Running a UPS store means being part of one of the biggest delivery services in the US, but it’s also a valuable case study in how a franchise might not be what you think.
An Overview of The UPS Store
UPS stores are best known for shipping, but it’s always worth looking deeper to understand what a franchise is really about.
When shipping via UPS, aside from shipping through the stores, customers can also print labels online or sign up for a UPS account, then use the store to drop off packages. UPS store owners earn very little from these drop-off customers, so while they provide foot traffic, they’re not the main source of revenue.
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When I owned a UPS Store, I learned firsthand how much your ZIP code shapes your outcome. I sold my store at a premium because my territory was in a high-value area. The best areas go first, and once they're gone, they're gone. Enter your ZIP code, and a territory specialist will walk you through the franchises still available near you, drawing on information that isn't publicly accessible — saving you months of wasted research.Stores have reinvented themselves into broader communications hubs, providing services such as mailboxes and packaging. Printing, ID photos, notary services, office supplies, and even design work mean that some UPS stores are business centers as much as shipping points.
Mailboxes are an underestimated profit center. Customers tend to stay with a mailbox for a long time, so once established they provide reliable revenue, but getting them signed up takes time. The key is to find a location with demand for mailbox services, preferably without established competition. After a couple of years to build up, a successful mailbox business can end up paying fixed costs like rent and wages.
The UPS brand makes its stores popular with investors. It’s therefore particularly important to look at the surrounding territory and make sure you won’t be competing with a new store close enough to cut into your sales.
There’s also an element of reinvention built into the business process at UPS. Every decade or so, the brand goes through a redesign, based on factors such as market research and franchisee feedback. Existing franchisees have to pay for the upgrades when their franchise next comes up for renewal. This can be costly, so franchisees need to plan ahead for that cost, but it’s usually accompanied by a bump in sales. These regular revamps help to keep the brand up-to-date, providing flexibility that proved vital in 2020, helping UPS stores adapt effectively to the pandemic.
The UPS Store in Context – the State of the Industry
Postal centers have seen a fundamental transformation over recent decades, as described in our coverage of this industry. The fall in letter post has taken a large chunk of business, while other courier services have taken much of the work provided by online shopping. The postal industry saw a small recovery at the start of the 2020s, but the trend is still down.
To survive, mailing centers have transformed into business centers. The focus is on serving small and medium businesses that can’t provide services such as design and delivery in house. Two-thirds of revenues for these businesses now come from copying and reproduction. UPS’s brand has kept it more focused on shipping, but it’s still part of this shift.
The number of businesses in the US is growing, up to an expected 8.3 million in 2024, which should be beneficial for business centers and mail stores. Growth either side of the pandemic left the industry 5.5% ahead of where it was in 2018, but there’s been a slight decline since 2021.
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The Finances of a UPS Store Franchise
UPS estimates that the initial costs to set up one of its locations are $209,195 to $495,945. This is reduced to $168,560 to $442,986 under the company’s rural program. These initial costs include a $29,950 initial franchise fee, $7,500 initial marketing plan fee, $3,000 design fee, $7,000 center development fee, and $7,000 to $8,500 initial training fees. Initial franchise, marketing, and training fees are reduced for the rural program.
Aside from this, the largest outlay is on leasehold improvements, which can cost anywhere between $64,480 and $249,283, or $55,013 to $239,816 under the rural program.
Ongoing fees are based on “subject to royalty” earnings (STR) – all gross sales and gross commissions, less certain exclusions.
The main ongoing fees are:
- Royalties: 5% of STR
- The UPS Store Marketing Fee: 1% of STR
- National Advertising Fee: 2.5% of STR
Regular refreshes of the UPS brand and systems mean that you’ll have to revamp your store every decade or so, and it’s important to also factor in funds to cover these costs.
"If I were considering buying a franchise today, checking territory availability would be one of my first steps — yet most buyers leave it until last." — Ambrosio, Franchise Chatter
🎯Find Best-Fit Franchises Still Available in Your Target Area (Free Tool)
When I owned a UPS Store, I learned firsthand how much your ZIP code shapes your outcome. I sold my store at a premium because my territory was in a high-value area. The best areas go first, and once they're gone, they're gone. Enter your ZIP code, and a territory specialist will walk you through the franchises still available near you, drawing on information that isn't publicly accessible — saving you months of wasted research.The average gross sales for a UPS store, based on data from 4,827 locations, was $721,274 in 2023.
Recent Developments at The UPS Store
The high profile of the UPS brand means that stores are affected by events in the delivery business.
In line with trends discussed above, UPS has seen an ongoing fall in deliveries. The company recently picked up a contract to deal with USPS air cargo, but unless this leads to packages passing through stores on their way to end users, it’s unlikely to counter this decline.
A pile-up of packages at a store in Chicago, which was apparently caused by a dispute with a former franchisee, didn’t do the company’s reputation any good, but is unlikely to have a lasting impact. At the end of the day, people will use the mail store near them.
The real challenge for UPS franchisees isn’t the UPS brand, which is one of the strongest in the sector. The problem is the industry. Potential franchisees should consider whether they can make a living off mailboxes and office services, not just shipping. The great age of postal businesses is behind us, and like similar franchises, UPS stores have to change with the times.
"Multi-unit ownership is where the real wealth in franchising is built — and it starts with one key decision: choosing a brand with enough territory runway to grow into." — Ambrosio, Franchise Chatter
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