Buying and Owning a UPS Store Franchise – My Experience
Several years ago, my wife and I owned an online sporting goods business. We shipped a lot of products, which meant we spent a lot of money on shipping. As any online retail knows, shipping costs continually are on the rise, and people don’t like to pay those costs, especially since Amazon has trained the general public to expect free shipping on almost everything.
At the end of one month, as we were reviewing expenses and trying to figure out how to cut costs, we decided to pursue becoming owners of a UPS Store franchise. We had heard that UPS Store owners get significant discounts (essentially wholesale prices) on shipping, so we figured that having a UPS Store would help us improve our overall margins on our sporting goods business. We decided to jump into the process of learning how to become UPS Store franchisees.
Below I will describe the details of what we experienced.
In summary, based on what I learned and observed going through the process, I do not recommend purchasing a UPS Store franchise unless there are particular reasons you have that make owning a UPS Store more attractive than the scenario I will discuss here.
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How Franchising Works
Starting a franchise business has both pros and cons associated with it. The major advantage of owning a business that’s part of a franchise network is that you get to take advantage of a proven system that usually has been tried repeatedly and has succeeded. Some well established franchises, like McDonald’s, are almost guaranteed to succeed. Becoming an owner of that type of franchise is usually only available to people who have already been very successful at running businesses.
There are advantages and disadvantages that exist to different extents depending upon the franchise organization and the industry being served. To give you more context for my experience vetting the UPS Store, here is a quick review of pros and cons of franchise ownership.
Pros of Franchise Ownership
Franchise businesses take advantage of a core set of business functions offered by the franchisor. These often include brand awareness and a potential already existing customer base that is familiar with the product offering, general marketing and demand generation, training and implementation of core business functions and technology systems, and professional, experienced guidance on situations you may not know how to handle well without help from the franchising organization.
Cons of Franchise Ownership
Franchises usually have more up front cost than starting your own independent business. Plus there are ongoing royalties that have to be paid to the franchisor. In the case of the UPS Store the royalties (comprised of both the standard 8.5% fee and another 2.5% for ad royalties) add up to 11% of your revenue.
Franchisors can severely limit an entrepreneur’s creativity and ability to find ways to grow the business. There are often strict requirements about which suppliers must be used, how a store or business should look, and policies governing other aspects of the business that restrict a franchise owner and can make it difficult to succed. I will explain some of the issues I found with the UPS Store as we did our research and interviewed several UPS Store franchise owners.
Franchise Ratings Don’t Tell the Whole Story
One of the reasons we were so excited about opening a UPS Store was how much the idea was touted on websites like Entrpreneur.com and other franchise media outlets. In fact, even years after we decided that owning a UPS Store was not in our best interest (for specific reasons I’ll explain below), I found Entrepreneur.com ranked it #4 on its franchise 500 list.
Because of these franchise ratings, which most often reflect simply how many new locations are being opened and other data that show success for the franchisor (not necessarily the various franchisees), there are lots of upstart entrepreneurs with little experience who jump at the chance to have their own retail location, complete with a bit, highly recognizable glowing signage, but who fail to give a hard look at the actual numbers.
The excitement we had at seeing the UPS Store promoted as such a great opportunity by a trusted, “independent” source for entrepreneurs (Entrepreneur.com) quickly gave way to a much more grounded reality as we dug into details about how the stores work and how much the owners actually make.
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Buying an Existing Store Versus Opening a New Territory
As I went through the required screening interviews with the UPS Store franchise development representative, I learned about startup costs and the process, which seemed pretty straight forward. I was told that in our area (about 15 minutes south of Provo, Utah), we could expect our startup costs to be just over $200,000.
I wondered whether there might be a store in our area that might be for sale, one that I could possibly get a good deal on from someone retiring or moving, or who had some other circumstance that would make it so that their selling their franchise to us would allow us to have a good head start and reduce our risk.
I was able to find one for sale, but I was surprised to find that the asking price for the existing business (several years old) was much lower than the cost of starting a new one. My business sense made me think, “Shouldn’t a business be increasing in value, not decreasing?”
