UPS Franchise Cost
February 6, 2023
Many people and entrepreneurs are looking for opportunities to become business owners, especially today, as countries are slowly easing out of the pandemic.
Some have shown a keen interest in opening and running a UPS United Parcel Service) franchise. If you are one of those individuals who are interested in a logistics business, then this article is for you.
As someone looking for investment opportunities in UPS, you may have questions like how to start a UPS franchise, where to begin, the pros and cons of this business, and if there are requirements. Also, how much money does this kind of franchise make?
This article offers information on how to start a UPS franchise and the benefits and drawbacks of investing in a UPS store franchise.
This article also gives ideas on how much funds you will need to start this business. Additionally, this article shows the profitability of this kind of business.
UPS and USPS (United States Postal Service) work hand-in-hand in delivering your packages throughout the United States. USPS handles the last leg of your package’s journey from the sender to you.
Do you need a post office address anywhere in the United States? You can visit FindPostOffice.org and access a comprehensive database of post offices in the country.
How Much Does It Cost to Open a UPS Store Franchise?
Depending on the location, you can calculate the cost of opening a UPS store franchise.
The startup franchise cost is also based on the type of UPS center you plan to open, the size of the store, and its location.
Aside from the location, you must factor in other expenses like marketing costs, training fees, computer installations, start-up supplies, printing equipment, and delivery methods.
Estimated Initial Investment
A franchise starts with an initial investment or start-up cost. You, as a franchisee, must have the starting capital for this investment.
Here is an estimated calculation of the initial franchise fee if you plan to invest in a UPS store franchise.
Note: Traditional and rural prices are subject to change.
- Traditional locations: $240,959 to $508,472
- Rural locations: $206,423 to $459,136
Note: Store-in-store location cost does not include an exterior entrance model.
- Store-in-Store locations: $80,357 to $216,148
Ongoing Costs of Owning a UPS Store
When entering a UPS franchising business, the expenses continue after the initial UPS store franchise cost.
There are ongoing costs that you should be aware of so that you would not be surprised by the added expenses.
- Marketing Fees: This fee is collected to fund PR (public relations), marketing activities, research, development, testing, and financing pilot programs to promote sales, products, and services that can add to your revenue.
- Hardware costs: Included in the franchise agreement is the purchase of POS (point of sale) system hardware, back office machines, UPS Store business station, and PIN pad devices.
Added to the hardware costs are gadgets and devices needed to serve customers on their delivery requests. When getting a UPS store franchise, you can head to the UPS website for a complete list of hardware you need to buy.
- Website expenses: A responsive website is essential for your franchise business. UPS provides each store with its website for advertisement and promotion in its area.
Average Sales or Revenue per Year
UPS is a successful worldwide shipping company earning billions of dollars yearly. In 2020, the company made $84.62 billion. During the pandemic, UPS revenue shot up by 14.2%.
UPS recorded a 26% growth during the fourth quarter (Q4) of 2020 across Asia and Europe. The company has many sources of income, one of which comes from the supply chain and freight deliveries.
By the fourth quarter of 2021, the gross sales of UPS were $97.3 billion. The company’s annual sales show how massive UPS is and how it goes head-to-head with other logistics companies like FedEx and USPS.
Is Owning a UPS Store Profitable?
A UPS Store can be profitable, especially if you have the know-how and commitment to make the business work.
This franchise is an attractive opportunity for entrepreneurs as it caters to thousands of package and mail deliveries daily.
When you, as a franchisee, have a keen sense of management, marketing skills, and a good location, a UPS store franchise has the potential to succeed.
How Much Does a UPS Store Make in Profit?
In 2020, UPS’s profit amounted to $1.4 billion. At face value, that number is significant, but it hid the fact that the company was declining due to the pandemic.
But when 2021 came, domestic revenues increased by 22.3%, all thanks to small and medium businesses that relied heavily on delivery companies. Now, UPS has bounced back from the decline during the onset of the pandemic.
In 2021, UPS earned a gross revenue of $97.3 billion. After deducting expenses, operational costs, maintenance, and taxes, the company’s net profit reached $12.89 billion.
This figure shows how lucrative the logistics business services are today, as the pandemic changed how people transact.
How Much Do UPS Store Owners Make on Average?
A UPS Store owner can earn up to more than $50,000 annually.
The franchise owner is tasked to advertise and promote the local store to people nearby.
The average earnings for this business can vary from time to time, especially according to the volume of orders the store processes daily.
How Do UPS Franchises Make Money?
UPS franchises make money from the packages, print services, and deliveries it provides to people in your area.
There is no specific data on how much store owners make, but reports show that for every drop-off package, the store earns $1.00.
