FDD Talk: What You Need to Know About The UPS Store Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on The UPS Store franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a UPS Store franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a UPS Store franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of The UPS Store’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016, 2015, and 2014 average, median, high, and low adjusted gross sales for the top-performing 10%, bottom-performing 10%, and all traditional UPS Store Centers in the United States and Puerto Rico that were in operation during the entire 2016, 2015, or 2014 calendar years, and reported their gross sales during the entire year

• 2016, 2015, and 2014 average, median, high, and low adjusted gross sales from the Corporate Retail Solutions Program for the top-performing 10%, bottom-performing 10%, and all traditional UPS Store Centers in the United States and Puerto Rico that were in operation during the entire 2016, 2015, or 2014 calendar years, and reported their gross sales during the entire year

Section I – Background Information

15 Things You Need to Know About The UPS Store Franchise

Celebrates 5,000th Retail Location Milestone

1.  In mid-September, The UPS Store announced that it had just opened it 5,000th store. The company has experienced strong growth over the past few years, adding over 100 stores per year to its system.

2.  One of the keys to its success is its ongoing evolution to better meet the needs of small business owners. As the number of small businesses has grown, The UPS Store retail locations have added a range of services that benefit small business owners, such as printing, notary services, shredding, mailbox and locker rental, and even inventory management solutions at some locations.

3.  Chris Adkins, vice president of franchise development for The UPS Store, said, “The UPS Store network is made up of dedicated individuals and families who are committed to serving small business owners, customers and their communities. Each of our franchisees has played a critical role in our growth and the development of our products and services. We look forward to welcoming more franchisees into our network as we continue to challenge ourselves to find new ways we can bring convenience and value to our customers.”

4.  Earlier in 2017, The UPS Store launched a new Print on Demand service that rolled out to 19 markets across the U.S. This service enables customers – including business travelers as well as small businesses – to enter a print job online, have it printed at a local store, and delivered to them within the same day once the project is completed.

5.  Some franchised locations also offer 3D printing for prototypes or unique items. The UPS Store is the first nationwide retailer to offer 3D printing services.

6.  In addition to updating the services it offers, The UPS Store has been experimenting with ways to better serve customers with more convenient locations. The brand has introduced alternative formats such as a store-in-store model, featuring small-footprint stores inside existing high-traffic retailers, such as pharmacies, hardware, and grocery stores. Another recent offering is “The Main Street Model,” which offers franchisees reduced fees for opening a location in rural or underserved communities.

Launched New Campaign to Help Small Businesses Close More Sales

7.  In early October, The UPS Store unveiled a new campaign aimed at helping businesses close more sales on Small Business Saturday (the Saturday after Thanksgiving). The campaign featured online videos of a helpful and informative salesperson named “Mr. Closer,” who provided tips and sales strategies to help business owners become more successful.

8.  The company also gave small businesses the opportunity to order Closer Kit print materials, which provide a range of affordable, customizable print materials that are specifically designed to help “on-the-fence” shoppers to make a purchase.

9.  According to Karen Kelly, director of advertising for The UPS Store, “Small Business Saturday is an important time for small businesses of all types, and it presents new opportunities to gain customers on that day and beyond. Most small businesses compete with unique products and exceptional service, but it’s hard to provide a personalized experience to every customer when your store is jam-packed. The UPS Store is delivering tools and tips to help business owners close this gap – and close more sales – on this important day and throughout the holiday season.”

10.  Closer Kit options start at $9.99 and include the following:

• Pass-Along Card: Specialized business cards that incorporate reminder notes or special offers for shoppers to share with a friend.
• Product Brochure: Allows businesses to quickly and effectively share features and benefits.
• Merchandise Rack Card: Provides shoppers with relevant information, even when an employee isn’t immediately available.
• The Come Back Card: Reminder cards that encourage customers to return by a certain date.

Launched Annual Fundraising Campaign for the Toys for Tots Literacy Program

11.  At the start of November, The UPS Store kicked off its annual fundraising campaign that benefits the Toys for Tots Literacy Program. All U.S. locations participated in the fundraising efforts until January 1, 2018; online donations were accepted at The UPS Store website. 100 percent of the money donated to The UPS Store during the campaign goes directly to the Marines Toys for Tots Foundation. The foundation then uses the money to buy books for less fortunate children in local communities across the country.

12.  Since the program launched in 2008, The UPS Store has raised over $4 million and Toys for Tots has distributed more than 39.4 million books. Tim Davis, president of The UPS Store, said, “There is no better investment than education and literacy for this nation’s future. We are proud to be able to give back to our communities through this program. Every child should have access to the opportunity and wonder of reading, no matter their situation or circumstance.”

