How to Start a Tea Shop

Even though the process of starting a tea shop can vary greatly depending on your unique circumstances and location, there are a few set steps that you’ll likely almost always need to take.

In this guide, we break down everything you need to know to get started, including the costs and earning potential involved.

Ready to turn your business idea into a reality? We recommend forming an LLC as it is the most affordable way to protect your personal assets. You can do this yourself or with our trusted partner for a small fee.

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Industry Overview

The tea shop industry has experienced steady growth in recent years, driven by shifting consumer preferences toward health-conscious choices, sustainability, and a desire for premium, personalized experiences.

The tea market caters to a wide array of consumer segments, ranging from casual drinkers to dedicated connoisseurs, each seeking different offerings and experiences.

As a tea shop owner, you’ll have the opportunity to meet these diverse demands by offering products such as loose-leaf teas, bagged teas, specialty blends, herbal infusions, and ready-to-drink options.

You can also tap into the growing trend of customization, allowing customers to create their own tea blends or choose specific tea leaf combinations, further enhancing the personalized experience.

By entering the market now, you’ll be well positioned to capitalize on these trends and take advantage of the industry’s expansion, which is projected to grow from $237.5 billion in 2023 (global tea market) to $327.9 billion by 2030.

Startup Costs and Earning Potential

If you’re considering whether a tea shop is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own tea shop?

Initial Investment Costs

The initial investment for a tea shop varies widely based on factors such as location, shop size, and the quality of the equipment and inventory you choose:

• Lease or Purchase of Space: Securing a physical location is typically one of the largest expenses associated with starting a tea shop, and the cost can vary greatly depending on factors such as the size of the space, its location, and whether you choose to lease or purchase the property. In urban areas, leasing costs typically fall between $25,000 and $150,000 per year, with prices increasing for larger spaces or more desirable locations.
• Renovations and Interior Design: Crafting an inviting, well-designed tea shop can cost anywhere between $5000 and $50,000, depending on how much customization your space will need in order to reflect your brand.
• Equipment and Inventory: To run a successful tea shop, you’ll need reliable brewing equipment, comfortable furniture, and a well-curated initial stock of teas and accessories. You should expect to spend between $2,000 and $10,000 on equipment, and another $5,000 to $25,000 on opening inventory to offer a diverse range of products that appeal to a broad customer base.
• Licenses and Permits: Typically, a tea shop will need some type of business license, health department approval, and food handling certifications, all depending on the specific regulations of your local, state, and federal authorities.  As a general estimate, you can expect to pay anywhere between $200 and a few thousand dollars for licensing before you can legally operate your tea shop.

Operational Expenses

Once your tea shop is up and running, you’ll need to carefully manage ongoing operational expenses to maintain profitability and growth.

These costs are heavily dependent on the size of your shop and the business strategies you employ; having said that, the key areas to focus on include:

• Staffing Costs: Depending on the size of your tea shop and the volume of customers you expect, you will likely need a team of between two to seven employees, meaning that your monthly payroll could be anywhere from $6,000 to $45,000.
• Utilities and Maintenance: You will need to regularly maintain your brewing equipment, restock tea leaves, cups, and other consumables, and ensure the cleanliness and functionality of your shop. These costs, combined with expenses for utilities, will typically bring your total monthly outlay to anywhere between $800 and $3,500 depending on the size and operational needs of your tea shop.
• Marketing and Advertising: To attract and retain customers, you will need to run social media campaigns, create engaging content, send email newsletters, and post promotions to build brand awareness and drive traffic to your tea shop. These efforts can cost between $1,200 and $4,500 per month, depending on the scale of your marketing strategy and the platforms you choose to utilize.

Note: Many tea shops choose to allocate a percentage of their revenue — rather than a flat fee — toward marketing, typically ranging from 5% to 10% of monthly sales. This flexible approach ensures that marketing costs scale with your business, allowing you to invest in growth while keeping expenses in line with your actual sales performance.

