FDD Talk 2021: The UPS Store 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 UPS Store franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for The UPS Store franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for The UPS Store franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned The UPS Store outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of The UPS Store’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020, 2019, and 2018 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 that were in operation during the entire 2020, 2019, or 2018 calendar years, and reported their gross sales during the entire year

• 2020, 2019, and 2018 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 that were in operation during the entire 2020, 2019, or 2018 calendar years, and reported their gross sales during the entire year

Section I – Background Information

17 Things You Need to Know About The UPS Store Franchise

Announces Leadership Changes

1.  At the beginning of June 2021, The UPS Store announced the retirement of President Jim Davis. Michelle Van Slyke, who has served as the senior vice president of marketing and sales for more than 10 years, will become the interim president.

2.  Throughout her tenure, Van Slyke has led the brand’s repositioning to better serve small business owners and was behind the recent major transformation of The UPS Store retail environment, which positions stores to better serve the needs of ecommerce businesses well into the future. The development of the new store design included the most consumer insight and franchisee input of any The UPS Store design utilized over the last 40 years.

3.  Van Slyke said, “I had the incredible fortune to lead with Tim Davis and understand his strategy and vision for The UPS Store. You can expect that we will continue to move forward our technology, operations, customer experience initiatives and innovation aggressively and without pause.”

4.  Joining the company in 2002, Davis assumed varying leadership roles, including vice president of technology and vice president of operations, before becoming the president in 2012. Under his leadership, The UPS Store network averaged a notably strong same-store sales growth rate.

5.  Davis said, “Michelle has a deep understanding of the complexities of The UPS Store model. The strength of our business and our franchise system have been unmatched even throughout this past year of uncertainty and change. I’m confident that The UPS Store network will continue to see great success with Michelle at the helm.”

6.  No stranger to small business herself, Van Slyke began working at her parents’ gas station and mini mart at a young age. She quickly discovered her love of business, which led her to pursue a career that included leadership roles for Ford Motor Company, including customer service, product development, strategy, sales, marketing, and advertising. She served as a vice president for Jaguar North America, Mercedes-Benz USA, and Hyundai Motor America. She also held senior leadership positions at Jacuzzi Group Worldwide and Raley’s Supermarkets.

7.  Van Slyke has a bachelor’s degree from the University of Southern California and an MBA from the University of Notre Dame. She has also completed executive education programs at Duke Fuqua School of Business and Emory Goizueta Business School.

Enhances Commitment to Diversity Ownership Program

8.  In late June 2021, The UPS Store announced an expansion of its Diversity Ownership Program. Formerly called the Minority Incentive Program, the program initially launched in 2020 to equip underserved groups with resources to become a retail owner of The UPS Store franchise. It offers an affordable path to business ownership by offering an approximate 50% discount off the franchise fee to eligible first-time Black, Asian, Hispanic, and Native American buyers. LGBTQ+ franchise applicants became eligible for the discount starting this past August.

9.  According to Michelle Van Slyke, interim president of The UPS Store, Inc., “Our retail network of more than 5,000 stores are owned and operated by individuals who know and love their local communities. We must be deliberate in our efforts and actions to ensure that all groups, especially those who have been historically underrepresented, have the opportunity to thrive as entrepreneurs who serve the communities they call home.”

10.  According to a 2018 study from the IFA Foundation, 31 percent of franchised businesses are minority-owned, compared to 19 percent of non-franchised businesses. As part of The UPS Store’s commitment to foster diversity in business ownership, first-time buyers of a new The UPS Store franchise who self-identify as belonging to a racial or ethnic minority group and/or the LGBTQ+ community would be eligible to receive $15,000 off the franchise fee, provided that they commit to developing their location under the company’s new store design. The company offers educational resources and expertise to build on helping retail owners make their stores sustainable and successful.

Raises Largest Annual Donation with $2 Million for Childhood Literacy

11.  In mid-April 2021, The UPS Store announced that in 2020, the company exceeded expectations raising the largest annual donation for the program to date, totaling nearly $2 million dollars. These donations will allow The UPS Store, Inc. to provide approximately 800,000 books to children who need them most.

12.  Tim Davis, then-president of The UPS Store, Inc., said, “The pandemic has presented new barriers between children and the foundational life skill of literacy, hitting economically disadvantaged families the hardest. The Toys for Tots Literacy Program is one impactful way we continue to support the communities we operate in, especially during challenging times. Our network of franchisees and customers are proud to help foster a love of books and learning through our continued commitment to this in-store donation program.”

