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What It Takes to Have a Profitable UPS Store Franchise

by Franchise Chatter on April 13, 2011

in Success Tips



Franchise Chatter Membership Information

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.

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{ 61 comments… read them below or add one }

Jordan June 11, 2011 at 9:54 am

This is one of the most accurate articles on TUPSS I have read. I am a current owner of two stores in Texas. What is keeping our stores alive is consistently growing our print side of the business. I am currently trying to come up with a valuation of my two stores. What criteria did you use to value your store that you sold?
Thanks,

Reply

Ambrosio June 11, 2011 at 12:46 pm

Hi Jordan,

Thank you very much for your comments. I sent you an email to answer your question. Hope it’s helpful.

I’m happy to hear that the print side of the business is taking off. That was one profit center that I didn’t pay a lot of attention to — but I really should have since it has good margins.

The primary reason for my lukewarm attitude towards document services was because there was an established local copy store (with several branches in the city) literally 3 doors away (and on the same side of the street!).

At that time, we didn’t receive any special training on how to produce professional document services. If I had more confidence in that area, I would have pursued the copy business more aggressively. I do notice that document services has been the focus of a lot of UPS Store ads, so things might have changed since then.

Thanks again for dropping by!

Ambrosio

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Alice August 29, 2011 at 8:52 am

I’m thinking about franchising a UPS Store in Canada. There are lots of posts I’ve found on internet blaming the UPS Store system. It seems that key problem is the difficulty in making profit. Is this business going down? Thanks.

Alice

Reply

Ambrosio August 29, 2011 at 9:13 am

Hi Alice,

Thank you so much for dropping by. I suggest that you speak with current owners of The UPS Store in Canada (go through the store directory and call as many owners as you can). I think it’s pretty clear what my thoughts are based on the posts I’ve written, but that’s just based on my own experience from owning a UPS store, which I sold 5 years ago. Talking with current owners will help you get a better feel for how the franchisees are doing today. Take your time, and good luck!

Reply

Alice August 29, 2011 at 9:28 am

Hi Ambrosio,
Many thanks. I like your posts which look professional.
Alice

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Patryce August 30, 2011 at 6:51 pm

Thanks, for your very informative post. I’ m considering purchasing an existing store(s) (there are a couple for sale in my area). I’ m in the early stages of evaluation. Do you have any tips on due-dilgence, valuation methods or any other words or wisdom?

Patryce

Reply

Ambrosio August 30, 2011 at 9:43 pm

Hi Patryce,

Thank you for your kind words. I appreciate it.

When purchasing an existing store, I would look closely at the breakdown of revenues by profit center (UPS shipping, USPS, packaging services and supplies, mailboxes, notary, and copy services). UPS and USPS have the lowest margins among them so I would look for a store that has a lot of mailboxes rented and a loyal customer base. Ideally, the monthly mailbox revenues should cover the monthly rent for the store, or at least come close to it. If you live in California, notary services (at $10 per signature) is another great profit center because it is pure profit (I can’t speak for how good this profit center is in other states.)

I’d also find out if the business is growning (or shrinking) year over year, and by how much. This can help you project where the business is likely headed if no changes are made.

And as I always say, talk to as many store owners in your city to get a better sense of how the stores are doing as a group in your area.

As for valuation, in this economic climate where lending is still tight, try not to pay more than 2x annual owner’s earnings, and make sure to ask your financial advisor to help you verify owner’s earnings because the financial statements for a business this size are not audited.

Good luck with your due diligence! Take your time, and wait for just the right opportunity because there will always be another one.

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Jenny October 20, 2011 at 10:48 am

I like your detailed information above.
When you talk about “not to pay more than 2x annual owner’s earnings”, does it include all fees paid to UPS, such as tranfer fee, franchise extension fee, training, upgrade etc. Thanks for your time.

Jenny

Reply

Ambrosio October 20, 2011 at 11:00 am

Hi Jenny,

Thanks for dropping in. There’s really no hard and fast rule, but in this lending environment, I do think it’s realistic to stick to a multiple of 2x owner’s earnings all-in (including all fees and upgrades). You want to improve the odds of recouping your entire investment within 2 years. If there’s a specific reason why you think you can boost earnings at that store so that you can earn back everything you’ve invested in less than 2 years, then there’s room to pay a little more. This is just my personal opinion, of course. Please consult your trusted financial advisor for more specific advice. Good luck!