Profit Margins

Tea shops generally enjoy healthy profit margins, often ranging from 20% to 45%, which are significantly higher compared to other food and beverage businesses (such as restaurants, where typical profit margins fall between 10% to 25% on average).

The higher margins are driven by the relatively low cost of tea ingredients, combined with the ability to mark up premium blends and specialty drinks.

Moreover, many tea shops follow the practice of offering complementary products, such as scones, muffins, biscuits, and cookies, at or near cost with only a small margin of around 5%. This approach encourages customers to pair these items with tea, where the real profit is made.

9 Steps to Starting a Tea Shop

In order to start a tea shop, you’ll need to complete the following steps:

1. Planning Your Tea Shop Business
2. Registering Your Business
3. Setting Up Your Taxes
4. Secure Funding (If Applicable)
5. Finding the Right Location
6. Designing Your Tea Shop
7. Getting a Business Bank Account and Credit Card
8. Getting all Applicable Licenses and Permits
9. Obtaining Business Insurance

We’ve broken each one of these down in more detail below.

Still exploring your options? Check out other small business ideas.

Step 1: Plan Your Tea Shop

Before diving into your tea shop, you’ll need to spend some time conducting thorough market research.

This will help you understand the competitive landscape, define your target market, and position your business uniquely within the industry.

You will need to begin by assessing the current tea shops in your area, paying close attention to their strengths, weaknesses, product offerings, and pricing strategies.

Customer reviews and the overall market presence of your competitors can offer valuable insight into their success or shortcomings, which will help you understand what attracts customers and what might be missing.

Once you have gathered this information, take your research further by attending local events, like farmers’ markets or tea-related gatherings, to network with industry professionals and gather additional insights from potential customers.

This approach will give you a clear understanding of the competitive environment and help you determine how your tea shop can offer something different or better than the competition.

Finding a Suitable Name

Choosing the right business name is both important and challenging.

This is because your name will need to be eye-catching, memorable, and (at least somewhat) related to your industry.

If you don’t already have a name in mind and need help, you can visit our How to Name a Business guide.

If you do have a name in mind, we recommend researching the following:

• Your state’s business records
• Federal and state trademark records
• Social media platforms

You will also need to make sure that your business’s name is available as a domain — this is your website’s URL address.

Note: If you’re planning to operate a sole proprietorship, you might want to operate under a business name other than your own name — known as a “Doing Business As” (DBA) name. Keep in mind that this is not recommended for a tea shop.

Sourcing Your Tea Supply

Sourcing quality tea is one of the most important steps in building a successful tea shop, as the variety, origin, and freshness of the teas you offer will directly influence your brand’s reputation and customer loyalty.

You’ll need to secure reliable suppliers who can consistently provide a diverse range of teas — from classic black and green to more unique varieties like oolong and white — ensuring that your customers always enjoy high-quality, flavorful products.

Keep in mind that while some suppliers may offer to provide custom blends or exclusive teas for your shop, you should always be cautious with non-labeled products.

Without proper certification, there’s a risk of inconsistency in quality, which could negatively impact your reputation and undermine your customer’s trust in your product(s).

Step 2: Register Your Business

One crucial aspect that cannot be overlooked when starting your tea shop is the importance of establishing a solid business foundation. While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs.

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your Tea Shop  were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Note: If you’re interested in more information before getting started, we recommend having a look at our state-specific How to Start an LLC guide (DIY) or our in-depth Best LLC Services review (for those opting for a professional service).

Step 3: Set Up Your Taxes

The next step you’ll need to take is to register your business for taxes. To this, you’ll need to obtain an Employer Identification Number (EIN), which you can think of as your business’s Social Security Number.

Did you know?

An EIN is also needed in order to hire employees, set up a business bank account or get a credit card. You can find out more information on this in Step 7.

If you form your LLC through a specialized LLC formation service, this will likely be already handled for you in exchange for a small additional fee.