Company History

13.  The UPS Store started out as Mail Boxes Etc., which was founded in 1980 by Gerald Aul, Pat Senn, and Robert Diaz in Carlsbad, California. Mail Boxes Etc. was an alternative to the post office and eventually grew to become the world’s largest franchisor of retail shipping, postal, and business service centers.

14.  In 2001, it was acquired by United Parcel Service (UPS) and two years later, over 3,000 Mail Boxes Etc. locations were re-branded as The UPS Store. Mail Boxes Etc., Inc. continued to open hundreds of new The UPS Store locations over the next decade before changing its name to The UPS Store, Inc. Today, there are over 5,000 The UPS Store locations in the United States and Canada.

Entrepreneur’s Franchise 500

15.  The UPS Store has appeared on Entrepreneur’s annual Franchise 500 list every year for the past 10 years. The company’s highest rank was No. 4 in 2017 and 2018, while its lowest rank was No. 46 in 2011.

Section II – Estimated Costs

• Please click here for detailed estimates of The UPS Store franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on The UPS Store’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

Part 1 – The UPS Store’s Financial Performance Representations (Average and Median Adjusted Gross Sales of All Centers, Top 10% and Bottom 10% of Centers)

This historical financial performance representation contains:

1.  the actual, average, annual adjusted gross sales and the actual, median, annual adjusted gross sales during each of the 2016, 2015, and 2014 full calendar years of all The UPS Store Centers in the United States and Puerto Rico that:

• (i) operated at “Traditional” sites;

• (i) were in operation during the entire 2016, 2015, or 2014 calendar years, and reported their gross sales during the entire year;

• (iii) were in operation as of January 1 of the 2016, 2015, or 2014 calendar years, and then operated until at least sometime in December of that calendar year, and reported their gross sales for the entire timeframe during which they operated; and

• (iv) opened sometime during January of the 2016, 2015, or 2014 calendar years, and then operated until at least sometime in December of that calendar year, and reported their gross sales for the entire timeframe during which they operated.

2.  as a component of that system-wide adjusted gross sales information, the actual, average, annual adjusted gross sales and the actual, median, annual adjusted gross sales during each of the 2016, 2015, and 2014 full calendar years of the top-performing and bottom-performing (in terms of adjusted gross sales) 10% of the franchised The UPS Store Centers in the United States and Puerto Rico that:

• (i) operated at “Traditional” sites;

• (ii) were in operation during the entire 2016, 2015, or 2014 calendar years, and reported their gross sales during the entire year;

• (iii) were in operation as of January 1 of the 2016, 2015, or 2014 calendar years, and then operated until at least sometime in December of that calendar year, and reported their gross sales for the entire timeframe during which they operated; and

• (iv) opened sometime during January of the 2016, 2015, or 2014 calendar years, and then operated until at least sometime in December of that calendar year, and reported their gross sales for the entire timeframe during which they operated.

3.  A UPS Store Center’s adjusted gross sales in a particular year are included in the calculation of the system-wide average adjusted gross sales during the 2016, 2015, or 2014 calendar years (subject to the qualifiers above) even if:

• (i) that Center’s ownership changed during the calendar year; or

• (ii) the Center did not operate during one or both of the other calendar years represented in this historical financial performance representation.

4.  The UPS Store Centers whose annual average adjusted gross sales and annual median adjusted gross sales are included in the calculation reported below are located only at “Traditional” sites.

• Traditional sites are highly visible locations in strip shopping centers or high foot-traffic downtown areas in urban, suburban, and rural markets.

• The UPS Store offers franchises for Centers at Non-Traditional sites under its Non-Traditional FDD. The characteristics of Non-Traditional sites vary significantly. The UPS Store included in this financial performance representation the results of only Traditional The UPS Store Centers because the Traditional site model is the only Center model it offers under this disclosure document.

5.  The UPS Store has not independently audited the financial information reported by franchisees.

Definition of Terms

1.  “Adjusted Gross Sales” are defined as a franchisee’s total gross sales (not including sales taxes collected from customers), plus “gross commissions earned” less certain permitted “exclusions.”

2.  “Gross Sales” is the total of all revenue derived from products and/or services sold by or through a Center during the franchise term, whether evidenced by cash, services, credit, property, barter, electronic funds transfer, or other means of exchange, and whether or not the products and/or services are sold in any other Center. “Gross Sales” includes UPS shipping costs that a franchisee receives from its customers.

3.  “Gross Commissions” is the total amount of all commissions actually earned by a franchisee during the franchise term on account of those transactions occurring at the Center in which the franchisee acts as agent for certain vendors or service providers specified in the Manuals, for example, UPS Drop-Off Program compensation.

4.  Examples of permitted “exclusions” are Counter Manifest System Processing Fees and deposits toward products to be sold or services to be rendered.

Year 2016