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How to Start a Tea Shop and Secure Financing for It

Understand the various areas of expenses involved to start a tea shop business in India. Explore funding options, business loan eligibility, government schemes, and more.

Tea is available in abundance in India, which makes it an economical business idea. To start, you need minimum capital, manpower, and infrastructure. Here is a tea shop business plan to initiate.

Step-by-Step Guide to Starting a Tea Shop Business

Mentioned below is the step-by-step guide that may help you establish a tea shop business in India:

1. Initialising the Tea Stall Setup

Undoubtedly, establishing a proper tea stall in India is an ideal way to form a profitable business. This is because tea is a popular beverage loved by almost everyone. Due to this reason, tea stalls at any location drag the attention of multiple customers. 

2. Planning and Targeting Audience

Although the tea stall business is a small enterprise, it still requires an effective business plan comprising thorough market research. You need to plan the kind of tea stall you need to establish and determine the target audience. 

Also, you need to determine whether the stall will be selling only tea or some food items as well. Planning and targeting the audience also comprises determining the design of the tea stall and deciding the price of tea, biscuits, snacks, etc. 

3. Ownership of Tea Shop

The business owner plays an important role in determining the policy and roadmap of the business. In addition, they need to have the skill and right to make strategic decisions so that their business flourishes without hassles. 

In India, with the rise in tea stall businesses, many big companies are offering franchise opportunities to individuals planning to establish a tea stall business. So, you can commence your own tea stall or get a franchise, depending on your financial capacity and other resources.  

4. Location 

While making a chai shop business plan, another important factor to keep in mind is the location of the tea stall. This comprises the locations where tea is in demand on a daily basis, such as hospitals, office areas, courts, railway stations, etc. 

Given the high demand, owning a tea stall in such areas can be more profitable than in areas with low demand. 

5. Establishment

Establishing a tea stall needs some general utilities, which are highly essential. These utilities comprise vending machines, ingredients like tea leaves, sugar, milk, etc., along with things like kettles, cups, stoves, chairs, and tables or benches. 

 Furthermore, as a business owner, you have to decide the type of tea you want to sell. Some popular kinds of tea comprise masala tea, green tea, cardamom tea or Elaichi chai, herbal tea, black tea, iced tea, aroma tea, kesar tea, etc.

6. Investment/Raising Funds for the Tea Shop

In general, the investment in a tea stall business in India depends on its nature, size, tea stall design, and so on. However, a basic investment of at least ₹1 Lakh is usually required while establishing any tea stall business. 

 This amount encompasses all the necessities for establishing a tea stall business. You can apply for a business loan to get the required funds.

7. Legal Documentation

With the increasing number of tea lovers, the tea stall business has been increasing at a staggering pace in every corner of India. Even though setting up a tea stall is quite effortless, it is mandatory to undergo legal documentation to avoid unwanted legal consequences. 

8. Registration

Registration of a tea stall business means obtaining a trade licence from the state government wherein you want to establish the tea business. If it is a small to medium-scale tea stall business, you can register as a sole proprietorship or partnership firm. 

Now, in case there is a ‘partner’, the firm will be registered as a Limited Liability Partnership (LLP) or Private Limited Company.

9. Licence

Obtaining a Food Safety and Standard Authority of India (FSSAI) licence is necessary. It is mandatory for all businesses involved in the production, processing, or distribution of food items. Without this licence, the business can come across a plethora of problematic situations, which may ruin its prospects.

10. GST Registration

Besides getting registered, it is also mandatory for a tea stall business to get the Goods and Service Tax (GST) registration. This is because every business needs to register themselves under the GST Act, as stated in the current GST Law in India.

Registration and Licencing for a Tea Stall in India

Starting a tea stall or tea bar requires proper registration and compliance with legal and safety norms. Here are key requirements:

  • Business Registration

Every business needs to be legally registered before starting operations. This ensures compliance with government regulations and helps avoid potential legal complications.

  • Proprietorship Model

Most tea stalls operate as sole proprietorships, where the business is owned and managed by a single individual. A PAN card with required registrations is needed to establish ownership under this model.

  • Trade Licence

A trade licence from the local municipal authority is required to operate legally. This ensures the business adheres to local laws and health regulations.

  • FSSAI Registration

A Food Safety and Standards Authority of India (FSSAI) licence is mandatory for tea bars, as they serve food and beverages. This certification ensures business adhere to the hygiene and quality standards.

  • Fire Licence

Tea bars have to obtain a fire safety licence to comply with local fire department regulations, ensuring the premises have proper fire-fighting measures.