Best regards,

Ambrosio

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Keith November 29, 2011 at 10:09 am

Ambrosio,
Thank you for your thoughtful and seemingly balanced points of view around owning/operating a UPS Store. Very helpful!
A few of the posts concern purchasing an existing store. I’m considering starting a new store in my area, and will speak with other current store owners here and elsewhere. However in general, any opinion on starting new versus purchasing existing (if available)? Would I be insane to start a new store?
Thanks so much!
Keith

Reply

Ambrosio November 29, 2011 at 11:57 pm

Hi Keith,

Thanks for visiting my blog. For a mature franchise concept like The UPS Store, I would first ask myself why is the opportunity to open a new location still available in my desired territory? The problem with a franchise that has over 4,000 units open is that most lucrative territories are taken. But there could be valid reasons why a few good areas are still open for development (like an emerging new neighborhood).

In my case, the territory I wanted had a former Mailboxes Etc. that turned independent years before. I felt the neighborhood had the ideal demographics for a shipping/mailboxes store and that I could co-exist with the 2 other independents in my area. I guess I was proven right because all 3 stores are open to this day — 9 years from the time I started exploring this opportunity.

If you are opening a new store, be mentally and financially prepared to build the business over the course of at least 2 years, because the most profitable part of the business — the mailboxes — takes time to develop. There have been exceptions like one store in Manhattan and another in The Flamingo Hotel in Las Vegas that suddenly appeared in the national store rankings within months of opening (But they achieved this through high shipping revenues, not from mailboxes). But most of the Top 200 stores nationwide have been around for over 5 years.

On the other hand, my fear in buying an existing store is ending up with a lemon or a real dud. If the location is poor, it’s going to be difficult even for the savviest business owner to turn things around.

Whether you decide to start a new store or buy an existing one, find the best location available because that will be the key to your success. I would say 90% of my store’s success was due to the demographics of the location.

Best of luck to you! Keep us posted!

Best regards,

Ambrosio

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Keith November 30, 2011 at 7:43 am

Hi,
Thanks so much for your thoughtful response, and your point is also one I’m pondering—why are there so few UPS Stores in our area, a place with strong economy and demographics…? My research will continue.
I’m not completely sold on the UPS Store franchise because I hear as many negatives as positives on sites/blogs such as yours. However, as a corporate sales guy who wants to run his own business and be a ‘former corporate sales guy,’ I understand the services business (as opposed to making subs, or a cleaning service) at UPS.
A different question, if I may…do franchisors like MBE/UPS or similar companies provide healthcare options of any kind to franchisees? Is this a point of negotiation?
As always, thank you for all of your insights!
Humbly,
Keith

Reply

Ambrosio November 30, 2011 at 8:41 am

Hi Keith,

With your background in corporate sales, you have a lot of options available to you and, if you find the right fit, you could do very, very well.

I sold my UPS Store in 2006 so, unfortunately, I’m not in the best position to answer that question. But during my time, there were no healthcare options availalbe to franchisees because we are independent business owners and as such, need to take care of our own health insurance. I vaguely recall some general discussion on a group plan to provide some form of healthcare to our employees, but it was in the early stages of discussion and I knew I wouldn’t be in the system long enough to take advantage of it. Things may, or may not, have changed since then.

Good luck researching your different options. If you have any other questions, feel free to ask.

Best regards,

Ambrosio

Reply

Keith November 30, 2011 at 9:19 am

Thanks, Ambrosio!
Keith

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Keith December 7, 2011 at 7:34 am

Ambrosio
Your insights are always very balanced and professional, and I appreciate that balance!

I need a sanity check, to pivot off an earlier thread from Jenny et al about buying an existing UPS Store property. The current owner (had it for 8-9 years) said a typical purchase price negotiation starts at about 75% of the store’s STR, or essentially, of its annual revenue. I’ll also be consulting with appropriate experts (legal, cpa, other owners, etc), but at a high-level, is the owner correct?

Any opinions or feedback would be most welcome. Thanks so much!
Keith

Reply

Ambrosio December 7, 2011 at 8:54 am

Hi Keith,

Based on the valuation I ended up getting for my store in 2006, 75% of the store’s STR seems like a fair place to start. But I would look carefully at the product mix to find out where most of their revenues come from because the different profit centers have vastly different margins. If they have a lot of long-term mailbox customers, a solid notary business (at least in California), healthy packaging revenues, and a good number of “house accounts” among local businesses, then that’s a good sign. But if most of their revenues come from UPS shipping, that makes the business less valuable, in my opinion, because of the lower margins. Having said that, most stores generate a significant percentage of revenues from UPS shipping (about 50%), so that’s not uncommon.

I would also look carefully at the lease agreement to see if the current lease is favorable or unfavorable given current conditions. It will be too much of a hassle to move locations, even if it’s just next door, because of your mailbox business, so make sure you can secure a good lease for the next 5 to 10 years in the current space.

I strongly recommend that you consult with your own financial and legal advisors because they can provide you with more guidance and help you identify specific warning signs. Good luck with everything!

