Top 5 Reasons Why Not to Buy the UPS Store Franchise

Over the years, the number of customers shipping products through services like UPS has increased dramatically. Unfortunately, this increase has not resulted in delivery revenue for the company. As the business has grown, franchisees have seen their bottom lines decline; many are now losing money. The main reasons include high franchise fees and substantial reliance on franchise stores for deliveries rather than its fleet of drivers. Their lack of support to their franchise stores, poaching practices, and heavy competition make this brand a poor choice for a franchise.

Hey, I’m Dan Rowe. At Fransmart, we help entrepreneurs become franchisees by providing world-class support at every step of the process. We’ve been in your shoes before — we’re experts on everything from finding a great franchise to financing to opening day. If you have any questions about buying a franchise, leave a message here, and we’ll get back to you as soon as possible!

Recently, UPS has had to make several operations changes to stay competitive. These changes included dropping rates, cutting overnight deliveries, and closing many franchise stores. While these cost-cutting measures may seem like a good business strategy, in reality, they are only short-term solutions that place the brand at an even more significant disadvantage with its competitors.

With a UPS Store franchise business, you’re not going to get rich very quickly. Because of the level of expertise and capital investment needed to run a franchise, you’ll have a hard time breaking even with a lot of hard work and help from your local community.

We can’t speak on behalf of any brand, but we think the QSR industry might be more cost-effective and lucrative than the shipping and packaging industry. We recommend you compare the top 11 fast-casual restaurant franchise chains with companies providing shipping franchises and see what the figures say about their investment ROI. The investment for fast food and QSR franchise is much less than that of a Packaging Franchise. Furthermore, the entry barriers in these industries are lesser than in the Packaging Franchise industry.

Ups Business: Pack And Ship Overview

The UPS Store is a well-known name in the packaging services industry. The company is involved in much more than just packaging and shipping. UPS Stores also handle printing business cards, flyers, letterhead, posters, and other general services like notaries. 

With locations all over the world, The UPS(United Parcel Service’s) reach is unparalleled. More than just packages, the company also handles printing business cards, posters, flyers, letterhead, and general services like notaries. This breadth of service allows anyone to order anything, anywhere. At present, UPS handles both U.S. domestic packages and international packages. It works in over 220 countries across the world and has more than 4,600 franchise-owned locations.

In a world of the fittest, United Parcel Service has remained a strong player in its industry. With competitors such as the United States Postal Service and FedEx, UPS has risen above the competition with excellent customer service and an impressive track record of on-time deliveries. They hold a market cap of $91.3 billion, and they’re known for their quick response times and guaranteed delivery dates.

UPS Store Franchise Investment Information

How much Investment required to Buy UPS Store Franchise

• Initial Investment: $167,825 – $353,580
• Net Worth Requirement: $150,000
• Liquid Cash Requirement: $60,000 – $100,000
• Initial Franchise Fee: $29,950
• Ongoing Royalty Fee: 8.5%
• Ad Royalty Fee: 2.5%

Is Buying the UPS Franchise Profitable?

One of the reasons UPS is a popular franchise is that it is touted well on the websites and media channels. Entrepreneur.com ranked it #4 on its franchise 500 lists. But these ratings are usually derived by the number of new locations added in the company and the company’s total market value. What they do not show is how much an individual location is earning through the franchise.

While the amount of money you can earn as a franchise owner depends on various factors, there are some general benchmarks stated in FDD item 19 for every business. But are these realistic income projections? How much do franchise owners make? 

The video below will show you how to calculate your return on investment (ROI) in 10 years for any franchise investment. It will also show you how much money you can expect as a business owner before taxes.

We have calculated the point of break-even for the UPS store Franchise owner for you. 

The UPS Store requires a $359,500 investment and a projected $35,333 monthly income to break even (including taxes and fees). Because of the high operating cost of a store, 60% of UPS Stores don’t turn a profit until they hit over $30,000 in monthly sales. With so many challenges, the UPS Store’s potential franchise buyers urgently require professional financial investment advice.

