Chinese tea brands push into franchising in South Korea

Chinese tea brands are intensifying their push into South Korea, with a growing number moving beyond company-owned stores to pursue franchise expansion.

Chabaidao is actively recruiting franchisees through a dedicated startup website, according to industry sources Thursday. The brand has grown its store count to 47 and aims to reach 50 by year's end. Chabaidao sells milk tea and fruit teas made with mango, shine muscat, watermelon and strawberry.

The brand is pitching the growth potential of the milk tea market as an advantage over the saturated cafe sector, and is promoting the earnings its franchisees can generate. Its top-performing Seoul location ranked No. 1 in sales in April, posting monthly revenue of 215 million won ($158,000).

Franchise sales figures back up the claim. Data from the Fair Trade Commission's franchise information system show that Chabaidao's 15 franchised stores averaged 597.59 million won in sales last year — surpassing low-cost coffee chains such as Mega MGC Coffee (412.87 million won), Mammoth Express (232.26 million won) and The Venti (221.81 million won).

The brand's relatively high price points appear to be driving the strong revenue. Most Chabaidao menu items are priced between 5,000 and 7,000 won. The popular Mango Pomelo Sago costs 6,900 won for a large, while the Taro Ball Milk Tea and Oolong Soybean Milk Tea are priced at 5,600 won and 6,300 won, respectively. Delivery prices run higher — the Mango Pomelo Sago is listed at 8,400 won on online food delivery platforms — and optional toppings such as coconut, jelly and cheese foam add another 700 to 1,400 won.

Auntie Genie and HEYTEA have also registered with the Fair Trade Commission's franchise information system, signaling preparations to formally enter the franchise market. Auntie Genie started with a location near Konkuk University and has since expanded to major commercial districts including Hongdae, Sinchon and Myeong-dong, most recently opening a store in Seongnam's Sinheung neighborhood to target the Greater Seoul market. HEYTEA currently operates stores in Gangnam, Myeong-dong, Hongdae, Garosugil and near Konkuk University.

CHAGEE, which entered the South Korean market in April, could begin exploring franchising as early as next year. Under the Franchise Business Act, a brand must operate company-owned stores for at least one year before launching a franchise business. Kim Jwa-hyeon, chief executive of CHAGEE Korea, said at a press briefing in April that the company would "review gradual store expansion by monitoring operational conditions and market response going forward."

"Most Chinese tea brands are focused on takeout and delivery, and have set relatively high price points," an industry official said. "The fact that Chinese milk tea and fruit tea are trending among younger consumers is also a factor drawing the attention of prospective franchisees."