Best regards,

Ambrosio

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Keith December 7, 2011 at 11:31 am

Excellent, sensible advice! Thanks so much.
Keith

Reply

Ambrosio December 7, 2011 at 4:47 pm

You’re very welcome, Keith!

Best regards,

Ambrosio

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Mona March 5, 2012 at 10:01 am

Hi

My name is Mona and I am thinking about opening a UPS Store. I hear bad things about them and you are the only one I found with possitive commnets. Would it be good idea to open one now with the shipping market? If so, which area of the store location would give more profit? By any chance do you know what would be profit per year on this store? If UPS Store is not the one to do business with, would you consider opening store like, Pack Mail, Goin’ Postal or Safe Ship? They offer diffirent opens to ship like UPS, FEDEX, USPS and DHL.

Your suggestions would be very helpful to us.

Thank you in advance.
Regards,
Mona

Reply

Ambrosio March 5, 2012 at 6:46 pm

Hi Mona,

Thank you for your email. There are a lot of things I don’t like about the UPS Store franchise opportunity, but I did well with it and earned a good return on my investment, so I can’t be too negative :-) My store was one of the first new stores to open as a UPS Store (this was back in 2003). Now, almost 9 years later, this brand is considered mature, and most of the best territories are already taken.

Please read all my posts on the UPS Store and I think you’ll find that my overall view of the franchise is mixed at best. I really don’t have any new information to add. I encourage you to broaden your options beyond the shipping/mailboxes franchise category and investigate what your neighborhood needs that it currently doesn’t have. Your final decision should be in the context of your own neighborhood (or chosen location).

Best of luck with your due diligence.

Regards,

Ambrosio

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Joe March 8, 2012 at 8:36 pm

If you were to hire someone to manage your UPS store, how much would you pay them and would you give them health insurance.

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Ambrosio March 8, 2012 at 8:57 pm

Hi Joe,

That’s a difficult question for me to answer because I see The UPS Store as an owner-operator business. With a full-time manager, there won’t be much cash flow left for the owner, especially during the first few years in business. Once the business is firmly established, or if you decide to open more stores, then hiring a full-time manager would make sense. By that time, you would know how much your store is actually making and can budget accordingly.

Best regards,

Ambrosio

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Ted March 24, 2012 at 7:37 pm

Hello Ambrosi,

Your posts have really clarified some of my questions about the UPS Franchise. I really appreciate you taking the time to answer our questions.

My question to you is this. Your response to Joe on March 8th, on hiring a full-time manager seem to express to me that a franchisee would really be living on a tight budget for the first two years. In your opinion, do you think a new franchisee would essentially be trading one job (current employee) for another (franchisee) by purchasing this business?

Reply

Ambrosio March 24, 2012 at 8:02 pm

Hi Ted,

Thank you for your kind words.

My answer to your question is Yes and No. Let me explain. During your first two years in business, you will probably be earning less than what you are currently making at your full time job. That’s just the nature of being a small business owner in general, and a UPS Store franchisee in particular.

But in the meantime, you are building an asset that (if you are lucky) you can sell for a good sum of money at the appropriate time. In my case, I was able to sell the business for a good price after just 3 years, which provided me with a very good return on investment. No regular job will give you that kind of exit strategy.

On the flip side, there is always the possibility that you won’t be able to sell the business easily or at all, if the financials are not attractive to potential buyers. So that’s the risk inherent in small business ownership.

Best of luck with your due diligence!

Best regards,

Ambrosio

Reply

Ted March 25, 2012 at 5:38 pm

Thank you for enlighten opinion Ambrosio!! Take care.

Reply

Ambrosio March 26, 2012 at 9:41 am

My pleasure, Ted. Thank you for dropping by, and best of luck to you!

Best regards,

Ambrosio

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Maria May 13, 2012 at 5:57 am

Hi Ambrosio,

I’ve been reading your post and found them very helpful.

I’m thinking of applying for an E2 Visa by making an investment in the US. One of the investment alternatives I’m thinking of is buying/setting a franchise from The UPS Store. If I didn’t misunderstand you, that was your situation too (as I read you were not a permanent resident of the US).

My question is: do you think The UPS Store is a good biz alternative to apply for the E2 Visa?

I will be more than glad to hear from you.

Best Regards,

Maria

Reply

Ambrosio May 14, 2012 at 8:55 am

Hi Maria,

Thanks for the note. Yes, I did get an E2 investors visa for my UPS Store. To be honest, if I truly found great long term potential in the UPS store, I would still be an owner today. My main concern was the shift towards printing UPS shipping labels online, thereby diminishing the revenue and profit potential of the stores. If you can find an existing store with a great mailbox business already in place, then that might provide you with a reliable, stable income. Remember that your visa is tied to the continued operation of your business, so finding something that will last for how ever long you want to remain in the US is crucial.

