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When most people think of The UPS Store, the first thing that comes to mind is shipping packages via UPS. But in order to have a profitable UPS Store franchise, it’s absolutely critical for the franchisee to develop and grow other profit centers as well, in particular mailbox, notary, photocopy, and packaging services.
Shipping: When I opened my UPS Store in 2003, the chain had just been re-branded from Mailboxes Etc. to The UPS Store. With the help of all the TV ads and press releases that came with the re-branding, we immediately had a good number of walk-in customers coming in to ship packages.
We were shipping between 20-30 packages a day during the first few months, which isn’t bad for a new store. But relying on shipping services alone would not have been enough to turn a profit because of the lower profit margins for shipping.
Although we could set our own price for all other services, our retail shipping rates were set by UPS in order to promote consistency throughout the chain. During my time, we were entitled to 40-50% profit margin on average for UPS shipping, with ground shipping having the lowest margins and international shipping (ex-Canada) having the highest.
It took a while longer for people to associate us with mailbox, notary, photocopy and packaging services. This is the problem when your store is called The UPS Store. You really have to work doubly hard to promote your other services and educate your customers on what else you can do for them.
Mailboxes: The mailbox service is by far my favorite profit center. It’s almost 99% profit. Your only expense is really the set of keys that you provide your customer.
Having a lot of mailbox customers provides you with a reliable recurring revenue and enables you to cover your rent and employee salaries. I also enjoyed seeing my mailbox holders regularly and developing a relationship with them.
It took us about a month to rent out the very first mailbox. When we had our grand opening event (about 6 weeks after soft opening), I knew I had to do something drastic. So I decided to offer 50% off any mailbox rented that day and, thankfully, we rented out about 30 mailboxes in 1 day.
That was a minor relief, and really started to get the ball rolling. Most of those customers stayed with me until I sold the store, and could very well still be using their maiboxes now under the current owner. When I sold the store 3 years later, we had close to 300 mailbox holders.
I know that the more established UPS Stores in San Francisco (those that were previously Mailboxes Etc. locations) had upwards of 500 mailboxes rented, with the top store downtown having close to 1,000.
Let’s just say that each mailbox is rented out at an average of $30 a month…well, you do the math. This is an amazing number and really provides the owner with a very healthy, steady, consistent income.
Notarization: Another profit center really worth cultivating is notary services, particularly in California, where each notary signature is a flat $10. Because I was not a citizen or permanent resident of the US at the time (I had an investor’s visa), I could not become a notary. I left so much money on the table, it’s not even funny. We had to constantly refer customers to our competitor down the street, which was just heartbreaking.
The top stores in San Francisco made anywhere from $3,000 to $5,000 a month on notary services alone, and again this is pure profit. The key to success here is always having a notary on duty during operating hours.
I paid for all of my employees to take the notary seminar and exam, but unfortunately, a few of them could not pass the first time (and in some cases, could not pass at all). And the others who did pass worked out great for a while, then they’d move on to other things, and I didn’t have any notary again.
So in order to make this work, the owner-operator or the full-time manager must be a notary.
Photocopying: Establishing a solid photocopy business in a UPS Store is easier said than done, because there is usually a formidable competitor nearby who specializes in photocopies. We had to compete aggressively on price, and even so, we were only able to attract smaller jobs.
If you can hire someone who used to work in a copy store and knows how to run this side of the business, you can probably get this profit center to contribute significantly to the bottom line.
I think we charged customers $.10 a copy and our cost was something like $.005 a copy, so the profit margin here is huge. It’s just a matter of getting enough volume to have an impact.
Packaging: As for packaging services, this is much easier to develop because it is a natural complement to shipping. We had a lot of customers bringing odd sized and oversized items for us to pack and ship. The key here is to establish a fair and consistent pricing scheme that will take into account the packaging materials used and the labor involved.
A good way to sell packaging services is to inform the customer that if they insure the package via UPS and the item that we packed for them is damaged in transit, they would be reimbursed for the full amount of the damage, including packaging costs, up to the amount insured.
This was a very good profit center for us, and what made a huge difference was developing a good relationship with the home decor retailers and designers in our area.
We once had a very nice couple from Hong Kong who shopped at the Pottery Barn next door. They shipped several boxes of houseware back to Hong Kong. Their whole tab for packing and shipping came out to about $7,000. That was a very good day. The good thing was they came back 6 months later to ship some more!
So, in summary, although shipping revenues will constitute the lion’s share of a typical store’s total sales, the most successful and profitable franchisees have found a way to grow and develop their higher margin services as well. It takes focus and creativity, but the pay off is definitely worth it.
Are you a current franchisee of The UPS Store? How have things changed since I left the system, if at all? Do you have any specific advice on how to grow any of the profit centers I discussed above? I would love to hear your comments.