Even so, it’s important to make sure that you fully understand your business’s tax obligations; since these can depend on your location, it’s a bit difficult to accurately break down exactly which taxes you’ll be subject to.

Nevertheless, most businesses will typically be subject to income tax, sales tax, and employment taxes at the federal level. Depending on your location — city or county taxes may also apply.

Due to the complex nature of business taxes, we always advise our readers to seek the help of a professional accountant or business attorney for this step.

Step 4: Secure Funding (If Applicable)

Securing funding is a critical step in starting your tea shop. Financing options include bank loans, Small Business Administration (SBA) loans, private investors, and crowdfunding.

Each option has its pros and cons, and the best choice will ultimately depend on your financial situation and business plan.

Of course, the extent that this step will be applicable to you will depend on your individual financial situation.

Step 5: Find the Right Location

The next step you’ll want to take is to find (and secure) the right location for your tea shop.

Keep in mind that the perfect spot for one business might not work for another, so it’s important to take your time and make a decision based on what will actually work for your tea shop — not just what seems appealing.

When choosing a location for your tea shop, you will need to concentrate on metrics that specifically relate to the tea shop industry, such as foot traffic, visibility, accessibility, and proximity to complementary businesses like bookstores, wellness centers, and/or gyms.

These factors will directly impact the success of your shop, as high foot traffic areas with strong visibility and nearby businesses that attract similar health-conscious clientele can help bring in the right customers and boost your overall sales.

Note: You will also need to make sure that your prospective property is zoned for commercial use and complies with all applicable local and state regulations (discussed in more detail in Step 8).

Step 6: Design Your Tea Shop

After finding the right location, it’s time to design your tea shop, and in this process, there’s no such thing as too much attention to detail.

Both the interior and exterior should reflect your brand, creating a space that feels welcoming and encourages people to spend time inside.

Your design choices will be influenced by your overall vision, goals, and target audience, but most successful tea shops prioritize two main objectives: creating a cozy, inviting atmosphere and fostering a sense of community.

To achieve this, you will need to focus on elements such as warm lighting, natural materials, and comfortable seating, and ensure that the overall ambiance invites customers to relax, enjoy their tea, and feel encouraged to return for future visits.

Step 7: Open a Business Bank Account and Credit Card

Using dedicated business banking and credit accounts is essential when operating as a business owner; this is because when your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) can be at risk in the event your business is sued.

In business law, this is referred to as piercing your corporate veil and is a result of the fact that not having a separate business bank account can be interpreted by some courts as evidence that you are not treating your business as a separate financial entity.

As a result, you could lose your limited liability protections even if you’ve registered a separate business such as an LLC or C Corp.

There are also a variety of practical and economic benefits to this step, such as a larger access to business loans and a more legitimate look.

Getting a business credit card can also be a great idea as it can help you build your company’s credit history from the start.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Step 8: Secure All Required Licenses And Permits

The number of licenses and permits required to operate your tea shop will depend on the regulations in your state, city, and municipality.

Even so, most tea shops will likely need to obtain a combination of the following licenses and permits to operate legally:

• Business License(s): Depending on your state, city, and municipality regulations, you will most likely need to obtain some type of business license in order to legally register and operate your tea shop.
• Food Service Permit: Since your tea shop will be serving beverages and potentially food on-site, you will need to obtain a food service permit from your local health department in order to ensure compliance with food safety and sanitation regulations.
• Sales Tax Permit: In most states, you will need to obtain a sales tax permit from your state’s Department of Revenue in order to legally collect and remit sales tax on products sold to customers.
• Signage Permit: You will likely need to obtain a signage permit from your local government or zoning office if you plan to install exterior signs for your tea shop.
• Fire Department Permit: You will need to obtain a fire department permit from your local fire authority to ensure your tea shop complies with fire safety regulations. You may also be subject to surprise inspections to ensure ongoing compliance with safety standards, such as maintaining proper exits, fire extinguishers, and smoke detectors.
• Occupancy Permit: You will need to obtain an occupancy permit from your local building authority to confirm that your tea shop complies with local building codes and is safe for public use. This permit ensures that your shop meets zoning regulations and is suitable for customers and staff.
• Alcohol License: Finally, if you plan to offer tea blends with alcohol or alcohol-infused tea beverages, you’ll need to secure an alcohol license from your state’s liquor control board.