  • Shop Name and GST Number

The owner needs to decide on a business name and register for a Goods and Services Tax (GST) number if the annual turnover exceeds the prescribed limit. This enables proper tax filing and legal recognition of the business.

Cost of Opening a Tea Shop in India

Opening a tea shop in India offers a promising business opportunity, given the country's deep-rooted tea culture. The initial investment varies based on location, scale, and business model. Understanding these costs is crucial for prospective entrepreneurs. 

Tier Classification and Cost Factors

  • Tier 1 Cities (e.g., Mumbai, Delhi, Bengaluru): High rental costs, competitive staffing, premium inventory, and substantial marketing budgets. 

  • Tier 2 & Tier 3 Cities (e.g., Jaipur, Kochi, Patna): More affordable rentals, lower staffing costs, a mix of local and national brands, and moderate marketing expenditures. 

Estimated Total Setup Costs

City Tier Small Store (120–150 sq. ft.) Medium Store (250–400 sq. ft.) Large Store (500+ sq. ft.)

Tier 1

₹2–5 Lakhs

₹6–12 Lakhs

₹12–20 Lakhs

Tier 2

₹1–3 Lakhs

₹4–8 Lakhs

₹8–16 Lakhs

Tier 3

₹50,000–1.5 Lakhs

₹1.5–3 Lakhs

₹4–8 Lakhs

Summary

  • Tier 1 Cities: Higher investment due to premium locations and brand positioning. 

  • Tier 2 Cities: Balanced investment with opportunities for growth. 

  • Tier 3 Cities: Lower initial investment with potential for community-focused businesses. 

Disclaimer: These cost figures are indicative and meant for illustrative purposes only and do not guarantee actual expenditure patterns. Actual investment needs may vary significantly depending on location, brand tier, inventory size, and infrastructure. Always consider consulting with related experts for more precise budgeting.

Financial Planning and Securing Financing for Your Tea Shop

Securing funds is a crucial step when launching a tea business. While self-funding is an option, a business loan can help if you need additional capital. 

Below is a guide on how to utilise business loan funds effectively, the benefits of taking a loan, and the steps to apply for one.

Uses of a Business Loan for Tea Stall

A business loan can help cover various expenses when setting up or expanding a tea business. From sourcing ingredients to managing daily operations, here are some essential ways to utilise the funds:

  • Setting Up the Tea Stall or Café

Use the funds for setting up your tea stall or café, including furniture, signage, and shop renovation. Expenses may also cover rent, electricity, and water bills to ensure smooth daily operations.

  • Procuring Ingredients and Supplies

A steady supply of tea leaves, milk, sugar, and disposable cups is essential. Funds can help in bulk purchases, ensuring cost efficiency and uninterrupted service.

  • Hiring and Paying Staff

Your business may take time to generate profits, but employees (tea makers and servers) depend on regular salaries. Utilising funds can help maintain payroll stability in the initial months.

  • Marketing and Branding

Consider implementing promotional strategies such as distributing flyers, leveraging social media, and offering discounts to attract customers. Business loans can be used to build a brand identity and attract a loyal customer base.

  • Emergency and Maintenance Costs

Unexpected repairs, equipment breakdowns, or seasonal downturns can impact operations. Setting aside a portion of the loan for tea-shop contingencies ensures financial stability during unforeseen situations.

Benefits of a Business Loan

No Collateral Requirement

Business loans are typically unsecured, meaning you do not need to pledge assets to obtain funds. Lenders assess your creditworthiness based on factors like your CIBIL score and repayment history.

Quick Fund Disbursal

With streamlined digital processes, approved business loans are disbursed swiftly, ensuring immediate access to funds when needed. This eliminates delays compared to traditional loan approvals.

Multiple Loan Options

Lenders offer a variety of loan products tailored to business needs, allowing entrepreneurs to choose financing that aligns with their specific requirements and growth plans.

Flexible Loan Amounts

Loan amounts vary based on eligibility and business needs. Lenders provide customised funding solutions, ensuring businesses can secure the right amount to meet operational and expansion goals.

Competitive Interest Rates

A wide range of lenders offer competitive interest rates, making borrowing more affordable. Comparing different loan offers allows businesses to secure the most cost-effective financing option.

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Business Loan Offers and Interest Rates by Various Lenders on Bajaj Markets

With these benefits in mind, you can apply for a business loan from Bajaj Markets. Get funding of up to ₹80 Lakhs through a simple online application with quick disbursal. Explore business loan options from Bajaj Markets’s partnered lenders below:

Disclaimer: The mentioned rates are subject to change at the lender’s discretion.

