Is The UPS Store Franchise a good investment? What dark lawsuits lurk in their past? How much does a franchise cost and how much can you make? Today on Franchise City.
The UPS Store started in 2001 when UPS acquired Mail Boxes Etc. In addition to a major rebranding UPS significantly changed operations. At the time many franchisees were very unhappy with the new business model claiming they were no longer making any money.
One of the changes franchisees disliked most was the fact customers no longer had to come to the store to pay for shipping, instead they could pay online, print off a label, and drop the package off for free at the store. So franchisees now got a 65 cent dropoff fee instead $5-$6 for a typical package.
Franchisees stated they were going broke under this new business model. One franchisee had to get a job and move to a trailer park. Others said they had become a glorified drop-box. Their only hope was a lawsuit.
They sued. they won and The UPS Store had to payout 4.2 million to 143 franchise centers.
And what about today? Well the UPS Store is no stranger to lawsuits a quick search on Justia shows 10 pages of lawsuits. But what about franchise owners, are they happy?
If we go back in time we see dozens of very unhappy comments from current and ex franchisees stating they were unable to make money and The UPS Store was a very difficult company to work with. This franchisee said he was working 7 days a week and made no money. This franchisee stated stores that do "OK" only make $40k a year and his wife made more at a job. Also the equipment he was forced to buy was overpriced, and the royalties are not really what they claim to be. Dozens and dozens of unhappy franchise owners left similar comments stating they had lost their life savings or were struggling in a business with an outdated business model.
If we look at bizbuysell we see many UPS stores for sale on the market. A lot. But there was something strange that happened over the past few years. All of a sudden there were almost no comments from owners online. Either bad or good. It was as if all of a sudden franchisees had disappeared from public view.
So I took a look at their most recent disclosure document and hidden in hundreds of pages I found this small paragraph. "Franchisees signed confidentiality clauses during the last 3 fiscal years. In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experience with The UPS Store franchise system. You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you".
So it appears that The UPS store decided to clamp down on any franchisees who wanted to complain, and I am assuming this confidentiality clause also threatened franchisees with legal repercussions for leaking this information online. That would explain why all of a sudden all the complaints just dropped off in the last few years.
Lets look at the numbers. To buy a new The UPS Store franchise is $247k-$476 $247,306 to $476,993 and the cost breakdown is on your screen. Here are your ongoing fees including royalties taken from the most recent disclosure as of the making of this video.
Keep in mind many franchises, not just The UPS Store require you to remodel your franchise at their request, and at your cost. For some food franchises this can run into the hundreds of thousands. The UPS Store franchisees cost to remodel into the new Laser Lite Design is between $100k-$200k $101,872 to $213,504. I can imagine how a struggling franchisee might feel having to put out $200k to remodel.
How much can you make with a The UPS Store franchise? Here is the data from their recent FDD. The Median Adjusted gross sales number for 2022 was $676,569. How does that compare to other industries? Many service based franchises have over 1 million average gross sales with a much lower investment, A Subway franchise, which is the 2nd lowest earning franchise on the QSR50, will average just over $400k.
What most buyers fail to consider in these numbers are many locations that have been operating for years. They have had a decade or more to build a customer base. Will your location that is likely to be competing against an established The UPS Store (because they already have over 5,000 locations in the USA) going to generate that amount. Remember with these very established systems it was the first franchisees that set up in the best territories with the least amount of competition.
Is The UPS Store the most profitable option in this investment range? No there are many other choices that can generate a higher revenue. But, which franchise is the best for you will depend on your own abilities, local market demographics and demand, operational preferences and a lot more.
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