Aside from this, the amount of money earned depends on the location and the volume of daily transactions a store franchise processes.
What Are the Financial Requirements for UPS Store Franchisees?
When you plan to open a UPS franchise, you will need liquid assets amounting to $75,000, which is the financial requirement for a franchise.
This requirement can be a combination of cash, bonds, mutual funds, retirement accounts, and stocks.
How Do You Franchise a UPS Store?
There is a four-step process for franchise approval. You must accomplish these steps to start a USP store franchise in your area.
- Step 1: This is the inquiry stage. You will get an invitation for a webinar and to complete an application.
- Step 2: This is the application stage. You will undergo your first interview and complete a franchise disclosure document.
Then you will go through validation and due diligence. The franchisor will request you submit your financials and undergo an executive interview.
- Step 3: This is the funding stage. You will send a letter of intent and have it signed, pay the initial application fee, and receive an approval letter.
- Step 4: This is the booking stage. You will secure financing, get your site approved and lease signed, complete a training program, and have your franchise agreement signed.
The UPS Store Franchise Location Formats Offered
UPS store franchise locations have different formats that fit the area where they are set up. These UPS business service centers will have different designs and services.
For traditional locations: The format is a standard, standalone print, packaging, and UPS business service franchise.
For rural locations: The franchise format allows for UPS Store development and operation growth.
Rural areas, especially smaller communities, may need access to delivery services, which makes a UPS store franchise a good opportunity.
For store-in-store locations: This format considers the premises of other businesses like hotels and convention centers. A store-in-store franchise may also fit small businesses like hardware stores and pharmacies. Business owners with customers needing delivery services would be a good fit for applying for a UPS franchise.
The UPS Store Franchise System Size and Composition
In 2018, there was an estimated 5,071 units in the UPS franchise system.
There are 4,729 franchises in the United States, while 351 are in international markets. These store locations contribute to sales of approximately $2.3 billion.
These numbers have grown considerably through the years, and in 2022, the number of franchise stores in the United States alone rose to 5,400.
Why Are Franchise Fees Lower for Rural Locations?
UPS Store centers in rural areas tend to cost less because running a store in areas with a smaller population is cheaper than in large cities.
However, it does not mean that rural locations have lesser opportunities. Instead, rural areas present an opportunity to expand, have less competition, and have the potential to build strong ties with the local community.
Rural locations also tend to have cheaper rental fees, utilities, and other necessities, contributing to lesser operating costs than franchises in traditional locations.
What Are Store-in-Store Locations?
A store-in-store location is a freestanding UPS franchise set inside another business.
The concept was first launched in the 1980s when UPS stores were placed inside hotels and convention centers. In 2016, UPS updated the concept to fit smaller businesses and stores.
How Do the Franchise Fees for a UPS Store Compare to Other Brands?
Compared to other brands, the UPS Store has a competitive franchise price model backed by a world-class support system.
UPS continues to be one of the best-valued franchise brands in the market.
What Financing Options Does the UPS Store Offer to Help With Franchise Costs?
If you plan to start a UPS franchise, the company provides several financing options that can help you start your journey.
These financial options include franchise business financing for non-traditional locations and veterans.
About The UPS Store Franchise: UPS Store Franchise Facts
Starting a franchise of any business is complex. There must be more than just the capital to enter a franchise business.
When starting a business like a UPS store franchise, you should do the following:
- Research your target franchise (in this case, UPS)
- Evaluate opportunities, especially where you will put up your UPS franchise
- Calculate and evaluate the cost of running the franchise
- Have a business strategy before you pay
With these guidelines, you can now look into UPS Stores and see if this business is for you.
UPS is one of the biggest shipping services in the world. Owning a franchise of this delivery service will mean ensuring that people’s mailpieces and packages are shipped to their intended destinations quickly and safely.
Who Is It for?
Investing in a UPS franchise is for you if you are comfortable with the following scenarios:
- You want to invest in a business franchise with a well-recognized and famous brand
- You want to work with multiple employees and enjoy a high-traffic business
- You want to manage many customers, points of service, and other businesses
What Would You Do as a Franchisee?
A franchisee is an individual or company that bears financial risk when investing in a franchise. Along with this responsibility are other tasks you should do to be a UPS franchisee:
- Oversee a business-oriented store
- Hire employees for different positions in different package delivery services like printing, packaging, and delivery
- Maintain the favorable profile of UPS and promote the brand to people
Once you have decided to invest in a UPS franchise, you will get financing options from the company. But before you think about finances, you should ask yourself if UPS is the right choice for you.