Documents and Eligibility Criteria for a Business Loan

Once eligibility is confirmed, the following documents are needed to complete the application:

Identity Proof (Any of the following):

  • Aadhaar card

  • PAN card

  • Voter ID

  • Passport

  • Driving licence

Address Proof (Any of the following):

  • Aadhaar card

  • Utility bills

  • Lease agreement

  • Passport

Income Proof (Any of the following):

  • Last six months' bank statements

  • Income computation

  • Profit and Loss (P&L) statement

  • Balance sheets for the past two years

  • ITR with certified details

Credit Score & Company Credit Report (CCR) for a Business Loan to Open a Tea Shop

When seeking a business loan to open a tea shop in India, your creditworthiness plays a pivotal role in the approval process. Lenders assess both personal and business credit profiles to determine your eligibility and the terms of the loan. 

Your personal credit score, typically provided by credit bureaus like TransUnion CIBIL, ranges from 300 to 900. A score above 750 is often considered very good and can enhance your chances of securing favourable loan terms. This reflects your individual credit history, including timely repayments and credit utilisation. 

For businesses, the Company Credit Report (CCR) is also crucial. The CCR provides a comprehensive overview of your company's credit history, including repayment behavior and credit exposure. The CIBIL Rank, derived from the CCR, ranges from 1 to 10, with 1 being the best. A lower rank indicates better creditworthiness, improving your loan approval chances. 

It is essential to maintain a strong personal credit score and CCR to secure a business loan and establish your tea shop.

How to Apply for a Business Loan on Bajaj Markets

Applying for a business loan on Bajaj Markets is a seamless online process, eliminating the need to visit a branch. Follow these steps to complete your application: 

  • Click on the ‘Apply Now’ button at the top of the page

  • Fill in your personal and business details in the online application form

  • Enter the required loan amount and select a suitable repayment tenure

  • Upload the required documents, like ID and address proof, business details, etc. for quick verification

  • Submit the application and wait for verification and approval

Schemes Offered by the Indian Government for SMEs/MSMEs

The Indian government provides various schemes to support small businesses, including tea shops, by offering financial assistance, skill development, and infrastructure support. These initiatives aim to ease the challenges faced by entrepreneurs in the food and beverage sector. 

Central Government Schemes

State-Level Schemes

State Scheme Name

Maharashtra

Chief Minister’s Employment Generation Programme (CMEGP)

Uttar Pradesh

ODOP Margin Money Scheme

Tamil Nadu

New Entrepreneur cum Enterprise Development Scheme (NEEDS)

Madhya Pradesh

Mukhyamantri Udyam Kranti Yojana (MMUKY)

Andhra Pradesh

Industrial Development Policy 2023–27 (MSME incentives)

Karnataka

Yuva Nidhi Scheme

These schemes are designed to provide financial support and promote entrepreneurship among small businesses, including tea shops. 

Disclaimer: These Central and State Government schemes may or may not be applicable to secure business funds for opening a car dealership in India. It is crucial to check the eligibility criteria and other terms and conditions of any scheme you are interested in before applying.

FAQs

Is opening a tea shop profitable?

Yes, opening a tea shop can be highly profitable, especially in high-footfall areas. With minimal investment and quick returns, many small tea stalls earn substantial daily profits.

Starting a basic tea stall in India can cost between ₹25,000 to ₹1 Lakh, covering essentials like equipment and initial stock. For a more elaborate café setup, expenses can range from ₹2 Lakhs to ₹10 Lakhs, depending on location and scale.

 

Selecting a location with high foot traffic, such as near bus stops, railway stations, or educational institutions, is crucial. Ensure the area is easily accessible and visible to attract a steady stream of customers.

Yes, obtaining a Food Safety and Standards Authority of India (FSSAI) license is mandatory for operating a tea business. Additionally, depending on the business model, registration with the Tea Board of India may be required.

To set up a tea shop, you need essential equipment for brewing, serving, and storing tea. These include: 

Tea Brewing Equipment

Teapots 

Tea kettles

Tea infusers

Tea filters

Tea timers

Tea Serving Equipment

  • Tea cups
  • Saucers
  • Tea trays
  • Tea strainers 

Tea Storage Containers

Airtight containers keep loose tea leaves fresh and maintain their flavour.

Water Filtration System

This ensures the quality of water used for brewing, enhancing the taste of tea.

India's tea industry is vast, with over 1 billion cups consumed daily. The sector employs around 2 million people and continues to grow, offering diverse opportunities from street stalls to premium cafes.

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