Note: Your tea shop will need to comply with the Americans with Disabilities Act (ADA), which requires accessible entrances, clear pathways, and the removal of barriers to ensure accessibility for individuals with disabilities.

Step 9: Secure Business Insurance

In addition to securing the necessary permits and licenses, you will need to obtain the right business insurance.

Note

Even if you form an LLC, purchasing business insurance is still a good idea. This is because an LLC structure protects your personal assets, not your business’s.

While specific coverage needs may vary based on factors such as location, size, and unique risks, there are several key types of insurance that most tea shop businesses should consider.

We’ve briefly outlined these below.

Food and Beverage Insurance

One of the most important types of insurance to consider is Food and Beverage Insurance. This coverage is especially important for tea shops because:

1. It covers incidents specifically related to serving food and beverages, which are your core business activities.
2. It can protect you from expensive lawsuits arising from food safety issues, such as contamination or allergic reactions.
3. It often includes coverage for product recalls, which could be necessary if one of your tea blends is found to be contaminated.

The cost of this type of insurance coverage will vary depending on factors such as the size of your tea shop, your annual revenue, and your personal claim history.

For a small to medium-sized tea shop, you can generally expect to pay anywhere between $300 and $2,500 per year for this coverage.

Note: It is common for Food and Beverage Insurance to be bundled with General Liability Insurance to help lower costs while still providing full coverage for your tea shop.

General Liability Insurance

General liability insurance is a foundational coverage that’s essential for tea shops because it protects against claims of bodily injury, property damage, and personal injury that may occur on your premises.

It should be noted that tea shops tend to have higher risk factors for general liability insurance compared to other businesses due to the following characteristics:

• Higher foot traffic
• Risks associated with serving hot beverages
• Potential for slip-and-fall accidents from spilled liquids

Due to these higher risk factors, the average cost of general liability insurance for tea shops typically ranges from $50 to $80 per month, or $600 to $960 annually; however, the exact cost will depend on your tea shop’s specific risks and needs.

Workers’ Compensation Insurance

Since your tea shop will have employees, workers compensation insurance is likely going to be a legal requirement depending on your state.

This insurance policy provides coverage for medical expenses and lost wages to employees who are injured during work.

The average cost of workers’ compensation insurance ranges between $45 per month, but this can vary based on factors such as payroll, location, and (once again) your business’s specific risk profile.

Ready to Get Started?

How to Start a Tea Shop FAQs

How much does it cost to start a tea business?

To start a tea shop, you’ll need to cover costs for leasing a space ($25,000 to $150,000 per year), pay for all required renovations ($5,000 to $50,000), purchase the necessary equipment and inventory ($7,000 to $35,000), and get your business licenses ($200 to $5,000).

In total, you can expect startup costs to range from $32,200 to $240,000, depending on your location and the size of your shop.

How profitable is the tea industry?

Tea shops, broadly speaking, are quite profitable, with margins ranging from 20% to 45%.

This high profitability is driven by the low cost of tea ingredients and the ability to mark up premium blends to health-conscious consumers, making it a compelling business opportunity.

Is it good to start a tea business?

Starting a tea business can be a great opportunity, especially with the tea industry’s steady growth and the increasing demand for health-conscious, premium products.

The global tea market is expected to grow from $200 billion in 2020 to $318 billion by 2025, offering strong potential for success.

What can be sold in a tea shop?

Tea shops typically sell loose-leaf teas, bagged teas, herbal blends, ready-to-drink options, and accessories like teapots, cups, and brewing equipment.

Many also offer complementary items such as scones, cookies, and light snacks to pair with the tea.