Meet one of Australia’s fastest-growing franchises: How Chatime is bucking the bubble tea trend
Wednesday, November 28, 2018/
For frequenters of any of Australia’s capital cities, happening across a long line snaking away from a seemingly hole-in-the-wall bubble tea outlet is probably nothing out of the ordinary.
Originally a Taiwanese drink, the unique yet massively popular beverage has exploded over the past decade, as international bubble tea brands have sprouted hundreds of outlets Down Under, spurred on by cities like Melbourne’s significant Asian populations.
Those consumers drove many of the brands’ growth in the early days, but bubble tea’s increasing popularity among non-Asian consumers has seen the drink enter a new phase of growth, reaching markets it had before considered unobtainable.
One such brand riding that success locally is Chatime, a Taiwanese-founded bubble tea business which chose Australia as its first-ever Western market almost 10 years ago in 2009.
The business opened its first store in Hurstville in the same year, and this week is now celebrating opening the doors of its 100th.
Speaking to SmartCompany, general manager of Chatime Australia Carlos Antonius says while it may seem like bubble tea’s growth in Australia happened overnight, the business’ path to success has been “quite a journey”.
Antonius came on board Chatime’s local operations at the end of 2015, enlisted by the business to review the company’s market opportunities and its strategy. While the business was far from failing, opening about seven new locations a year, the company was looking to kickstart its franchise growth.
“In 2018 we launched with a new look with new brand pillars, a new comms strategy, and we invested fresh capital in the business. We wanted to refresh our whole market offering,” Antonius says.
This year, the company will have opened 31 stores in what Antonius says is a “remarkable” uptick in growth despite the challenges facing Australia’s franchising sector.
In the past four years, Chatime has seen combined like-for-like sales growth of 50%, cementing its position as one of the fastest growing franchises in the country according to SEEK. Antonius says the Australian arm of the business will achieve revenue in excess of $100 million by 2019, and says the business’ current turnover isn’t far off that figure.
Franchises bubbling along
Antonius says there were many contributing factors to Chatime’s significant growth in the past few years, but pins much of it on the company’s attempts to broaden its market away from predominantly Asian consumers.
“We wanted to take a fantastic product which Asian consumers knew and culturally understood and give it a Western appeal without ‘westernising’ the brand,” he says.
This involved a simplification of Chatime’s menu — cutting back from the over 100 bubble tea variations available — and making the stores more visually appealing by putting the tea creation front and centre.
The business also sought to further diversify its workforce, and reassess what core values it looked for when it came to franchisees.
“Historically in franchising, if a franchisee is waving a cheque you take it in a heartbeat, but we decided to be more rigorous about the partners we chose, valuing hands-on experience and commercial aptitude above all else,” he says.
Chatime’s success flies in the face of the broader franchising sector locally, which has been struggling over the past 12 months, with the government’s franchising inquiry shining a light on some questionable practices by some of Australia’s larger franchisors.
Antonius also blames the banking royal commission for a slowdown in the sector, believing lenders are now less likely to give business loans to prospective franchisees.
Comparably smaller franchises, such as Dymocks and Boost Juice, have told SmartCompany recently they’re still seeing success, and Chatime is no different, with Antonius pointing to Janine Allis’ Boost Juice as the only recent innovation in the beverage franchising space before Chatime’s arrival. purple
Antonius, a former manager at Nando’s, says he’s always taken the view of franchising being an investment in people and strategy, saying the recipe for success is treating franchisees with respect and providing them significant support.
“No matter how much the franchisee is dropping in, be it $1 million or $300,000, you need to make sure they’re bringing passion and experience, and you need to back them. We also do a lot of stuff like mandatory bookkeeping to make sure we have all the visibility we can,” he says.
“We’re also very confident about the business model, and we’ll open a location even if we don’t have a business partner. That sort of thing has really contributed to the success of the brand.”
Growth still forecasted
Looking to the future, Antonius says Chatime is hoping to further reinforce its branding, not wanting to be filed away as a “one-hit wonder” by Australians observing the bubble tea trend. The brand is also gearing up to launch a large-scale sustainability push for the brand.
Despite the business’ astounding growth, Antonius concedes it’s still not a market leader locally.
“I wouldn’t say we lead the category, we have to earn that. Just because we have the most sites doesn’t mean we’re the leader,” he says.
“But the more innovation and players we have in the space only reinforces the legitimacy and appetite for bubble tea.”
With Chatime launching right at the beginning of the bubble tea explosion in 2009, Antonius does admit the business’ timing was impeccable, but also forecasts the business to be growing for the next 10-20 years as Australian consumers start to know “all elements” of tea.
For other businesses, Antonius says the key to succeeding in a market similar to Chatime’s is having a “world-class product”.
“If you don’t have a great product, it doesn’t matter what you do,” he says.
“You’ve also got to ensure you have a strategic perspective alignment across the business. When we made our recommendation in 2015 to our shareholders about the significant shift we were planning, our communication and engagement were critical to our success.”
“But in the end, you never know how it will play out. You could have what we have or it could all fail dismally.”