Gong Cha Franchise Costs, Fees & Owner Salary (2023)

INVESTMENT

$164,000

-

$576,000

LOCATIONS

723

Emily

Updated

April 11, 2024

Is

Gong Cha

a franchise?

Yes,
Gong Cha
currently
accepts
franchise
applications

Gong Cha, founded in 2006 in Kaohsiung, Taiwan, is now headquartered in London, UK. It's a global tea drink franchise that expanded rapidly, reaching Hong Kong in 2009 and numerous other countries thereafter. Gong Cha is known for its wide variety of tea-based drinks, including milk teas, fruit teas, and creative mixes, differentiating itself with a commitment to high-quality ingredients and innovative beverage creations.

The name "Gong Cha" refers to the ancient Chinese practice of offering the finest tea to the Emperor, symbolizing the brand's commitment to excellence and quality fit for royalty. Gong Cha has grown to become a leader in the global tea market, thanks to the expertise and dedication of its founder, Wu. The brand is dedicated to providing premium products, utilizing high-quality tea leaves and ingredients to ensure every cup is an exceptional experience.

Gong Cha's journey of expansion is notable for its focus on innovation and tradition, offering a wide range of drinks that cater to diverse tastes. From classic milk teas with freshly made pearls to innovative fruit-infused blends, Gong Cha's menu is designed to provide a unique tea experience for every customer. The franchise differentiates itself with its extensive selection and emphasis on the fusion of traditional tea culture with modern tastes.

The brand began its franchising journey in 2011, marking a significant phase in its expansion. This move allowed Gong Cha to spread its wings beyond Taiwan, bringing its authentic Taiwanese bubble tea to a global audience. The franchise model has been a key factor in Gong Cha's growth, enabling it to establish a presence in numerous countries and become one of the world's fastest-growing tea brands.

How many

Gong Cha

franchises

are there?

In 2022, there were
723
outlets in
the United
States, of which
136
are franchises, and
587
are corporate-owned.

What are the

Gong Cha

franchise

fees?

Advertising fee

1.00%

Initial Franchise Fee ($35,000 to $40,000)

  • This fee is payable when the Franchise Agreement is signed. The fee is for the grant of the franchise and for initial services provided by the franchisor.

Royalty (5% to 6% of Gross Sales)

  • Franchisees are required to pay a weekly royalty fee based on a percentage of their Gross Sales. This fee compensates the franchisor for ongoing services and the right to use the franchisor's trademarks and system.

Advertising (Up to 4% of Gross Revenue)

  • Franchisees must contribute to the System Ad Fund, which is used for system-wide advertising and promotion. The contribution rate is up to 2% of the Gross Revenue.
  • Additionally, franchisees are required to spend on local advertising and promotion, which will be used to satisfy the Cooperative Ad Fund if one is instituted in the franchisee's trading area.
  • The Cooperative Ad Fund contribution, termed as "Regional Marketing Fees", will not exceed a certain percentage of the franchisee’s Net Sales, unless the members of such Cooperative Ad Fund vote to exceed the maximum amount.
  • Any Regional Marketing Fees paid by the franchisee will be credited against the franchisee’s local advertising expenditure requirement.

Grand Opening Advertising ($2,000)

  • In addition to the regular advertising obligation, franchisees are required to spend a minimum of $2,000 for grand opening advertising and promotional programs in conjunction with the store's initial grand opening.

Note: The fees presented here can be found in the Item 5 of the Franchise Disclosure Document. For a complete list of all the fees borne by the franchisee, please consult the Franchise Disclosure Document.

How much does

it cost

to start a

Gong Cha

franchise?

It costs between
$164,000
and
$576,000
to start a
Gong Cha
franchise.

For potential franchisees, Gong Cha offers two distinct franchising avenues:

  • Master Franchise Business: For visionaries looking to scale, this opportunity allows entrepreneurs to obtain rights to grant subfranchises within a specific territory, facilitating the establishment and operation of multiple Gong Cha outlets. The investment for this model is projected to span between $188,200 and $684,500.
  • Affiliate Owned Gong Cha Store: This model is tailored for those who wish to establish and operate a Gong Cha store through an affiliate. The investment for this venture is estimated to range from $163,700 to $576,300.

For a comprehensive breakdown of the costs associated with each franchising model, the subsequent table provide a detailed insight.

Type of Expenditure Amount
Initial Franchise Fee $34,500
Rent, Security Deposits and Utility Deposits $5,000 - $31,500
Architect / Engineering Fees $5,000 - $12,600
Leasehold Improvements $50,000 - $262,500
Exterior Signage $2,000 - $5,250
Fixtures, Furnishings and Equipment $25,000 - $52,500
Technology Systems $2,000 - $7,350
Training Expenses $1,500 - $5,250
Insurance $1,000 - $7,350
Business Licenses and Permits $200 - $21,000
Professional Fees $1,000 - $5,250
Initial Inventory of Food, Beverages, Paper Supplies and Small Wares $25,000 - $42,000
Grand Opening Advertising $1,500 - $5,250
Additional Funds (for the initial 3 months of operations) $10,000 - $84,000
Total $163,700 - $576,300

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Does

Gong Cha

provide

training

to its

franchisees?

Yes,
Gong Cha
provides
training

Gong Cha provides its franchisees with a robust training program that covers various aspects crucial to running the store:

  • Initial Training: Gong Cha offers an initial training program for franchisees. This program is mandatory for the Designated Principal, the General Manager, and up to one additional person, with a total of three individuals attending. The duration of this training is approximately two to three weeks, depending on the role of the individual attending.
  • Location of Training: All training programs are conducted at locations designated by Gong Cha. This could be at Gong Cha's headquarters or other specified locations.
  • Ongoing and Refresher Training: They provide ongoing training as they deem appropriate. Additionally, they may require franchisees or their Designated Principal and General Manager to attend refresher courses, seminars, and other training programs from time to time.
  • Training Costs: While Gong Cha bears the cost of all training instruction and required materials, franchisees are responsible for other expenses related to training.  If Gong Cha conducts any additional training, they reserve the right to charge franchisees a per diem fee for such training.

Does

Gong Cha

provides

territory

protection?

Franchisees will be granted the right to operate a Master Franchise Business within a specific Authorized Territory. This Authorized Territory is described in the Key Terms of the Master Franchise Agreement.

However, it's important to note that the Authorized Territory does not include certain locations like airports, sports arenas, hospitals, schools, college campuses, corporate campuses, health clubs, military bases, casinos, convention centers, theme parks, and other similar types of locations that have a restricted trade area, termed as "Non-Traditional Locations."

While franchisees have conditional protection within their Authorized Territory, there are certain situations where this protection can cease. For instance, if the franchisee breaches specific clauses of the agreement, such as those related to subfranchising, use of the trade name, fees and payments, operation of the business, or purchases from the franchisor, their territorial protection might be affected.

Can a

Gong Cha

franchise

be run as

a passive

investment?

Franchisees have the responsibility to manage, direct, and control their Restaurant.If a franchisee or their Principal Owner does not intend to oversee the Restaurant full-time, they must appoint an individual, referred to as the "Designated Manager," to supervise the Restaurant on a full-time basis.

This Designated Manager must meet all of Gong Cha's qualifications. If there's a change in the Designated Manager, a new one must be appointed immediately and must complete all required training within a specified timeframe.

In conclusion, while Gong Cha provides some flexibility in its management structure, they emphasize the importance of active management and supervision of the franchised business.

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