How Is UPS Store Franchise Positioned in the Industry?
UPS, FedEx, and USPS are three shipping companies that handle almost 95% of all eCommerce deliveries in the United States.
This company is a massive logistics industry, which a franchisee must understand when getting into this business.
Aside from this, other statistics about UPS and its position in the U.S. logistics industry are available, including:
- The UPS Store brand has the largest airlines and fleet that use alternative fuel
- UPS caters to 1.7 million shipping customers, and 11.8 million delivery customers
- UPS delivered approximately 6.4 billion packages in 2021
- The company’s total revenue or gross sales for 2021 was $97.3 billion
The UPS Store Main Street Model
Another UPS Store design is the main street model. This format provides an attractive yet affordable franchise opportunity with low-cost options for entrepreneurs seeking business opportunities in rural areas.
The main street model will also have the same access to advertising, promotional and corporate resources from UPS.
What Do I Get When I Invest in the UPS Store?
There are benefits when you invest in a UPS franchise business model. You will get the following perks from the company:
- Access to ongoing support
- A new franchise with a well-recognized brand
- A store with a well-established reputation
- A chance to be part of a company featured in the Franchise 500 list of 2022
Advantages of a UPS Store Franchise
To explain further the advantages of investing in a UPS store franchise, here are three areas where the company stands out:
The UPS Store is a globally recognized brand alongside other logistics company giants. A well-known brand is an advantage among competitors, especially for prospective franchisees aiming to set up a USP store in rural areas.
Another perk of franchising a well-known brand like UPS is you will have access to the training the company provides to ensure quality. UPS has a 4-phase training program:
- Web-based training of store operations and foundation
- In-store experience training about technical systems
- University business course and print service training
- Five-day training and review of print services, technical systems, and store operations
The UPS franchise business ownership grows annually. As of 2022, there are 4,800 franchise stores in the United States. UPS is one of the best franchises you can get.
The company will continue its growth in the following years due to the increasing demand for reliable and fast package shipping services.
Challenges of a UPS Store Franchise
Even though UPS is a big brand with a huge following, a store franchise bearing this famous brand can mean something other than automatic success. Here are some challenges of starting a UPS store franchise:
Lack of Global Presence
UPS is a big logistics company that delivers packages worldwide. However, most of their stores are in the United States, some are in Canada and Puerto Rico.
Even if they deliver worldwide, their global presence still needs to be improved.
UPS reported that 60% of their franchises in the United States did not break even. It shows both honesty on the part of UPS and reveals “questionalbe profitability.”
But a franchise’s success depends on the area’s demand, location, and how well the brand is marketed to the community.
There are mixed reviews from people who invested in a UPS store franchise. People have both positive and negative experiences with this franchise.
But these varied reviews can help you determine whether your franchise plan will work. You will also learn about mistakes that caused the franchise’s failure and expert opinions and practices that resulted in successful franchisees.
How Many UPS Store Units Have Opened and Closed?
From 2019 to today, the number of franchises and stores has increased. Though there may be stores that stopped operating, the report of new stores is a motivation.
An example is the number of stores during the onset of the pandemic was 4,773. But at the end of 2021, the number rose to 5,037.
One of the scenarios that may happen when you start a UPS business franchise is transferring store ownership.
According to records, cases of store outlets changing hands average out at 7%. Around 356 stores changed owners in a single year.
Promote Yourself to Business Owner
The UPS Store provides ways to improve your experience as a business owner.
The opportunities, training, and support all aim to full both your business aspirations and your personal and financial goals.
Support Our Veterans
UPS shows support for veterans who served the country in active military duty by giving them a 50% off the initial application fee and saving $10,000 off the franchise fee.
These discounts are an incentive for veterans and retired veterans to invest in a company that may help veterans make the most of their time outside the military.
Is the UPS Store Franchise Profit Worth the Franchise Cost?
If your net sales are under $1 million, your UPS Store’s selling price would be significantly lower than the franchise investment.
For instance, if your sales range is around $611,274, your business will sell for only $268,960, which is lower than the investment cost of $374,715.
But if your sales are above $5 million, even if you have made that amount by having around ten stores, your business will still sell higher than the investment you made.
What Is an Alternative UPS Store Franchise?
The UPS Store is a logistics company focusing on processing, packaging, and shipping items from senders to recipients worldwide.
Alternative businesses to UPS Stores would have the same logistics aspect in their business structure.
Is a UPS Store Franchise Right for You?
Like any business, if you have the right location, passion, and love for this kind of business, then a UPS store franchise is one of the right businesses for you.
But if you do not have a passion for this kind of high-traffic package processing and shipping business, this is not for you.