June 18, 2017 6:51 pm JST

Watching for an American 'bubble tea' bubble

Entrepreneurs move slowly on franchising to protect image of Taiwanese drink

ELISABETH ROSEN, Contributing writer

The Boba Room pop-up in New York generates long lines of bubble tea fans. (Photo by Elisabeth Rosen)

NEW YORK -- Emily Walsh had never heard of bubble tea until she was introduced to the drink five years ago by a blogger friend. Now the New York University graduate student buys a cup two or three times a week.

"I like that it's sweet, but not a juice, and it doesn't need to have caffeine," she said. "And the bubbles are fun."

First created in the 1980s in Taiwan, the flavored teas with chewy tapioca balls have spread across Asia and on to the West. The beverage, also referred to by its Chinese name boba, made its entry into the U.S. primarily via shops in ethnic Chinese neighborhoods. In recent years, boba has emerged into the mainstream.

Tickets to the Boba Room, a pop-up "bubble tea theme park" in New York organized by two art school graduates, sold out online before it even opened in April. Visitors waited for over an hour to go inside the gallery, where a $10 ticket bought them a bubble tea and the chance to drink and take photos of the beverage in a brightly lit room filled with giant pastel balloons.

After witnessing the popularity of a pop-up called the Museum of Ice Cream in New York last year, Iris Xing and Yanqiong Zeng got the idea of designing a boba version. Originally from China, they shared fond memories of hanging out in bubble tea shops with friends and marveled at the drink's growing availability in the U.S.

"When I moved here [in 2013] from Beijing, I didn't really know New York City had bubble tea," Xing said. "It's become more and more popular since then."

Visits to bubble tea shops have increased more than 25% in the last six months compared with a year earlier, according to location intelligence company Foursquare. A Yelp search for bubble tea in New York City returns nearly 1,500 results, including branches of Asian chains like Gong Cha and CoCo Fresh as well as homegrown options such as Patea, Vivi Tea and Kung Fu Tea. Kung Fu is now the biggest company selling the drink in the U.S. with 120 stores.

When Kung Fu Tea opened its first shop in 2010, about 70% of its customers were either Asian or Asian-American, according to marketing manager Mai Shi. Now Shi and other Kung Fu Tea managers estimate that those groups account for just half the clientele.

"Bubble tea has grown out of Chinatown," Shi said. "It's become an alternative to coffee."

A tale of two teas

In the U.S., the early bobas of the 1990s and 2000s were typically made with pre-mixed powders, resulting in a cloying, artificial taste. But the last few years have seen a new wave of entrepreneurs interested in creating more authentic versions of the drink.

In 2009, Kung Fu Tea's four founders were discussing business ideas in a bubble tea shop in Flushing, a neighborhood of New York City home to many Taiwanese near LaGuardia Airport, when they came upon the idea of selling the drink. In contrast to the flavorful bobas they had sampled in Taiwan, they found the version they were drinking mediocre. Yet a crowd had lined up at the counter, which suggested to them that there was healthy market demand.

They opened four locations within the first year in New York and 10 the second before starting to sell franchises. This year, the company will open 25 U.S. franchise shops and expand to Australia, Canada and Vietnam with the goal of reaching 300 branches in the next three years.

While Kung Fu Tea aggressively scaled up, Boba Guys, where graduate student Walsh often lines up to get her drinks, has remained consciously small-scale and artisanal. But its provenance is remarkably similar. Seeing a lack of quality bubble tea, Bin Chen and Andrew Chau started the company in 2011 as a pop-up in a friend's ramen restaurant in San Francisco.

With an emphasis on local ingredients and preparation of drinks from scratch, the two opened their first store in San Francisco's Mission District in 2013 and now operate seven branches between that city and New York. To make their signature strawberry matcha latte, pureed strawberries are layered with milk from a local dairy and a shot of organic matcha is whisked by hand and poured over the top, a marked departure from the powdery blends of the early 2000s.

"They called it milk tea, but they weren't brewing it with real milk or real tea," Chen said.

Popping bubbles

Chen relates bubble tea's growth to the rise of the pop-up, a format which fueled experimental culinary ventures like Mission Chinese in New York and Kogi BBQ in Los Angeles.

"People were starting to take gambles on these new concepts that were very experimental," he said. "The mentality was: 'I don't know what it is, but I'll try it'."

While these factors explain bubble tea's cultural acceptance, the franchise model suggests why so many boba companies -- both international and domestic -- were able to scale-up so quickly. For aspiring entrepreneurs in the U.S., opening a boba shop is a more attractive option than a restaurant. Licensing is usually simpler, the equipment investment and space required are smaller -- a key factor in light of high rents in New York and San Francisco -- and the setup and operations are standardized, making it easy to train employees and to run even with limited business experience.

When he got the idea to open a bubble tea shop, Patea founder Patrick Yeh attended a popular series of classes for aspiring operators organized by supplier Q Bubble. Every week Yeh receives a handful of inquiries about franchising while about a hundred people contact Kung Fu Tea.

However, as the industry becomes more competitive, applicants face increasingly demanding criteria. Just a fifth of applicants meet Kung Fu's standards around brand familiarity and business management, according to Shi, the market manager. Only half of that group are ultimately selected based on their qualifications and how their desired location fits into the company's overall development strategy.

Yeh also maintains strict oversight of the Patea brand. After opening his first location in 2013 in New York, he has only granted one franchise, and is opening another shop himself in late June in the city to serve a "higher class" of bubble tea.

"I don't want to open too quickly. It's hard to maintain quality control," he said. "Now more customers know what good tea is. There's so much competition."

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