Chatime is a bubble tea business that began in Taiwan in 2003, expanding into other countries across the globe. The goal of this blog post is to highlight the initial and ongoing financial demands of purchasing a Chatime franchise. You can also find a copy of a publicly filed disclosure document at the end of this post.
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The Cost to Open a Chatime Franchised Outlet
Interested in opening your own Chatime franchise business? Expect to invest between $208,600 to $475,400 to launch your first Chatime restaurant which is a food service establishment that offers gourmet coffees and teas, other coffee and tea-based beverages, bubble tea, compatible food products, coffee and tea makers, and related supplies, accessories, and gifts at a specified location within a designated geographic territory.
Meanwhile, you can also enter into a multi-unit development agreement whereby you will open and operate an agreed number of Chatime restaurants in a specific geographic area, the number of locations in a multi-unit agreement normally ranging from three to ten locations. Expect to invest between $293,600 to $700,400 when entering a multi-unit agreement.
That is what Chatime estimates it will cost you to get your location ready to open and operate for 3 months according to its 2023 franchise disclosure document (“FDD”).
The Initial Franchise Fee
As of 2023, the initial franchise fee is $49,900 for each franchised location. This fee goes to Chatime Franchise, LLC when you sign a franchise agreement. They also offer a discounted fee on multi-unit deals.
The Startup Expenses
You will need funds sufficient to build-out a franchised location. This includes the initial training and related personnel cost, rent, lease security deposit, leasehold improvements, equipment, external signage, opening inventory, initial local marketing, licenses, permits, and utility deposits, technology systems, uniforms, insurance, professional fees, and certain other items.
The initial estimated expenses are laid out in Item 7 of the Chatime’s Franchise Disclosure Document.
The leasehold expenses and equipment make up a bulk of the estimated startup costs.
The Operating Expenses
According to the 2023 FDD, you will need $20,000 to $60,000 in cash on hand to operate a Chatime franchise location for the first three months. This amount does not include any owner draw or salary, non-Chatime restaurant management expenses, and the purchase of your Chatime restaurant’s opening inventory.
The Ongoing Expenses Due to Chatime
You will naturally incur ongoing operating expenses for any business. The franchise relationship typically involves ongoing support and an ongoing obligation to pay certain royalty fees. As of 2023, Chatime collects 5% of Gross Sales as ongoing royalty fee on a monthly basis. They also require a marketing expenditure into a brand fund of at least 2% of Gross Sales, and require the same to be spent on local marketing efforts. Additional fees paid to the franchisor are included in Item 6 of the FDD.
Paying ongoing royalties and fees is the cost of doing business. You pay these fees in exchange for the franchisor allowing you to take advantage of their “know how” and use their marks, systems, and processes to offer their products and services.
Does Chatime Negotiate With Prospects?
Maybe.
Dr. Chester L. Karrass wrote a book entitled: In business as in life, you don’t get what you deserve, you get what you negotiate. Our experience has found this adage to be true.
You should consult with a franchise attorney about negotiating the business and legal terms of every franchise agreement.
Are There Chatime Franchise Requirements To Participate In Day-To-Day Operations?
Any restaurant requires full time attention and management. Chatime’s franchise agreement provides that the franchisee’s operating manager must devote his or her full time, attention and effort to the franchised business and provide direct and day-to-day supervision of the operation.
How Many Franchised Locations?
Franchisors disclose the total number of outlets in operation in Item 20 of the FDD. Over at least the past 3 years franchised outlets have increased slightly. Overall, the franchisor has grown from 17 franchised outlets on January 1, 2020, to 22 franchised outlets on December 31, 2022. No outlets have been terminated or reacquired in the past 3 years. Current outlets are located in California, Georgia, Kansas, Maryland, Michigan, New York, North Dakota, Ohio, South Carolina, and Washington.
Where Can I Find The 2023 Chatime Franchise FDD?
Click here for the initial version of the 2023 franchise disclosure document issued on April 18, 2023 which was filed in Virginia through the NASAA electronic filing depository.) Please note, this disclosure document may may not be in its current form or approved in all states. We have no affiliation with Chatime and relied on publicly available information to compile this blog post. Minor changes may occur in the FDD, or the franchisor may not be authorized to offer franchises in your state. You should consult with franchise counsel and reach out to the franchisor directly if you are seriously considering a franchise opportunity. If we are retained to review an FDD for you, we will review the copy disclosed to you directly by the franchisor.
Have questions? Learn more about Derek Colvin, our law firms franchise partner. We excel at empowering clients to make informed decisions and we love supporting entrepreneurs as they explore opportunities in franchising. We would be honored to provide legal guidance as you explore an opportunity with any franchisor.
Meet the Author:
Christine Bontuyan is a lawyer in the Philippines and she is based in Cebu City. She earned her Juris Doctor degree in 2020. Apart from handling civil and criminal cases in the Philippines, Christine serves as a paralegal for reputable US law firms. She previously served as an elected public official in the Philippines, as the Sangguniang Kabataan Chairperson of Barangay Talamban, Cebu City from 2018 to 2023.