13.  The Toys for Tots Literacy Program, developed by The UPS Store, Inc. and the Marine Toys for Tots Foundation in 2008, aims to offer our nation’s most economically disadvantaged children the ability to compete academically and succeed in life. The program provides direct access to resources that will enhance children’s reading and communication skills. The Toys for Tots Literacy Program works with various agencies to identify local schools and organizations that will benefit from books purchased through the program’s donations.

14.  Lieutenant General Jim Laster, USMC (ret.), president and CEO of Marine Toys for Tots Foundation, said, “We are incredibly thankful for all of the support this program has garnered over the years. The UPS Store continues to make it possible to support children nationwide in their literacy journey, especially amid the pandemic and for years to come.”

15.  In addition to national distribution, The UPS Store, Inc. will hold donation days to distribute 50,000 free books across both Atlanta, GA and San Diego, CA as part of its mission to provide underserved children with access to literacy materials. Both events will give out 12 different book titles for children ages 1 through 12 and will be open to the public with all books free to those who can attend.

16.  The UPS Store, Inc. will adhere to all safety protocols while distributing books to people in cars and to people that prefer to walk up. A coupon for 15% off packaging services at The UPS Store will also be included with each book.

17.  In support of the Toys for Tots Literacy Program, The UPS Store locations have collected nearly $7.3 million dollars and donated more than 44 million books to kids in need over the past 13 years. The effort not only brings the joy of reading to children, but also serves as an important tool in breaking the cycle of poverty with the gift of a book.

Company History

18.  The UPS Store was originally founded as Mail Boxes Etc. in 1980 by Gerald Aul, Pat Senn, and Robert Diaz in Carlsbad, California. Mail Boxes Etc. was founded as an alternative to the U.S. Post Office and provides comparable services, such as shipping, logistics, printing, marketing, and design to business and private customers. Over the next few decades, Mail Boxes Etc. expanded around the world.

19.  In 2001, Mail Boxes Etc. in the United States was acquired by UPS. Following the acquisition, U.S. Mail Boxes Etc. stores were converted into The UPS Store. Mail Boxes Etc. still operates as its own entity internationally.

20.  After becoming The UPS Store, the company has spent the last few decades growing around North America. Today, The UPS Store is the world’s largest franchisor of retail shipping, postal, printing, and business service centers and there are locations across the U.S., Canada, and Puerto Rico.

Entrepreneur’s Franchise 500

21.  The UPS Store ranked No. 3 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of The UPS Store franchise costs, based on Item 7 of the company’s 2021 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  4,669
• Outlets at the End of the Year:  4,773
• Net Change:  +104

2019

• Outlets at the Start of the Year:  4,773
• Outlets at the End of the Year:  4,866
• Net Change:  +93

2020

• Outlets at the Start of the Year:  4,866
• Outlets at the End of the Year:  4,958
• Net Change:  +92

Company-Owned

2018

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

2019

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

2020

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

Section V – Financial Performance Representations (Item 19, 2021 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 2020, 2019, and 2018 full calendar years of all The UPS Store Centers in the United States that:

• (i) operated at “Traditional” sites;

• (i) were in operation during the entire 2020, 2019, or 2018 calendar years, and reported their gross sales during the entire year;

• (iii) were in operation as of January 1 of the 2020, 2019, or 2018 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 2020, 2019, or 2018 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 2020, 2019, and 2018 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 that:

• (i) operated at “Traditional” sites;

• (ii) were in operation during the entire 2020, 2019, or 2018 calendar years, and reported their gross sales during the entire year;

• (iii) were in operation as of January 1 of the 2020, 2019, or 2018 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 2020, 2019, or 2018 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 2020, 2019, or 2018 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 2020

• Total Number of Centers:  4,642
• Average Adjusted Gross Sales (“AGS”) for All Centers:  $607,750
• Median AGS for All Centers:  $579,101
• Average AGS for Top 10% of Centers:  $1,044,417
• Average AGS for Bottom 10% of Centers:  $299,467
• Highest AGS for Top 10% of Centers:  $3,741,902
• Lowest AGS for Top 10% of Centers:  $885,126
• Median AGS for Top 10% of Centers:  $995,081
• Highest AGS for Bottom 10% of Centers:  $365,191
• Lowest AGS for Bottom 10% of Centers:  $293,129
• Median AGS for Bottom 10% of Centers:  $311,057