I might just come up with an information product on all matters related to E2 visas and franchises. Thanks for giving me the idea. Best of luck with everything.

Best regards,

Ambrosio

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Maria May 14, 2012 at 2:09 pm

Hi Ambrosio,

Thank you very much for your quick answer.

What you say is one of the thoughts that keeps me busy thinking all day long. Finding the right opportunity for a long-time business.

The other thing that occupies my mind nowadays is how the E2 process is (what should I do first: invest and apply for the visa or viceversa). You’re the first person I “meet” that went through the process. Everything you can tell me is going to be very useful and greatly appreciated.

Best Regards,

Maria

Reply

jeff January 13, 2013 at 1:15 am

Hi and thank you for your posts I am currently in the process of buying an existing UPS store. The staed income is 4ook + annually with a supposed net of 85k + fronm a very non scientific look does this sound like a reasonable number.
Thanks in advance

Reply

Franchise Chatter January 13, 2013 at 1:30 am

Hi Jeff,

Profits will depend primarily on the sales mix of the particular store. If they have a lot of mailboxes rented, then yes, that can be a realistic number. However, there are too many factors (sales mix, rent expense, labor costs, etc.) for me to say with confidence whether those numbers are accurate or not. Best of luck with your due diligence.

Best regards,

Ambrosio

Reply

Chris Wickersham February 2, 2013 at 11:17 pm

Ambrosio,
Your blogs are very helpful.
I would like to know that whats the discount on International shipments from the listed price on ups.com.
I own a eCommerce business with a turn over of 3 million.I was thinking of buying a existing store and pass all those savings to my web business.

thanks

Reply

Franchise Chatter February 2, 2013 at 11:37 pm

Hi Chris,

Thank you for your kind words.

I don’t know what the current discounts are, but during my time (2003 to 2006), the incentive on international shipping was very good — at least 50% off the retail rate. Keep in mind that the retail rate is probably much higher than what you are currently being charged if you have your own UPS account (considering the high volume of your business). I would advise you to first negotiate a better rate from your UPS account representative before considering buying a store. Your account rep might be able to give you a discount that is substantial enough that you don’t have to go through all the trouble of buying an existing UPS Store.

Best of luck to you!

Best regards,

Ambrosio

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Lysa_tupss February 17, 2013 at 7:53 pm

Hello Ambrosio,
Im in the process of opening a UPS store in an area which i never lived in before, or even close. What are the must have amenities on the list the stores location i should have or look for? The UPS real estate people have showed me a few. I picked two of them because i liked the city around the neighborhood. Is this the right way to pick up a location? Also what do you think the ideal rate of rent is reasonable for the business? Both of the stores i liked both ran between 4,500 to 5,000 a month. One of the stores has a ups drop box in the shopping center. which i had asked if they could remove it and they responded by saying it would be tricky? Is that allowed? Can they keep a drop box in my territory after i open right outside my door? Im growing frustrated at this point with the lack of answers im getting from them. thanks for your help!

Reply

Franchise Chatter February 17, 2013 at 8:29 pm

Hi Lysa,

Thank you for your question.

Are you planning to move to the neighborhood where you will be opening your store? It will make your life so much easier if you live nearby.

For me, the most important qualities of a good UPS Store location are:

1.) Right Demographics – you need to be in a neighborhood where people can afford to pay a premium for packaging and shipping services. There are cheaper alternatives out there (postal service, DIY packing, etc.), so you need customers who are willing to pay for the convenience. You also need a lot of mailbox customers because that is a terrific profit center, and can have a huge impact on your bottom line.

2.) Visible – you cannot be somewhere hidden or tucked away. It takes most people a long time to realize that a new UPS Store has opened in their area, so you want to make it easy for them to see you.

3.) Accessible – you need convenient parking right outside your door.

4.) Reasonable Rent – are you in a high rent area? $4,500 to $5,000 a month sounds high. I owned a store in San Francisco, and my rent when I sold the store was a little over $5,000 per month, and that was considered very high in 2006. I think my location was terrific, and we got to break even pretty quickly primarily because of the location, but I always wished I had opened in a smaller unit in the same building. The retail space I had was about 1,200 square feet, and there was just so much wasted space in the lobby area. I think 1,000 square feet or less would have been more efficient.

As for the UPS drop box, I’m not surprised by the answer you received. Even though The UPS Store is owned by UPS, they are run independently and I don’t think the UPS Store side can insist on having that UPS drop box removed; although if you’re lucky, you might find someone on the UPS Store side who is aggressive enough to make it happen. Having said, the people who use that UPS drop box are not your target customers. Those people have UPS accounts. You really want to go after individuals and small businesses without UPS accounts.

If you have any other questions, please feel free to ask.

Best of luck with your site selection. That’s probably the single most important decision you will make, so take your time.

