Franchiser tests lure of Tapioca 'boba' balls beyond California

Wayne Lin wants his business to become the Starbuck's of "boba" drinks.

For the uninitiated, boba refers to the globules of tapioca that sit at the bottom of a cup and then are covered by a tea, milk or fruit juice concoction, sealed and sucked through a large straw. The drinks, with flavors ranging from the familiar coconut or strawberry to the more exotic sesame or lychee, originated a decade ago in Taiwan and have been gaining popularity in the United States for the last two years--especially in areas like West Los Angeles and Pasadena.

South El Monte-based Tapioca Express Inc. claims to be the first company to bring a "boba" franchise to the United States and currently has 40 stores, with plans for 100 units by 2003. Tapioca Express' original store opened in Alhambra, and began franchising in areas with large Asian communities in Southern California and the San Francisco Bay area.

'Word of mount'

The drinks became popular through word of mouth, allowing the company to grow rapidly, said Lin, Tapioca's president and chief executive. He owns the business with three partners, all originally from Taiwan.

Interested franchisees need $65,000 to $195,000 to open a Tapioca Express. The company's corporate office receives at least 12 calls a day from people interested in franchise possibilities, according to Laura Lin, marketing manager for the three-year-old company (no relation to Wayne Lin).

A typical Tapioca Express store generates $30,000 to $40,000 in monthly revenue, according to company officials. "Their revenues are on par with a yogurt, bagel or juice shop," said Janet Lowder, president of Restaurant Management Services, a restaurant consulting firm. Comparatively, a fast food restaurant like McDonald's typically brings in more than $100,000 monthly.

The Tapioca Express menu consists largely of hot and cold teas, coffee, shakes and smoothies, which are most commonly served with the tapioca "boba" balls. A few snack items are available. Prices for a 12-oz. drink average $2.50.

While the company's formula has worked in areas with many Asians, the true test will be the appeal of the drinks outside the two coasts as the chain expands nationally.

The company plans to open stores in areas like Colorado and Texas where demographics are less likely to be primarily Asian. "They might encounter the same problems as El Pollo Loco," said Lowder. "Its concept came from Mexico and had a tough time outside of California. It's going to be a challenge to attract customers in Middle America."

Laura Lin said, however, that the clientele in its Old Pasadena shop is 80 percent non-Asian and the company is using its San Diego location as a testing ground for their nationwide expansion.

Retooling the concept

Company President Wayne Lin began by hiring a store manager who worked as a trainer for Starbucks in Taiwan. He also added typically un-Asian fare, like mochas, lattes (coining the phrase "lattea") and a selection of cheesecakes to its menu to appeal to American tastes, he said.

While "boba" has been a hot commodity for Tapioca Express, basing business around one product is risky, and can easily be wiped out if a large chain adds it to their menu, Lowder said.

"It happened to yogurt companies in the late '80s when chains like Dairy Queen and Baskin-Robbins added yogurt to their menus," she said.

South Pasadena-based Panda Restaurant Group has introduced the "boba" beverages into eight of its Panda Express locations. The Chinese food chain currently offers three flavors--honeydew, passion fruit and milk tea.

But no competition from Starbucks yet. "Starbucks is always looking to expand our tea business and has looked into a variety of tea beverages, including the 'boba' drinks," said Starbucks Corp. spokeswoman Kelly Hewitt. "But we do not have plans to introduce a similar drink in our stores at the time."

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