Year 2019

• Total Number of Centers:  4,561
• Average Adjusted Gross Sales (“AGS”) for All Centers:  $521,316
• Median AGS for All Centers:  $494,759
• Average AGS for Top 10% of Centers:  $916,057
• Average AGS for Bottom 10% of Centers:  $252,427
• Highest AGS for Top 10% of Centers:  $1,629,204
• Lowest AGS for Top 10% of Centers:  $770,189
• Median AGS for Top 10% of Centers:  $875,020
• Highest AGS for Bottom 10% of Centers:  $304,394
• Lowest AGS for Bottom 10% of Centers:  $215,671
• Median AGS for Bottom 10% of Centers:  $264,252

Year 2018

• Total Number of Centers:  4,473
• Average Adjusted Gross Sales (“AGS”) for All Centers:  $494,418
• Median AGS for All Centers:  $468,498
• Average AGS for Top 10% of Centers:  $876,809
• Average AGS for Bottom 10% of Centers:  $239,092
• Highest AGS for Top 10% of Centers:  $1,615,715
• Lowest AGS for Top 10% of Centers:  $737,341
• Median AGS for Top 10% of Centers:  $836,522
• Highest AGS for Bottom 10% of Centers:  $291,072
• Lowest AGS for Bottom 10% of Centers:  $65,662
• Median AGS for Bottom 10% of Centers:  $246,070

Part 2 – Corporate Retail Solutions Program Component of Centers’ Adjusted Gross Sales

• Franchised Centers must participate in all services and programs The UPS Store makes available to every client in the Corporate Retail Solutions (“CRS”) Program and follow all CRS Program workflows and instructions, which may differ among individual clients.

• The CRS Program component of a Center’s adjusted gross sales includes transactions for distinctive (1) products, services, and business term processes and (2) discount card programs.

• The historical financial performance representation below contains the system-wide actual, average, annual adjusted gross sales and the actual, median, annual adjusted gross sales derived from the CRS Program by the traditional The UPS Store Centers whose performance is described above during each of the 2020, 2019, and 2018 full calendar years, as well as by the top-performing and bottom-performing 10% of those Traditional The UPS Store Centers during the same timeframe.

• Adjusted gross sales from the CRS Program are encompassed in these Traditional UPS Store Centers’ total annual adjusted gross sales.

• The franchisor has not independently audited this information.

Year 2020

• Total Number of Centers:  4,642
• Average Adjusted Gross Sales (“AGS”) from CRS Program:  $47,334
• Median AGS for All Centers:  $35,559
• Average AGS for Top 10% of Centers:  $144,317
• Average AGS for Bottom 10% of Centers:  $10,333
• Highest AGS for Top 10% of Centers:  $678,113
• Lowest AGS for Top 10% of Centers:  $89,384
• Median AGS for Top 10% of Centers:  $121,884
• Highest AGS for Bottom 10% of Centers:  $14,661
• Lowest AGS for Bottom 10% of Centers:  $220
• Median AGS for Bottom 10% of Centers:  $11,016

Year 2019

• Total Number of Centers:  4,561
• Average Adjusted Gross Sales (“AGS”) from CRS Program:  $47,035
• Median AGS for All Centers:  $35,921
• Average AGS for Top 10% of Centers:  $140,404
• Average AGS for Bottom 10% of Centers:  $9,404
• Highest AGS for Top 10% of Centers:  $442,565
• Lowest AGS for Top 10% of Centers:  $90,062
• Median AGS for Top 10% of Centers:  $122,068
• Highest AGS for Bottom 10% of Centers:  $13,508
• Lowest AGS for Bottom 10% of Centers:  $1,156
• Median AGS for Bottom 10% of Centers:  $9,881

Year 2018

• Total Number of Centers:  4,473
• Average Adjusted Gross Sales (“AGS”) from CRS Program:  $43,963
• Median AGS for All Centers:  $32,345
• Average AGS for Top 10% of Centers:  $138,079
• Average AGS for Bottom 10% of Centers:  $6,909
• Highest AGS for Top 10% of Centers:  $408,825
• Lowest AGS for Top 10% of Centers:  $87,869
• Median AGS for Top 10% of Centers:  $120,544
• Highest AGS for Bottom 10% of Centers:  $10,632
• Lowest AGS for Bottom 10% of Centers:  $7
• Median AGS for Bottom 10% of Centers:  $7,309

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