My wife and I scheduled a meeting with the couple who owned the store. We went to dinner to talk about some of the details we needed to know as part of our due diligence in potentially purchasing their business. During our meeting, my wife and I (a young couple with a two young kids at the time) described our family goals and our business aspirations in light of our interest in buying their business, and we tried as best we could to hide our excitement about the possibility of owning our own retail shipping location.
I was surprised at the response. Instead of being salesy at all, the couple came across unequivocally with a demeanor that said, “You don’t want this!” After the meeting I discussed with my wife how it seemed like they were trying to tell us to spare ourselves from the mistake they’d made.
I found out why when I looked at the financials they sent over the next day.
Owning a Chance to Make $60k Per Year?
Although it’s been more than a decade since that meeting and since we were able to look at the details of revenue, costs, and other aspects of the business, I don’t want to give too much detail that might compromise these unfortunate business owners. Nor am I unaware of the possibility that the store could have been managed under new ownership in a way that would have made it much more profitable.
However, I will say this. In this and many other situations I’ve seen with people attempting to purchase franchises, there is too often a lack of looking at the situation objectively along with not comparing it to alternatives.
In too many cases, people make the mistake of purchasing for hundreds of thousands of dollars a business that maxes out at an income of less than $100,000 per year. There are lots of different ways to calculate ROI that would tell you that’s not a good idea. If you have the skills required to run a UPS Store business, you should also be qualified to fulfill a job that makes at least $60k annually and should likely be able to find something closer to six digits. Those jobs usually don’t come with nearly the amount of stress and extra hours as owning a UPS Store franchise.
Investing lots of money into a business that doesn’t have high earning potential (more than $100,000 per year) is simply a poor decision financially.
When I looked through the financial statements of this couple and realized what they’d endured during the time they were running their store, I was heartbroken for them. I was also grateful that they didn’t seem interested in transferring their misfortune to me by misrepresenting the opportunity.
This situation is not unique. According to data reported on Balance SMB, it is estimated that 60% of UPS Store franchises do not break even. That’s not a great track record.
Interviews with UPS Store Franchise Owners
For anyone who is considering purchasing any kind of franchise, I highly recommend interviewing current or former franchise owners. The franchisor will often have a list of hand-picked franchise owners they want you to talk to. You can learn a lot from those, but I also recommend finding others to talk to, ones who are not poster children for the franchise.
In my case, I called both the existing UPS Store franchise owners. One of them tried his best to be loyal to the UPS Store while still being objective about what I’d be facing as a new franchise owner. He told me about the extent of control that UPS corporate has over
A policy had recently been put into effect that UPS Store locations could not have a visible clock in their stores. This franchisee was not happy about the policy, but had to comply to avoid penalties from the franchise auditor.
Regulations about signage, where to buy supplies, and other restrictions made him feel like he couldn’t lower his costs or find creative ways to increase his margins.
Likely the most egregious issue for me was this directive from those who provided revenue support to him. He told me that they’d recently encouraged him to use this strategy for growing (or at least not shrinking) his business, “You need to find ways to make money outside of shipping!”
The recommendations included promoting other services like copying and faxing, greeting cards, and other add-on sales items. However, in keeping with the strict franchising policy he was also severely limited in what he could offer in his store.
No candy bars.
No essential oils.
Nothing that would detract from the UPS Store brand.
Start an online business instead…as a teacher.
UPS Store Owner Forums – What Other Franchisees Said
I had already made up my mind, deciding not to, after my interviews with existing franchise owners and my meeting with the couple whose store we had been interested in purchasing. However, to be thorough, my wife and I decided to check out reviews from other UPS Store franchise owners online. What we found was disappointing and in many other cases, heartbreaking. Surely there are people who succeed with UPS Stores, especially those who are already good at retail and who can naturally handle the restrictions while having the acument required to maximize revenue. However, we found too many stories from people who had invested their life savings or who made similar sacrifices for the privilege of owning UPS Stores, who lamented that they didn’t do more due diligence beforehand.
One of the most notorious of the complaints that I found was a lack of support from the UPS corporate, no synergy, and commonly the opposite.