Best regards,

Ambrosio

Reply

Lysa_tupss February 19, 2013 at 7:18 am

Ambrosio,
Your reply was extemly helpful, thank you. I wanted to say, yes i do plan on moving to the area where i am opening the store. I would like to start a family in the same town as my business. The town i am looking at is extemely pricey and high in taxes. The neighborhood im looking at has a median income of $117,394. it is a high middle class area so that is why the rent is so high. Other than the rent and the drop box issue, everything else including the demographic, visability, and accessibility is excellent. Should i still be nervous about the rent in this case? Besides the rent, royalty fees, and equiptment fees are there any other hidden costs that you know of i should be aware of?

Regading the mailboxes, who has say in how many is built into your store? Can you tell them you want a specific amount? Now that you mention the profit margin and mailbox customers i am definitly making this my priority. I will tell them (based on my rent) i will need 250 mailboxes in my store. I want to be able to make my rent with them. Will they accommodate me?

I also wanted to find out what the hype is with the printing servies they push on you. Do they train you for these projects? Did you use these services with your customers, and what was the profit margin for this? Also what do you think is the most efective and easy way is to market for your store?

Thank you so much for your help Ambrosio you are a life saver!

Reply

Franchise Chatter February 19, 2013 at 9:28 am

Hi Lysa,

During my tenure as a UPS Store owner back in 2003 to 2006, there was a “sweet spot” in terms of rent in San Francisco, and that was somewhere between $3,000 and $4,000. My rent was closer to $5,000, so on the plus side, having such a visible location helped me get to breakeven sooner. But the high rent was a drag to profitability in the first year. And looking back, I wish I had chosen a smaller space in the same complex. I would consult with other store owners in the surrounding neighborhoods to see what their rent is. I feel uncomfortable advising one way or another, because it is such a big decision, and I can only share my experience.

Aside from royalties, rent, and equipment fees, you will also have to pay your marketing contribution and technology fees.

You can definitely specify the number of mailboxes you want in your store. I had close to 400 mailboxes (various sizes).

Honestly, with a name like The UPS Store, it is an uphill battle to establish the brand as a professional print shop, although they seem to be putting a lot of money and energy into this initiative. Our typical copy order was $5. We were about 3 doors away from a professional copy shop, so we just couldn’t compete. It was more of a convenience for our shipping and mailbox customers. During my time, there were stores nationally that were doing very high copy sales, but they were very much in the minority. Maybe things have improved since then?

In terms of local store marketing, advertising in our community newspaper was very helpful. And now, there are many social media channels that you can add to the mix (Facebook, Twitter, LinkedIn, etc.) as well as Google Adwords. Another key is to be very visible in your local community (reaching out to your neighbors and small business owners, sponsorships, etc.).

Please check out the Franchise Mentor articles that come with your Platinum subscription. You will find a lot of real world advice there from franchisees operating in various industries. This is exactly the kind of advice I wish I had when I was running my UPS Store.

Hope this helps. Best of luck with your due diligence.

Best regards,

Ambrosio

Reply

Lysa_tupss February 23, 2013 at 8:45 am

Ambrosio,
Your response and details were very helpful thanks again. I have decided (under my sisters pressure) to look in another state for my business venture. I am doing my research in Coral Springs and Boca Raton Florida. The real estate is cheaper and the rent is amazing there. Since i have a ups real estate here in NJ looking for sites, i have to break the news to him and tell him i want to look elsewhere. Before i do that im wondering, am i getting myself in hot water? Will there be any penalties against me for this by the ups advisors? And do you have any advice regarding finding a location and going through the process in another state while still living in NJ miles away? Im hoping the less travel the better, but of course I will be required to travel. Thanks so much!

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Franchise Chatter February 23, 2013 at 9:39 am

Hi Lysa,

I don’t think you have anything to worry about with UPS corporate. You are doing a good job of exploring all your options before committing. Just tell them that you want to keep your options open, and why you want to look into Coral Springs and Boca Raton as well. I am not aware of any penalties for changing your mind about the territory, but you should confirm this with your point of contact.

Of course, the ideal situation is that you already live in the community where you plan to open the store because you will know the area inside and out. A good retail broker can recommend potential locations, but you have to do your own independent research and on-site evaluation. You need to check out the potential locations in person so that you can meet your future neighbors (customers, surrounding businesses, competitors) and observe traffic patterns, visibility, parking situation, etc.

Does your sister live in Boca Raton or Coral Springs? If so, you can ask her to check out the recommendations of the broker for some initial feedback, which is particularly valuable if she lives in the area.

Best of luck and keep us posted!

