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Bubble tea may have started as a playful drink, but it has grown into an industry worth billions.

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 Business 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.

Mixue has emerged as the sector’s heavyweight, operating more than 46,000 stores worldwide by the end of 2024. 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 business 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 home, 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 profitability — and prove they can build more than just a fad.

Watch the full explainer by clicking the video at the top of the story.