Many of the store owners told about how they made great efforts to attract local clientele to come to their store, people who would pay retail shipping prices on a repeat basis. They would later find that UPS had contacted these customers and set up shipping accounts directly with them, which meant that instead of making decent margins each time they came in to ship a few packages, their revenue potential was reduced to something around $1 for handling each package and passing it on to UPS for shipping.
This habit by UPS was seen (rightly so) as cannibalization of the franchisee, their own local customers being poached in an effort to increase the profits of the franchisor. I have to agree with their assessment.
Some Resources for Researching UPS Store Franchising
I hope this description of my vetting experience has been helpful for you, whether you’re investigating getting your own UPS Store franchise or you know someone else who is. It may very well be that you can be successful, and that the model works for you, but it’s important to know what you’re up against before you make the money and time investment.
You might also be interested in a few of the resources I used to do research on UPS Store franchising, including an article from Balance SMB that evaluates pros and cons of a UPS Store franchise, an Amazon seller forum thread where the question is asked about whether buying a UPS Store to get discounted shipping rates (the same reasoning I used) is recommended, and a video review posted in 2018 by Franchise City, UPS Store owner reviews on Glassdoor.com, and a post about how much UPS Store franchises make on UnhappyFranchisee.com. The comments made in the discussion section of the Unhappy Franchisee post are very telling, as there are several franchise owners who vent the details of their respective situations.
If you are a UPS Store franchise owner or have something you want to share about the topic, feel free to comment here or contact me with your opinion.
If you are still determined to get into business by opening a UPS Store franchise, PLEASE make sure you do all the requisite due diligence first.
Thank you very much for this info. I have been looking into getting a UPS Franchise for about three years. The one located around the corner isn’t for sale. I just got a call yesterday from consultant that said he had a store owner that was ready to sell. I am planning to meet with him in the next couple of weeks. After reading your article I will definitely be much more prepared.
Hey Keith, How did your meeting with UPS owner go? Did the financials satisfy you? What sort of things did you check with the owner?
How Do Your Meeting Go?…Did You buy It?
We did not buy the store. In fact, the owners (who were probably 10 years or so older than my wife and I) seemed to feel pity on us and appeared to lose interest in selling it to us, apparently out of a sense of not wanting us to endure what they had endured.
I’d like to echo what Keith said. Thank you.
Very informative, thanks.
Excellent write up. I only discovered this post because I was curious about how well UPS Store owners do. We have one in our town that is always busy, but that doesn’t always equal profits. What I don’t understand is why someone wouldn’t just open an independent shipping business and set up volume accounts with UPS, FedEx, DHL, etc… You would be able to maintain your own database of customers and pit each common carrier against each other to get better pricing. I built a logistics company serving cloud companies such as Amazon and Microsoft and received discounts of up to 70% off shipping with each carrier. After 20+ years, I sold the business to a multi-billion distributor for a good sum. Maybe I’m missing something, but anyone could do this on their own, spend some money on advertising, and not be locked into one carrier and franchise rules.
Tim, could I visit with you more about your experiences? I currently manage a storage unit and have been looking for ways to increase sales outside of storage, due to small town.
I would love to get more information, Tim! I am an entrepreneur at heart but haven’t met the right person to help guide me. If you’re interested in being a mentor, please reach out! I would sincerely appreciate it and probably send you a compliment every day for the rest of your life. Let’s do this!
Great response, and congrats on the sale of your business.
I wanted to ask, what kind of logistics company you had? Is it the same as the independent shipping store you wrote about it above or a different type?
Tim, would you be able to give me more information about your start up? I’m looking to do exactly what you said but I don’t know where to start.
You’d be insane to start a UPS Store now or buy a store that doesn’t gross AT LEAST 500k not relying solely only on shipping. You will now have to be open 7 days a week, so prepare to pay for an employee or work Sunday yourself. Lastly, an upgrade to a new style is on the way, cost is going to be a lot, not disclosed yet.
Blue Horizon new floor plan is 150K
this new floor plan is expensive!!
thank you for bringing that up!