Best regards,

Ambrosio

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Lysa April 8, 2013 at 9:41 pm

Hi Ambrosio,
I am currently completing my business plan for my loan and i am running into a few pages that I definitley need help with. Im wondering are there any sample business plans for the UPS completely filled in already? I know most of this requires my own financial input with my potential business but im running into some road blocks in this process and its quite frustrating. Any information would help at this point. Thank you for your help.

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Franchise Chatter April 8, 2013 at 9:54 pm

Hi Lysa,

Unfortunately, I am not aware of any sample business plans for The UPS Store with the numbers already filled in. Completing the financial section is the most difficult part of writing a business plan. A lot of it will be based on assumptions and educated “guesses” and even with the best due diligence, your estimates will most likely differ from your actual results. I would ask your UPS Store franchise development rep for guidance, although I’m sure they will not provide you with actual numbers (they can’t). Hopefully, they would know how others in your situation worked through this process.

Wish I could be of more help. I did not go through the loan process when I opened my UPS Store back in the day (I used personal and family funds).

Best regards,

Ambrosio

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pmpfornbs March 17, 2013 at 3:56 pm

This looks a very good advise. I am looking to be my own boss now since I had few job changes in past few years, I want to start something of my own. I am exploring opening shipping/mailing store since this might fit my corporate lifestyle and work experiences. I am looking this in North metro Atl area where peoples have comfortable living and few good schools and no crimes. So I live in this area for last few years.
I want to go for independent mailbox type store where I dont pay any franchise fee and can have as many services as I want. I am looking at option of builtup by mail box stores inc which charge currently around 80-85K including equipments. Do you think that is good idea or UPS store might be better? Also can I replace my existing net income of 80K/yr with this type of stores in two years from date of start of new store, assuming little competition and very visible location and average demographics? What type of peoples typicially rent Mailboxes at UPS stores? Aprt from mailboxes, mail, shipping, boxes, packing supplies, greeting cards, copier , print, notary, stationary, internet/email/scaner, photo printing what type of other services can be good profitcenter for new stores in this age.

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Franchise Chatter March 17, 2013 at 5:11 pm

Hi there,

Thank you for your message.

There are pros and cons to starting an independent mailbox store versus going with a franchise. Unfortunately, there is no easy answer and I encourage you to do your own due diligence to empower yourself to make the right decision for you.

In my experience, $80,000 per year after 2 years in business is not a realistic expectation. Although some stores may achieve this much, I don’t think you can count on that. Many new stores do far less, and some don’t even reach breakeven after 2 years.

Typical mailbox customers are those who work from home, and those who do a lot of online shopping.

You pretty much mentioned all the major profit centers for a typical mailbox store, and I would focus on the major ones like mailboxes, notary services, packing and shipping, and copies, and then the rest will depend on the needs of your community.

Best regards,

Ambrosio

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pmpfornbs March 18, 2013 at 8:06 am

Thanks for your detailed reply. I was disappointed to know the earning potential of the mailbox/shipping stores.

Could you highlight some pros and cons of owning Independent V/S Brand name (such as UPS). I always thought you have only advantage if you own independent store since you have comparatively less investments, no franchise fee to worry about, also you can offer same services with lot more careers (USPS, UPS, FEDEX, DHL all combined) along with many extra additional services at independent store since there is no more control from top people.

Thanks

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Franchise Chatter March 18, 2013 at 8:14 am

Hi there,

The main disadvantage of an independent store is that you won’t have the brand recognition of a national franchise, as some customers prefer going with a brand that they know and trust.

Also by being part of a franchise, you benefit from national and regional marketing campaigns that you pay for through your ad funds. A local store will not be able to afford ads on TV and national magazines.

Franchisees of the UPS Store in particular receive discounted rates on shipping so they are able to offer prices to customers that are lower than what independent mailbox owners can provide.

You will also receive training and support with a franchise, and you will have a network of other franchisees that you can call on for advice.

When it comes to site selection, some landlords might prefer having a national franchise in their properties.

In terms of resale when you decide to retire, some buyers prefer purchasing a franchise and being part of a nationally recognized brand, and other franchisees in your area are potential buyers for as long as your store is doing reasonably well. Hope this is helpful.

Best regards,

Ambrosio

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Delia May 18, 2013 at 2:02 pm

Hi,
we are considering buying an existing UPS franchise, after reading all these comments it is making me hesitant, since my husband is close to retirement. We just closed one business and are looking for another business this seemed like a good alternative. What is the net profit percentage for these stores.
I would appreciate your input. thanks

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Franchise Chatter May 18, 2013 at 11:14 pm

Hi Delia,

Thanks for your question.

It’s not my intention to discourage anyone from buying a franchise, whether it be for The UPS Store or any other franchise. There are stores within The UPS Store system that are doing very well, and those that are losing money. Since you are thinking of purchasing an existing store, you will have access to the financial statements of the seller to help you determine whether the store is doing well or not. Make sure to look into the sales mix of the particular store (Do they have a lot of mailboxes rented?). How is the store performing relative to the average? Is it in the Top 5%, Top 10%, or Top 20% of all stores?

