FDD Talk 2019: Annex Brands (PostalAnnex+, Pak Mail, AIM Mail, Etc.) Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Annex Brands franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Annex Brands franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Annex Brands franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Annex Brands outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Annex Brands’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• fiscal year 2018 average, median, highest, and lowest gross sales for the upper 50%, lower 50%, and all 533 franchised Annex Brands centers (PostalAnnex/PostalAnnex+, Pak Mail, AIM Mail, Parcel Plus, Handle with Care Packaging Store, Sunshine Pack & Ship, and Annex Copy) that had been in operation for 12 months or more as of September 30, 2018 and that had represented the principal operating activity at their business locations

• fiscal year 2018 gross sales for the 1 company-owned Annex Brands center (Pak Mail) that had been in operation for 12 months or more as of September 30, 2018

Section I – Background Information

13 Things You Need to Know About Annex Brands Franchises

Announces Several C-Level Promotions

1.  In mid-October 2018, Annex Brands, Inc. announced several promotions in the C-Suite and other ranks. All of the company’s officers have been awarded the designation of Certified Franchise Executive (CFE) from the International Franchise Association for their knowledge, experience, and participation in furthering the franchising industry.

2.  The promotions were as follows:

• Patrick Edd, CFE was promoted to chief executive officer, retaining the title of company president. Edd has been part of the leadership team since 1991, starting as director of finance and administration.

• Steve Goble, CFE was promoted to executive vice president and chief brand officer. Goble started with Annex Brands in 2000 as a PostalAnnex+ franchisee before moving over to the Home Office in 2006 to lead the company’s marketing department.

• Ryan Heine, CFE was promoted to senior vice president of franchising. Heine started with the company in 2002 in franchise sales and development.

• TanaSue Carpenter, CFE was named executive director of finance, an addition to her current title of controller for the company. Carpenter started with the company in 2012 as director of accounting.

• Dan Cox, CFE was promoted to executive director of franchise services. Cox began his career with Annex Brands in 2000 as a PostalAnnex+ franchisee before moving over to the Home Office in 2005 as franchise services coordinator.

• Chris Kimball, CFE has been named executive director of real estate and leasing. Kimball has been with Annex Brands since 2005, starting as franchise placement specialist.

• Jeri Beery was promoted to director of franchise services. Beery joined the company in 2016 with the acquisition of Pak Mail and has worked with the brand since 1996, first as an accounting clerk then moving over to the operations department in 1997.

New PostalAnnex+ Locations

3.  As Annex Brands, Inc.’s largest brand, PostalAnnex+ continues to open several new locations each year. So far in 2019, PostalAnnex+ has opened a few new stores in Carson City, Nevada; Concord, North Carolina; and Roseville, California. Each of these PostalAnnex+ locations offers customized packaging and shipping services, along with private mailbox rental, notary public service, and copy services. Shipping is available via UPS, FedEx, USPS, and DHL, as well as freight companies.

4.  The PostalAnnex+ in Carson City was opened in late June by members of the Musgrove family, including husband-and-wife James and Cindy Musgrove and daughter Katelyn Musgrove. Originally from San Diego, the family has visited the Eastern Sierra mountain regions on vacation for many years and Carson City had been a favorite getaway. They recently bought a home near Carson City and will relocate to operate the new PostalAnnex+ with a family atmosphere, they said.

5.  James Musgrove, who previously worked for Coca-Cola for 29 years, added, “As a family-run shop, we are committed to offer superior customer service. We also will focus on supporting the local community, including youth sports leagues and nonprofits that support military families. After dealing with the fast-paced Southern California lifestyle, we are looking forward to enjoying working and living in a smaller town.”

6.  PostalAnnex+ Concord also opened at the end of June at the Cannon Crossroads shopping center. Operating the new PostalAnnex+ will be owner Hemal Patel, who has lived in North Carolina the past 11 years. Patel has management experience with the Staples chain and also spent the past 10 years operating a convenience store. A family member who operates a PostalAnnex+ store in Texas encouraged Patel to make the investment in the home office services franchise.