There is a store in my location that I’ve seen up for sale. It is listed for 650k, they say gross is 818k, and cash flow is 242k. Could these numbers make sense?
It doesn’t make sense. From what I know, operating income is 15% of total revenue.
what i heard is that is for semi absentee owner, which means if you work there and manage the store yourself there will be roughly a salary of 75k. which can have a potential of 200k income. of course that would not be a correct way of figuring the price of the business. it should be more like 120×4=480
This is a very thorough and accurate outline of what you would face as a UPS Store franchisee. I can vouch for the reports of UPS literally poaching frequent shippers away from UPS stores and incentivizing them to start an account directly with UPS, bypassing the locally owned franchise. Frequent customers have literally shown me the letters they received. To test it, we even started a fake small business name and shipped a bunch of packages from it, lo and behold, a few weeks later we got the letter from UPS. (They weren’t savvy enough to realize they were sending the letter to our UPS Store address lol). UPS stores use a shipping program called iShip, which is owned by UPS. UPS uses the data collected in this program to contact those frequent shippers to steal them from the small business person representing their name. These are the kinds of practices we are up against, along with everything else outlined above.
One thing I don’t see much of is the turnover rate of employees at UPS Stores, the time and extra money spent on training these, sometimes constant flow of new employees.
I had the opportunity to purchase the UPS Store that I had been managing for several years, however over the last couple years seeing as how the `The UPS Store Inc.’ and UPS had been making deal after deal with the likes of Amazon and others that continues to take more and more money out of the owners pocket, along with other factors, decided I would rather not.
Regarding the deal with Amazon; and the way it affects owners and employees, especially in what may be an already very busy store, it’s not good.
The store revenue can go down by thousands a month, an owner ends up paying their employees to essentially work for Amazon with the new Amazon/UPS returns program.
the store employees can get unbelievably stressed in a busy store with the constant bombardment of what is mostly “free” Amazon returns which they have to adhere to policy and package these items up.
There’s the extra time and work that the store owner is paying for (losing money), and the employee is forced to do while also trying to maintain the line in order to get the customers in and out.
Since this program started I’ve lost at least two workers specifically to the the stress this put on them, plus the amount of pay you can afford them to put up with it.
And now here comes the time and money spent on training new employees to take their place.
I could go on, however the bottom line is that unless you plan on owning several stores, it’s not worth it.
Unless of course you’re retired and just looking for something to do.
What was the annual revenue for mailbox rental? And did the mailboxes receive mostly paper mail or packages, or both?
Thank you in advance!
Thanks very much for the information. I am just starting my due diligence on buying a UPS Store franchise.
Hi Gene… did you end up purchasing the franchise? If so, how’s it going?
on Cons of Franchise Ownership, you indicated 8.5% Royalty plus 2.5% ad making it a total of 11%. What is your source of this information? Or how did you end up with this %?
Great article. Thanks for saving me the headache I was thinking about opening one.
Thank You for taking the time to write this. You saved a lot of people a lot of money, including ME!
Some scary facts that jump out in this article:
1) 60% of franchises make no money
2) How little a UPS franchise grosses/yr
2) UPS literally poaching frequent shippers away from UPS stores owners
3) The choke hold UPS has on its store owners killing opportunities to increase profits
4) MOST Importantly: How unhappy the owners were that you interviewed.
** I guess you have to be a UPS driver to make any money with UPS!
Only way you could make money is if you have lot of mailbox customers who will bring pure 100% income every months.
I bought the UPS store in 2019 and sold it a year after. Don’t buy the UPS store. You will regret it.
We are in small town TX. What state/city was your store? Would you be willing to have a chat to provide relevant details? Please respond, if you can, even if you don’t want to talk with us. Thank you.
What area did you buy ? I’m looking in buying in San Diego county.
What was the annual revenue for mailbox rental? And did the mailboxes receive mostly paper mail or packages, or both?
Thank you in advance!
I am looking to open UPS store ? what was the cons you had ?
owner for 15 months and I think I made a huge mistake for my son and mines future
What were the revenues of the store you purchased?
How much did the revenues decline after your purchase?