I just posted my review of The UPS Store’s Item 19 (2013 FDD) today. It will help you benchmark the store you are interested in purchasing against the average store, as well as the top performing stores in the system.

http://www.franchisechatter.com/2013/05/18/fdd-talk-2013-average-gross-sales-of-all-the-ups-store-centers-top-5-10-and-20-of-centers-2013-fdd/

As for the net profit percentage, it really depends on the sales mix of the particular store. The most profitable stores tend to have a lot of mailboxes rented, a solid notary business, a decent copy business, and a higher percentage of Air and International Shipping.

Best of luck with your due diligence.

Best regards,

Ambrosio

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delia June 4, 2013 at 10:44 am

Hi,

We recently have an opportunity to open a golden spoon in a really good location, then a yougurtlan opened in the same plaza at the other end ,they have been opened about a month sales have not gone down so far. How can we find out how much sales go down when a yougurtland opens in the same plaza as a golden spoon? I really appreciate your input. the price they are asking for it is really reasonable.

Thank you
Delia

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Franchise Chatter June 4, 2013 at 11:01 am

Hi Delia,

Thank you for your message.

The impact on the sales of a frozen yogurt store when a competitor opens in the same plaza is highly variable, although it is usually negative. I don’t know of any reliable statistic that will be helpful, since the effect of competition varies on a case to case basis.

Unfortunately, you would have to rely on the actual experience of the store you are interested in, and it may still be too early to tell what the long-term impact of increased competition is. Keep in mind that it takes several months before a new store gains its footing, and most people in the community probably don’t even know that a new Yogurtland has opened in the plaza after just one month of operations.

This is where your own investigative skills are needed. Try to frequent both establishments over several weeks and observe how each store is doing. There is no substitute for your own observation and gut feel.

Best of luck with your due diligence.

Best regards,

Ambrosio

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delia June 5, 2013 at 8:44 am

Thank you for your prompt response, you have been very helpful.
have a great day.
Delia

sam May 20, 2013 at 9:44 pm

Hi Ambroisio,

Thanks for sharing your experience with people who are looking at UPS as an investment.

I am thinking about opening a UPS store in Canada in a brand new shopping center which is half open and still under construction. It has offices, Walmart, London Drug, 3 banks and car dealerships around. the community average income is 115,000 but in 4 km there are 350,000 $ income homeowners. The UPS Representative is very positive about location but I have no idea how much I can be my net profit in first year. There are 2 UPS stores in 5 km radius in south and east of this location. It is a 800 SQ ft brand new store. With this information can you please let me know if you consider this location as a good location? if I do all my best for networking and marketing. What I find out I need to have 350,000 gross to have 35,000 net profit which is alot lower that what I expected. what should I expect as a yearly goal. is any limit for growth in this business?

I appreciate your time and effort.

Regards,

Sam

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Franchise Chatter May 20, 2013 at 10:08 pm

Hi Sam,

Thanks for visiting the blog and for leaving a comment.

The shopping center you described sounds promising, particularly for the shipping side of the business, because ample parking is a definite advantage. Walmart and London Drugs will drive a lot of traffic to the center, which is a good thing. But keep in mind that the Walmart customer is not necessarily The UPS Store customer. The UPS Store customer values convenience and service over price.

For a store to maximize profits, it has to have a healthy mailbox rental business. My store was in a neighborhood location so it was very convenient for customers to check their mailboxes on a daily basis. Not sure if the shopping center you described will be convenient to mailbox customers, although it could be depending on the immediate neighborhood. I would look into this more carefully.

I know that some high volume stores in the U.S. are in busy shopping centers so just weigh the pros and cons before making your decision.

I like the small size of the store (800 square feet) because it will reduce your rent expense and build-out costs. You could make the same amount of money with a small store, provided it is in the right location.

I would suggest that you not count on turning a profit during the first year. Just try to break even. It takes several years to build the mailbox side of the business, but once that is set, you will have a nice cash cow. Think 3-5 years before you really enjoy the fruits of your hard work during the first couple years. I do think a six figure income is within reach if your store is in the Top 5 to 20% of stores in North America. Lower volume stores will obviously do much less, but six figures is something to aim for by your 5th year.

Hope this helps.

Best regards,

Ambrosio

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sam May 21, 2013 at 4:49 pm

Ambrosio,

Thanks for your kind response. I am going to meet with two owners who have UPS store in shopping center. I hope I can figure it out if this business is right for me.

Cheers,
Sam

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tom June 10, 2013 at 9:15 am

Hi,

I lives in a small town, about 50 000$ persons, there is no UPS STORES in this area.

