Do you want to open a profitable tea shop (Chai Shop) business? This article includes a detailed guide on how to start a tea shop business in India with a small investment. Also, it includes a business plan guide, cost, and profit margin.
Opening a small tea stall is a profitable and self-rewarding business. Depending on your investment capacity, you can establish the store in any size. Also, you can consider buying a franchise.
In India, every time is tea time. Mornings in India are incomplete without a cup of tea. And people prefer tea over coffee even. The Indian population consumes 30 cups of tea for every cup of coffee. An Indian adult on average drinks at least 2 cups of chai a day. Sometimes, it increases to 4 to 5 cups also. India is the highest tea-consuming country globally and the second-largest producer of tea in the world after China.
A tea stall business is perfect to start a venture not only in metro cities but also in small towns. Actually, Tier II and Tier III cities have shown similar demand as metro cities depending on the area and population density.
The tea shop business is easy to start for women entrepreneurs who want to become financially independent. However, the business demands hard work, direct customer interaction, and long working hours.
5 Steps Guide on How to Open a Tea Shop Business
Step 1: Tea Shop Business Model
Depending on your investment capacity, you must create the right business model. Broadly, you can open the shop in two ways. One is a small tea stall and another is a tea bar.
Generally, the small tea stalls sell low-cost tea to the customers along with other foods. Sometimes these stores don’t provide even sitting arrangements. Here, you can price a cup of tea typically Rs 5 to 10. These stores offer tea in paper cups or in Khulad. You can sell bread toast, omelets, noodles, and even cigarettes, tobacco, etc. This is a low-cost model and you can open this type of store even with Rs 50000 cash.
The tea bars operate in a retail location that provides a good sitting arrangement and comfortable ambiance. Generally, tea bars are the air-conditioned store. They sell tea at a premium price. Also, they offer different types of tea along with coffee. Most of the tea shop offers iced tea, green tea, bubbles tea, cardamom tea, and aroma tea. Actually, this type of tea stall invites customers to spend time on a cup of tea.
Opening a tea bar requires moderate capital investment. Generally, the initial investment highly depends on the rent of the store and the infrastructure building. At least, you need Rs 30 Lakh cash in hand to open a tea bar in the metro cities.
Step 2: Franchise or Ownership
In urban areas, the demand for tea bars has increased in the recent past. A lot of companies are now offering franchise business opportunities to new entrepreneurs. If you want to start a business with a brand, then a franchise is the better option for you. With an established brand, you can generate a good number of clients from the very first day.
However, if you want to open a store with a small investment or you want to develop your own brand, then you must go for your own business. If you have some previous experience in retail, then starting your brand is the more profitable option for you. On the other hand, if you are a beginner, a franchise is the safest option for you. So, determine wisely whether you open the franchise or your own business.
Step 3: How Much Profit a Tea Stall Earns
First of all, you must calculate the gross profit of one cup of tea you sell from your store. Definitely, the above-mentioned two different business models ensure different profit margins. You can’t expect a high-profit potential from a low-cost model. Also, in your financial plan, you must calculate the overhead cost to calculate the net profit.
In the low-cost model, you can expect a 100% gross margin from a cup of tea you sell. As the overhead cost is very low, you can earn a good amount of money provided the store ensures sufficient footfalls.
In a tea bar business model, the gross profit margin is much higher than in the low-cost model. Apart from different types of tea, you can sell raw tea, food items, soft drinks, chocolates, and even gift items from the store. However, here you need to pay higher overhead costs too. The overhead cost includes rent, utilities, employee salary, ingredients, etc.
Step 4: Location
The location will play a crucial role if you want to build a profitable tea shop business in India. Drinking tea is a practice in our country from morning to evening. Generally, the nearby commercial locations, offices, colleges, shopping centers, and markets are the best places to open tea stalls. Ensure easy accessibility.
Simply a place that has a good number of pedestrians is the perfect location for this business. People enjoy tea with friends, colleagues, and sometimes with relatives.
Step 5: Tea Shop Business Registration & License
Most of the tea stalls run as a proprietorship model. If you want to run the business as a proprietorship firm, your individual PAN card is sufficient for that. Additionally, you will need a Trade License from the local Municipal Authority.
For opening a tea bar, you need FSSAI registration. Also, apply for the Fire License.
Step 6: Establish the Store
A small tea stall often keeps the need-based utensils and ingredients. Also, you can consider opening the stall on a movable van. In this case, you can change your location.
In the Initiating tea bar, you will need to acquire at least 600 Sq Ft of retail space including the toilet facility. In this case, you can consider the shop-in-shop option too. Decorate the inside shop area with a simple and sophisticated design. Provide a comfortable sitting arrangement. Pay attention to the Floor, walls, and lighting.
Step 7. Go Online
You will find a lot of websites selling tea online on the internet. With a nominal investment, you can set up a quality website and start selling tea online.
The presence of your tea shop online will help in building your brand and reputation among your existing and potential customers. Also, take advantage of free social media sites like Facebook, and Twitter in spreading your tea shop offers to a bigger audience.
Opening a tea shop business in India is a very common business in India. However, it needs a lot of planning to make it a great success.
Rupak is the founder of MUVSI. He is a small business consultant by profession. His mission is to make people know how to make money and understand personal finance for a better living.