How much cash flow did they tell you it produced?
How much did it really produce?
Before finding and reading your words, I did a little research into fedex. They offer an incentive, I doubt it’s enough to do much in the way of an income, and because they also have rules as you described in regards to UPS, the two are using a, pretty much, identical marketing method. Great for their pockets but not the individual business owners. Boycott…but then, who would do the shipping. The trucking industry is not cheap even when you own a fleet of trucks.
Supplies, trucker and worker wages, insurances, taxes, lots of things UPS and fedex face day in and day out. Not always cheap. Oh, and fuel, fuel surcharges, cards with fees, possibly paying fob fees as well as over state lines fees, the list is long for them I am sure. Then, franchises and leaving it up to those businesses’ owners to price above the actual shippers costs. I am definitely not defending any company here but taking into account many factors influencing such companies and their charges. Stinks but then, they are in business to make money and who isn’t. Without the greenbacks, businesses sink. I don’t like how they are drawing the unsuspecting in but eventually, with usps offering shipping for flat, and I prefer them over the others because there is less of a pocket gouge going on in comparison, usps could be leader of the pack. Better service, more sure on pricing, no secrets there, they’ve got their stuff together. Well, ‘nough said. Appreciate hearing the truth and you have to have a lot if dough or drown in debt for ups, fedex and others like ’em.
Please do research before you invest in a UPS store. My father decided to invest and open up a UPS store in a low income town. That was the worst mistake he had ever done to the family. My mom was severely stressed and later passed away. I tried to take over until the contract was over but many stress and headache came with it. I ended up in the emergency room due to it. The store was eventually terminated by UPS when my father eventually tried to sell it for a profit. I hate the UPS store and UPS with a every fiber of being due to my experience. I can’t visit a UPS store or ship UPS with having deep trauma of it. It is better to save money and time and do something else. Also, when owning a UPS store, your biggest enemy is UPS itself. UPS store is a slave job fraud of franchise. Never again. Don’t do it to yourself. Invest in something else that is marketable!
The Ups Store Brand is not good fit in low income area to brake even you need 350k in revenue unfortunately you had to suffer that sorry to hear that
All good information, thank you.
Im looking at purchasing an existing store, which the current owner has had for 9 years. With sales at about $350K last two years, projected to $425K for 2021. Located in a rural area, the closest other UPS Store is about 20 min away in the more downtown area, it supposedly has annual sales of $495K.
The current Store location would is on the outskirts of a growing area, high seasonal tourist demand, population about 12,200.
Lots of valid concerns in this post, Are there ANY positive benefits to owning a UPS store?
I need to bring home as an owner-operator around #110K annually. Is that possible?
$350k would be tough to make it forget the 110k
Thank you for sharing your experience. Very insightful.
What was the annual revenue for mailbox rental? And did the mailboxes receive mostly paper mail or packages, or both?
Thank you in advance!
ALL I CAN SAY TO YOU IS THANK YOU FOR THIS ARTILCE. REMAIN BLESSED
Great intel here. Much appreciated. I just started to explore the opportunity and and received all the franchisee info. My concern like most is ROI. Is there any way to determine market opportunity based on demographics and number of households/residents located within the area?
I don’t know that UPS provides that kind of information about opening one of their stores. Since your income from owning a UPS Store would mostly come from external sources outside of shipping, I think you’d be best served by communicating with the local chamber of commerce to figure out what services and products you’d need to provide in a UPS Store to make it worth persuing.
My overall take on it is this: Don’t get involved with them.
Excellent write-up. Saved me a lot of time to make a critical decision.
Thank you so much for sharing!
what i heard is that it is for semi absentee owner. which means if you work there and manage the store yourself there will be roughly a salary of 75k. which can have a potential of 200k income. of course that would not be a correct way of figuring the price of the business. it should be more like 120×4=480
does anyone know how much UPS pays to franchisees, the store owners for shipping a package? for example if you are taking in a package and charging the customer $100 to ship it, how much of that is the stores share and of course will the royalty be calculated based on the $100 or based on the stores share ?
For those who are thinking of owning UPS Store in 2022, to summarize: Don’t.