UPS is a very well-known brand, but a big name does not necessarily mean success and wealth for its franchisees. Well, It would be best if you still did your due diligence research or trusted us to find out whether to buy the UPS Franchise. We have researched UPS, its competitors, and franchisee feedback, their complaint forums to determine how profitable it could be for you. 

 #1 For Ups, Shopping Online Brings Big Problems:

E-commerce is one of the biggest factors driving the market growth of packaging and courier companies today. But because of the pervasiveness of free shipping, fierce competition in the market, and the conglomerate giant Amazon driving down the shipping cost, UPS’s average income from each parcel delivery is reducing.

Even though sales volume has been increasing, the net profit is not good for the franchises.

#2 Investment Is Not Yielding Returns:

Investing money into a franchise that cannot give decent ROI is simply a poor business decision. UPS charges fat starting fees along with other royalties ( standard 8.5% fee and another 2.5% for ad royalties), which can add up to 11% of your total revenue. Then there are multiple hidden charges as well. Most of their franchises have not been able to break even because meeting day-to-day expenditure itself has become an arduous task for them.

#3 Strict Regulations on Doing Business:

UPS has stringent regulations about how a franchise can do business. They had this policy of no clock being at their store, which a customer could see. Non-compliance with these rules results in heavy penalties. 

They also restrict the franchisees in doing business in ways through which they can cut their cost and increase profitability.

#4 Lack of Support From the Company: 

Many existing franchisees have accused UPS of “cannibalization,” which means poaching franchisees’ customers to get in direct contract with the franchisor to increase their revenue. This has resulted in low or no payments for the franchisees even when they entertain the business.

#5 UPS Store has Heavy Competition 

When it comes to the packing and shipping industry, UPS is not the most prominent name among all. The U.S. market has many existing, reliable, and cheap partners for retail packing, shipping, freight, postal, printing, and business services, with convenient locations and world-class service. The other market leaders giving tough competition to UPS are the United States Postal Service and FedEx.

Buying Franchise For Quick Start 

Franchising, like any other business opportunity, has no guarantee of making a profit. Franchise buyers become hugely successful and expand, or they close down their business in a few years. Success is an outcome of making the right business decisions which includes choosing the right franchise.

How Franchising System Works

The biggest advantage of owning a franchise network is that you take advantage of a proven successful system. Some of the most popular franchises, like McDonald’s, Dunkin Donuts, Krispy Kreme, Cold Stone Creamery, Jersey Mikes, Subway, are almost always known to succeed. But to be able to take their franchise and run it smoothly, one needs hands-on experience in the same business.

Here is a short review of the pros and cons of the franchise business:

Pros of Franchise Business:

Franchise businesses take advantage of a business setup offered by the franchisor. They benefit from brand awareness and an existing customer base who are familiar with the product offering. Franchise owners usually have set systems for marketing and demand generation, training and operations and technology systems, and experienced guidance on problems faced. 

Cons of Franchise Ownership

Franchises cost more than starting your own independent business. Also, there are ongoing royalties that have to be paid to the franchisor. Franchisors also limit an entrepreneur’s ability to grow their business. There are usually strict requirements and policies regarding other aspects that restrict a franchise owner and make it difficult for them to succeed. 

Conclusion:

The biggest threat which the existing courier companies are facing is from Amazon. Companies like UPS have been losing their market share every year since 2016. 

In recent times many other factors have also negatively affected the business of UPS. The growing business through E-commerce pushes reduced margin for courier companies and the companies high fees from franchisees.

With so much going against the UPS, it is not the best of ideas to invest a huge amount of money into their franchise.

Sources:

https://splashanddashfranchise.com/payoffs-owning-ups-store-franchise/

https://prosperopedia.com/buying-owning-ups-store-franchise-review/

https://www.latimes.com/archives/la-xpm-1990-08-28-fi-92-story.html

https://www.nytimes.com/2012/09/20/business/media/ups-bills-stores-as-small-business-solution.html