! The Ding Tea subfranchisor’s average three years failure rate was 2.65%, which was significantly lower than the average in the industry.
Opened and Closed Ding Tea Franchise Units
| State | Year | Outlets at Start of the Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by Franchisors | Ceased Operations – Other Reasons | Outlets at the End of the Year |
|---|---|---|---|---|---|---|---|---|
| Total | 2019 | 39 | 33 | 1 | 0 | 0 | 0 | 71 |
| 2020 | 71 | 26 | 1 | 1 | 0 | 0 | 95 | |
| 2021 | 95 | 22 | 1 | 4 | 0 | 0 | 112 |
Summary
The rapidly growing milk tea industry has not only attracted customers of all ages but also entrepreneurs investing in the business. Ding Tea Franchise, being one of the global brands in the industry, can help you build a solid customer base. However, due to its lack of transparency of its financial performance, potential franchisees should be alert and manage to interview several current franchisees for further information.
You can find more tea drinks franchises at Vetted Biz, in the Food and Beverage industry.