7.  The PostalAnnex+ in Roseville opened its doors at the beginning of June and is owned and operated by husband-and-wife team Taysir and Hiam Tayeh. The couple, who have lived in Roseville for the past 30 years, previously operated a convenience and liquor store at Darling Way and Clinton Ave. in Roseville.

Company History

8.  Annex Brands began in 1985 when Jack Lentz founded PostalAnnex+ near San Diego, California. Lentz saw a need that no other mail and parcel center at the time was fulfilling – offering a complete line of small office and home-based office services under one roof. Within the first year, Lentz opened three stores and started franchising the PostalAnnex+ concept in 1986.

9.  Over the next few decades, PostalAnnex+ grew to a couple hundred locations. Then in 2006, the company saw an opportunity to continue growing through acquisition. That September, PostalAnnex+ acquired the Florida-based Sunshine Pack & Ship retail and commercial shipping center franchise. The Sunshine acquisition provided new opportunities with the shipping of large, fragile, and valuable items through its logistics and van line operations.

10.  Exactly one year later, PostalAnnex+ added another brand, Handle with Care Packaging Store. These locations strengthened the company’s vertical reach into the shipping and transportation business through its commercial logistics operations, including creating packing solutions via custom-built corrugated cartons or wooden crates.

11.  As a result of growing a couple of brands beyond the flagship brand PostalAnnex+, the company renamed itself Annex Brands, Inc. in late 2007. Annex Brands spent the next few years growing its three brands and in 2011 acquired two additional brands: Navis Pack & Ship and AIM Mail Center. In 2012, Annex Brands established the Annex Copy Center as a full-service copy and print center.

12.  A few years later, in 2014, Annex Brands grew once again with the acquisition of Parcel Plus, which had 28 locations at the time. Most recently, in April 2016, Annex Brands acquired Pak Mail Centers of America, Inc., franchisor of over 370 Pak Mail locations in the U.S., Mexico, and Japan.

Entrepreneur’s Franchise 500

13.  Only a few of the brands under the Annex Brands, Inc. umbrella have ranked on Entrepreneur’s 2019 Franchise 500 list – PostalAnnex+ ranked No. 181 while Pak Mail ranked No. 349.

Section II – Estimated Costs

• Please click here for detailed estimates of Annex Brands franchise costs, based on Item 7 of the company’s 2019 FDD.

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

• Please click here for detailed information on Annex Brands’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

PostalAnnex/PostalAnnex+ (Franchised)

2016

• Outlets at the Start of the Year:  262
• Outlets at the End of the Year:  265
• Net Change:  +3

2017

• Outlets at the Start of the Year:  265
• Outlets at the End of the Year:  272
• Net Change:  +7

2018

• Outlets at the Start of the Year:  272
• Outlets at the End of the Year:  276
• Net Change:  +4

Pak Mail (Franchised)

2016

• Outlets at the Start of the Year:  216
• Outlets at the End of the Year:  213
• Net Change:  -3

2017

• Outlets at the Start of the Year:  213
• Outlets at the End of the Year:  214
• Net Change:  +1

2018

• Outlets at the Start of the Year:  214
• Outlets at the End of the Year:  205
• Net Change:  -9

AIM Mail (Franchised)

2016

• Outlets at the Start of the Year:  49
• Outlets at the End of the Year:  49
• Net Change:  0

2017

• Outlets at the Start of the Year:  49
• Outlets at the End of the Year:  48
• Net Change:  -1

2018

• Outlets at the Start of the Year:  48
• Outlets at the End of the Year:  48
• Net Change:  0

Parcel Plus (Franchised)

2016

• Outlets at the Start of the Year:  24
• Outlets at the End of the Year:  24
• Net Change:  0

2017

• Outlets at the Start of the Year:  24
• Outlets at the End of the Year:  24
• Net Change:  0

