Do you want to open a profitable tea shop (Chai Shop) business? This article includes a detailed guide on how to start a tea stall business with a small investment. Also, it includes business plan guide, cost, 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 a tea time. Mornings in India are incomplete without a cup of tea. And people prefer tea over coffee even. 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 venture not only in the 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 the women entrepreneurs who want to become financially independent. However, the business demands hard work, direct customer interaction and long working hour.
5 Steps Guide on How to Open a Tea Stall Business
Step 1: Tea Stall 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 with a retail location that provides a good sitting arrangement and comfortable ambiance. Generally, tea bars are the air-conditioned store. They sell tea at the 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 stalls invites customers to spend times 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 opportunity to the new entrepreneurs. If you want to start a business with a brand, then the 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 the store with a small investment or you want to develop your own brand, then you must go for 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 the low-cost model. Apart from different types of tea, you can sale 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
Location plays a crucial role in this business. Drinking tea is a practice in our country from morning to evening. Generally, the nearby commercial locations, offices, colleges, shopping centers, markets are the best places to open tea stall. Ensure the easy accessibility.
Simply a place that has a good number of the pedestrian is the perfect location for this business. People enjoy tea with friends, colleges and sometimes with relatives.
Step 5: Tea Stall Business Registration & License
Most of the tea stall runs as proprietorship model. If you want to run the business as proprietorship form, you individual PAN card is sufficient for that. Additionally, you will need the 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. So that, you can change your location.
In 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 the simple and sophisticated design. Provide a comfortable sitting arrangement. Pay attention to Floor, walls, and lighting.
Opening a tea stall is a very common business in India. However, it needs a lot of planning to make it a great success.