Do you believe it’s a goog idea to open a new stores in this conditions ?

Thanks you very much.

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Franchise Chatter June 10, 2013 at 3:15 pm

Hi Tom,

I received an email from a member of The UPS Store PR team a few weeks back about their Main Street franchise model for small towns and rural communities. (http://www.theupsstore.com/mainstreet).

How are your neighbors doing their shipping currently? If there are already adequate options available, the small size of the community might not be able to support a new shipping and mailbox store.

Are there a lot of home-based small businesses that would need your mailbox, printing, and related services?

In big cities like San Francisco, we had a lot of mailbox customers who were frequent online shoppers. UPS does not usually like to leave packages outside apartment buildings and homes in big cities. But in a small town, the UPS driver probably just leaves the packages in a secure location, even when no one is home. So your mailbox service might not be as attractive to your customers. However, I am merely speculating here, and I’m sure you know your neighbors’ needs better.

Some key things to think about:

– you need customers who are willing to pay a little more for service and convenience
– home-based small business owners are your ideal regular customers
– mailbox services is a very important profit center (far more profitable than shipping)

Hope these help you get started.

Best regards,

Ambrosio

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Kevin June 24, 2013 at 7:32 am

Great posts Ambrosio.

I am a current owner of the ups store from houston tx. We bought an existing ups store last year with established revenues. So far I am happy with my investment. We were blessed to find an existing store with healthy mailbox revenue stream. Currently 280 out of 330 mailboxes are full with average rental ownership/ customer of 3 years. We have always received new mailbox customers through regular foot traffic. My question to you is is there any way we could market mailboxes to increase sales. My goal is to rent all 330 mailboxes and then build more to increase capacity to 500 mailboxes.

Additionally. My copier sales are insignaficant, We do about $350 per month in copy sales, We do not have any copier close by. We did direct mail marketing for 3 months but sales increased only a little bit. Any suggestions how we could improve it.

Thank you,

-Kevin

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Franchise Chatter June 24, 2013 at 9:53 pm

Hi Kevin,

Glad to hear your investment is working out so far.

You’re lucky that you already have a solid number of mailboxes rented. This makes running a store much less stressful because you can count on recurring revenues.

It’s typical to offer discounts to attract new customers (2 months free for a 12-month rental, 1 month free for a 6-month rental, etc.). But I bet you’re already doing that.

In my experience, the most effective way to rent more mailboxes is to get your existing box holders to recommend you. If you provide them with awesome service, I’m sure they’d be happy to spread the word about your store to their family and friends. If you have a good a relationship with your box holders, you can casually mention that you are trying to build that side of your business. They might be able to give you suggestions and/or referrals.

Building a significant copy business takes a lot of work. It requires doing sales calls with large customers (law firms, etc). If you have a sales background, this might be easy for you.

If your shipping, packing, and mailbox business is not yet where you want it to be, I suggest focusing on those profit centers first. It will take a huge marketing push to position The UPS Store as a copy store. They’ve been trying to do this since 2005. Not sure if they’ve made any significant headway since then.

Best of luck with your business! You seem to be well on your way!

Best regards,

Ambrosio

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Brett July 21, 2013 at 12:33 pm

I am very interested in purchasing 2 stores in a medium sized city but have been hesitant with the future of the industry. With the proliferation of the internet, people being able to ship on-line, print labels at their homes, etc., do you feel owning a UPS franchise going forward becomes a more risky venture? Thank you for your thoughts.

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Franchise Chatter July 21, 2013 at 7:40 pm

Hi Brett,

The ease of printing shipping labels online is a serious headwind for The UPS Store business model. But this was already the case when I sold my store back in 2006 and average unit volume for the franchise continues to rise. So if you decide to purchase a UPS Store, you have to accept the fact that this profit center is probably not going to grow significantly. The mailbox rental side of the business continues to be lucrative and it can provide you with a nice, consistent cash flow if the demographics of your area are ideal for this service. Definitely look into the mailbox opportunity for the two stores.

Is there any reason why you want to purchase two stores, instead of starting out with just one? I feel that this is multiplying your risk by two. It’s always better to have hands-on experience before deciding if buying a second store makes sense. Just my two cents.

Best of luck with your due diligence.

Best regards,

Ambrosio

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Brett July 22, 2013 at 5:57 am

Ambrosio,

Thank you so much for your response. The opportunity I have is there is an owner of 2 stores that wants to sell them together. It appears to be good deal but as stated before I am a bit skeptical of the total outlook of the franchise. It’s too bad the Franchise Disclosure Document doesn’t state the median unit volume instead of average. Thanks again!

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Franchise Chatter June 5, 2013 at 8:51 am

Hi Delia,

My pleasure. Best of luck and please keep us posted.

Best regards,

Ambrosio

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