China's booming bubble tea industry faces a test: Is it here to stay or just a fad?

The global bubble tea market size will grow from $2.83 billion in 2025 to $4.78 billion by 2032, according to a report from Fortune Insights.This year, three Chinese bubble tea chains — Mixue Group, Guming Holdings and Auntea Jenny — listed in Hong Kong, and raised more than $700 million as investors bet on China's fast-growing consumer market. "This is the right place at the right time," said William Ma, chief investment officer at Grow Investment Group, said in an interview with "CNBC Explains.""A lot of global investors are trying to invest in sectors less sensitive to the U.S. tariffs

So domestic consumption, younger generation consumption, is a more stable or less vulnerable sector," Ma added

That makes it the world's largest food-and-beverage chain by outlet count — ahead of McDonald's, Starbucks and Subway

Its ultra-low pricing and high-volume model lean heavily on franchising. "In 2024, they are growing at around 22% in terms of new store growth," Ma noted

Franchising is central to the bubble tea industry

Most large bubble tea chains don't run the shops themselves

Nearly every outlet is franchised

Parent companies earn from supplying ingredients and equipment, and collecting fees, while franchisees shoulder the costs of rent, labor and utilities

That model fuels rapid growth but comes with trade-offs: maintaining quality and avoiding store cannibalization gets harder as outlets multiply. "The normal payback period for the owner, for the franchisee, is between 18 to 24 months," said Ma, estimating store closure rates at roughly 20% across the market

But overseas expansion is no guarantee of success

CNBC's China reporter Elaine Yu noted that replicating the domestic formula abroad comes with added challenges. "Supply chains are harder to control, and consumer tastes differ from city to city

That's why brands are adapting to regional flavors and different store formats to win over local customers," Yu said

Market saturation at , rising costs and intense price wars are also testing the resilience of these brands

Whether they can sustain their valuations will depend on their ability to balance scale with fitability — and ve they can build more than just a fad

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