How To's

The Cost of Owning a UPS Store Franchise

Published

3 years ago

April 21, 2021

Peter Bolic

If you want a business that involves a retail service, how about a UPS Store franchise? By 2025, parcel volume globally is expected to reach over 200 billion. As more customers enjoy the perks of having their orders delivered to their doorstep, packaged deliveries are expected to rise along with eCommerce. So, here’s what you need to know about owning the franchise:

UPS Store Franchise: Overview

The UPS Store began business in 1980 in San Diego, California. In the same year, it started franchising and managed a total of 5,165 units throughout the years. It’s a retail service business that offers the following service:

Mail and parcel receiving
Packaging and shipping services
Includes services such as notary, printing, and copying
Office supplies
Communication services (Ex. Fax)

The franchisor grants the franchises to be operated at traditional and non-traditional locations:

Traditional Locations

Highly visible locations
Strip shopping centers
High foot traffic downtown areas

Non-Traditional Locations

Colleges
Universities
Hotels
Resorts
Military base
Convention centers
Airport
Self-storage facilities
Office buildings
Bus or train stations

Training Program

The training program for UPS Store franchises is focused on developing necessary skills to the franchisee such as:

Business Management
Technical, conceptual, and diagnostic skill

After the introductory Web-based training, there are two essential parts of the training program:

1. In-store Experience Parts I and II.

Each part requires a five-day training at a Certified Training Center

2. University Business Course

This course involves ten days of training at the UPS Store University in San Diego, including four days of printing service training.

Furthermore, the franchisee’s designated primary operator must complete a Financial Management Training Program offered by an approved training vendor. The primary operator should apply for the training no later than six months after the Franchise Agreement’s effective date.

Lastly, the franchisor has sole discretion to require the following to franchisees and supervisory employees:

Periodic supplemental program
Additional training program
Refresher courses

Territory Agreement

After the franchisor’s approval, the franchisees will be permitted to operate their franchise store at a specific location. The Franchise Agreement will include an attached map and description that will describe the center’s geographic area. It’s essential to note that the franchisor will grant no minimum territory size to a franchisee. Also, it will depend on the market factors of the area. Furthermore, the territory granted will not be exclusive to the franchisee.

What’s Expected of a Franchisees?

Here are the following obligations and restrictions for a UPS Store Franchise:

The franchisees are not required to supervise the center personally.
It’s required that each day-to-day operation of the center be directed at all times on-premises by a designated “Primary Operator.”
All primary operators are required to complete the required training programs.
At least one full-time supervisor must complete all Print Training program parts.
Primary operators must complete the Financial Management Training program.
Franchisees should only use center premises solely for UPS Store operations.
The center must operate within regular operation hours.

Franchise Terms

Initial Length of Term: 10 years

Renewable Length of Term: 10 years

Before renewing the initial franchise term, the franchisee must be in good standing regarding compliance with the Franchise Agreement.

Financial Assistance

Occasionally, the franchisor provides financing for qualified prospective franchisees or multiple center owners under its guidelines:

Initial equipment cost worth up to $50,000.
Multiple center owners can loan up to 100% of additional existing centers’ purchasing price (up to $200,000).
Multiple center owners can loan up to 100% for the cost of the build-out of additional centers (up to $200,000).

If you’re interested, take note that the franchisor has the discretion to add, alter, or delete any financing programs.

Did You Know?

UPS means United Parcel Service.
Previously, the franchises were under the “Mail Boxes Etc.” trademark.
In 2020, UPS Store was ranked #5 as the overall top franchise brand according to Entrepreneur’s Magazine.
City Business Journals awarded the UPS Store franchise network the American Brand Excellence Award Winner in the Retail category.
Overall, there’s a total of 5.5 billion packages delivered by UPS annually.

Your Investments

Let’s dive into the total cost breakdown of owning a UPS Store Franchise. Take note that all details below are compiled from the 2020 FDD of the UPS Store.

Name of Fee	Low	High
Initial Franchise Fee	$9,950	$29,950
Initial Marketing Plan Fee	$4,000	$7,500
Design Fee	$1,075	$1,075
Center Development Fee	$5,000	$5,000
Initial Training Fees	$4,650	$6,000
Travel and Living Expenses While Training (per person)	$3,000	$4,000
Site Rent and Security Deposit	$1,000	$18,000
Leasehold Improvements; Construction Costs; Signage; Furniture and Decor Items	$38,429	$280,634
Computer Hardware/Installation/Freight	$6,243	$10,847
Annual Technology Development and Support Fee	$1,692	$1,800
Software	$3,420	$5,420
Printers	$1,282	$87,102
Other Equipment	$6,349	$21,302
Start-Up Supplies	$6,180	$9,155
Utility Deposits	$200	$3,000
Insurance	$1,000	$5,000
Additional Funds – 3 months	$40,000	$70,000
ESTIMATED TOTAL*	$133,470	$566,585

Other Fees

Type of Fee	Amount
Royalty	5% of STR (STR includes all gross sales plus gross commissions from the center, less allowable exclusions).
“The UPS Store” Marketing Fee’	1% of STR.
National Advertising Fee (NAF)	2.5% of STR.
Advertising Co-op Dues	Varies from Co-op to Co-op. Range is $100-$500.
Annual Technology Development and Support Fee	$1,800 for new center franchise and transfers; $1,692 for rural centers; $1,692 per center if franchisees are purchasing their 2nd or greater franchise.
Transfer Fee	The current transfer fee is $5,000. The franchisor may also periodically increase this fee.
Processing Fee	The current processing fee is $4,000 if no finder’s fee is paid to the franchisor; $1,000 if a finder’s fee is paid. The franchisor may also periodically increase this fee.
Renewal Fee	25% of the then-current initial franchise fee.
Sales Fee	25% of then current initial franchise fee.
Insurance	Amount of unpaid premiums.
Audit	Cost of audit ($475 minimum) plus 18% interest or the highest rate allowed by law on underpayment. In addition, the franchisee must pay a late fee of $25 per week.
Audit Non-Prepared Fee	$500 per type of document as specified in operations manual not supplied upon auditor’s request but in no event greater than $2,500 per occurrence, and cost of audit including reasonable expenses incurred by auditor if rescheduled.
Non-Transfer Ownership Change Fee	$500
Incorporation Fee	$500
Family Transfer Fee	$1,750
Entity Name Change Fee	$500
Indemnification	Varies under circumstances.
Interest on Financing Offered by Franchisor	Financing of initial equipment: prime rate plus 4%. Financing for the purchase of a second center: prime rate plus 2%. Meanwhile, financing for the TUPSS 2000 remodel of the Center: prime rate plus 1%.
Late Payment Fee	$35 per month or 10%, whichever is greater.
Equipment or Equipment Lease and Computer Hardware/Software Maintenance	Varies.
iShip Processing Fee	$0.22 per transaction.
Upgrade Review Fee	$500
Finder’s Fee	The greater of $11,980 or 10% of the center’s sales price.
Finance Charges	Highest annual rate allowed under applicable law.
Design Fee	$660 or $1,075 plus $250 in the event of a change.
Non-Compliance Fee	$250, but the franchisor may charge up to $1,000.
Tax Reimbursement	Out-of-pocket cost reimbursement.
Customer Concern Reimbursement	Out-of-pocket cost reimbursement.

For more franchise ventures, explore Franchise How.