2018

• Outlets at the Start of the Year:  24
• Outlets at the End of the Year:  22
• Net Change:  -2

Handle with Care Packaging Store (Franchised)

2016

• Outlets at the Start of the Year:   17
• Outlets at the End of the Year:  15
• Net Change:  -2

2017

• Outlets at the Start of the Year:  15
• Outlets at the End of the Year:  14
• Net Change:  -1

2018

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  13
• Net Change:  -1

Sunshine Pack & Ship (Franchised)

2016

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2017

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2018

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

Annex Copy (Franchised)

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

Company-Owned (Pak Mail Only)

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2018

• Outlets at the Start of the Year:   1
• Outlets at the End of the Year:  1
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

Annual Gross Sales for the Fiscal Year Ended September 30, 2018 of PostalAnnex/PostalAnnex+, Pak Mail, AIM Mail, Parcel Plus, Handle with Care Packaging Store, Sunshine Pack & Ship, and Annex Copy Centers in Operation for 12 Months or More as of September 30, 2018

• “Gross Sales” include all revenue for products and services sold to customers, including products and services with higher margins such as shipping services (including ground, next day, freight, and custom packaging), faxes, copies and metered postage, and products and services with lower margins such as postage stamps, but exclude:

• (i) sales, use, or service taxes collected and paid to appropriate taxing authorities;
• (ii) customer refunds and adjustments;
• (iii) the cost of electronic funds transfers for resale;
• (iv) the cost of money orders for resale;
• (v) utility funds collected;
• (vi) the cost of lottery tickets for resale and phone cards for resale;
• (vii) the cost of 3rd party truck rental sales;
• (viii) the cost of eBay sales;
• (ix) the cost of metered postage and postage stamps for resale; and
• (x) the cost of ancillary fees paid to the appropriate government agencies to process fingerprinting, LiveScan, and passports.

• Annex Brands franchisees pay royalty fees and marketing fees based on Gross Receipts (defined in Item 6), which are calculated by excluding the cost of metered postage and postage stamps from Gross Sales.

• Both Gross Sales and Gross Receipts include fees and commissions generated from electronic funds transfers, money order sales, utility collections, lottery ticket sales, phone card sales, 3rd party truck rental sales, fingerprinting, LiveScan, passport services, and eBay sales.

• Annex Brands reserves the right periodically, in its sole discretion, to add additional exclusions to the list above as new programs, products, or services are established, or as changes to existing programs, products, or services are established, as specified in the Manuals or otherwise in writing.

• The mix of postal, printing and copying, packaging and shipping, and business support services offered to the public by each individual center varies at the discretion of each franchisee.

• The Gross Sales attainable by a franchisee are largely dependent on the type and quality of service offered to the public, and individual sales and marketing efforts.

• An “average” is calculated by adding the numerical values of all data points in a set, and dividing by the number of data points in the set.

• A “median” is the numerical value of the data point in the middle of all data points in a set. If a set contains an even number of data points, the median is calculated by identifying the 2 data points in the middle of the set, adding their numerical values, and dividing by 2.

• As of September 30, 2018, 276 PostalAnnex/PostalAnnex+ centers, 205 Pak Mail centers, 48 AIM Mail centers, 22 Parcel Plus centers, 13 Handle with Care Packaging Store centers, 3 Sunshine Pack & Ship centers, and 1 Annex Copy center were in operation, for a total of 568 franchised centers and 1 company-owned Pak Mail center.

• The averages, ranges, and medians below are based on the actual Gross Sales, for the fiscal year ended September 30, 2018, of the 533 franchised centers that had been in operation for 12 months or more as of September 30, 2018 (17 franchised centers were excluded for this reason), and that had represented the principal operating activity at their business locations (18 express centers were excluded for this reason).

• The 1 company-owned Pak Mail center’s Gross Sales are not included in the averages, ranges, or medians for the franchised centers, but are shown separately in the chart below.

All Franchised