Corporate has been changing the rules many times and in your terms and agreement, you must abide by their on-demand changing rules. And if you think getting a deferral is easy, it is not. Those who you talk to on the phone may sound nice but they don’t really do anything to your own business benefit.
On the new contract, YOU MUST open on Sundays where many stores are simply losing money. Having a worker even minimum wage will drive the store to the red marks. If you have a non-traditional store, you still can’t get away from it.
2. Vendors rising their prices while you cannot
Corporate relationship between many vendors such as ATT, Cox, etc you will be getting around $1-2 after all of the boxes you have to purchase with price increases, the man hour you spent on creating them, etc.
All of those logoed boxes from vendors has risen 20-35% within 1 year time.
What concerns me the most is the communication between franchisor and franchisee where there is almost none. When you talk to the UPS rep (any of them) realize that they’re on the corporate side, not yours.
They will force their way by using their attorneys to bend to their will and these contract between you and them, which can change however they want and you have literally no say about it as a franchisee or “partner”
And the changing world right now, even a more flexible way in communication is needed and corporate rather stand behind their attorneys and their contract and not listening to the franchisee.
Never have I ever feel I was a partner. Many good words thrown around from the corporate office but those are just PR words.
Wow.Thank you for being forthright and honest here. I was very excited i must say about owning a UPS store. I can only imagine it being worth the time, expense and hard work to take on an existing store making over a million a year (100k for the owner likely less now because of expenses) and nothing less especially the expense of a start up or taking on an existing store making 350k a year (35k for the owner.) Thats a disgrace especially how UPS the franchisor steals high business profit customers from the franchisee. Thats so wrong. Thanks to all writing here i will not be pursuing UPS store ownership unless things changed drastically with UPS the fanchisor. Gods speed to everyone, Jeff
Thanks so much for the detailed realistic information here. I know now to go in asking for a existing location with a minimum average of 700k yearly for 5 years minimum expecting 70k in that scenario and if it doesnt exist where i am located look into something else!
My wife and I recently sole our UPS Store after being an owner for 20 years. When we started out the franchisor was interested in helping you grow, but that has changed. We went from owning 1 store to 2, then sold one and finally the second on last month. The UPS Store is a subsidiary of UPS, which is both good and bad. When we started we have a local UPS representative, now a 1-800 #. As mentioned above, if you want a decent salary, buy an existing store with over 700k in sales, but it will cost more, we were fortunate to have gown our to over 1m in sales. We sold hours for many reasons.
1. You are now required to be open 7 days
2. Technology has become problem. We once had a solid /reliable computer system that rarely went down. Now, at least once a month and over the last 2 years it has gone down on the busiest shipping day during Christmas, and they continually raise our tech fees.
3. The have developed and expensive/costly store design that all existing stores are required to go too. This would be added to you purchase price of an existing sore unless you can get the sellers to help pay for it.
4. Vendor prices are higher than what you can get on the open market your self, patricianly because the franchise get a cost, they don’t want you to know that.
5. The franchisor is more interested is the inspection process of their quarterly visits than helping you grow revenue. It is high praise to find and documents compliance problems then you help you grow and expand your business.
6. Our area franchisee retired so we ended up with a new person that is in line with the above compliance inspection. Our previous area franchisee was more interested in helping us grow while also keeping store compliant.
We miss the people and customers, but we got out when we did, 3 years ago I could recommend, not now.
Thank you for this article and thank you to everyone else who weighed in with their experiences. This franchise is a bad deal any way you slice it unless you have cheap rent in the middle of a commerce hub. And even then, not good.
The way I see it is, I would pay for startup, bear all of the financial risk, for a franchisor’s “brand”. I will then pay this entity, who becomes my competition, and who also dictates the financial capabilities of my business and limits my profitability. It’s no wonder the majority of stores don’t break even. It’s a bad model. And all that for what? The chance to maybe earn half of my state’s median income? I can beat that just doing warehouse work 5 days/week. Hard pass.
Glad I started digging around before wasting time reading through their contracts and disclosures let alone investing the money.
Thanks again to everyone here.