UPS Store Franchise Review and Costs
Is a UPS Store Franchise Good or Bad Investment?
Watch Our Video or Scroll Down for More.....
UPS Store Franchises - By Robert Edwards
Lately we have had several requests to review the UPS franchise, is it a good franchise to own? Let's take a look.
Taken from their 2017 FDD the Cost of a UPS Store franchise ranges from $177,955 to $402,595. Royalties are 5% marketing is 1% national ad fee is 2.5%. We'll get into some more fees a bit later on.
To clarify the business relationship - The UPS Store, Inc. is the franchisor and UPS is the parent entity. UPS franchised stores are retail storefronts which offer mail and parcel services as well as other assorted services like notary,copying, office supplies, printing and others.
UPS is a very well known brand name - and like we have said in other videos with franchises like Subway or Quiznos, a big name does not necessarily mean security and wealth for its franchisees. Please don't think just because a franchise is well known that you don't need to perform due diligence.
The UPS Store franchise has been no stranger to Litigation over the years. when MailBoxes etc switched to UPS way back in 2003 they were sued class action style based on the assertion that this rebranding violated California, New York and Illinios franchise laws. Many, many franchisees were very unhappy when this change took place and the consensus seemed to be that their potential for profits were severely undermined and that UPS had essentially cheated them. As a result of that suit ultimately 10 years later 143 franchisees were awarded $4.2 million. The claims of the class action suit were not part of the settlement and remain pending.
If you take a close look within the pages of the UPS franchise 550 page franchise disclosure documents, there are almost 10 pages of lawsuits concerning in legal terms things like breach of contract, fraud, negligent misrepresentation and similar. In non legal terms a lot of franchisees felt they were royally screwed by UPS.
Not to be outdone UPS of America then sued a bunch of their own franchise owners in 2014 for things like trademark infringement, breach of contract, unfair competition, and failure to comply with post termination provisions of their franchise agreements. The franchise owner defendents denied all claims and filed a counter suit against UPS. Last I heard the franchise owners and their 11 stores had been ordered to pay UPS franchising 1 million dollars.
There are other lawsuits against the UPS franchise including allegations of overcharging for notary services, civil theft, slander, fraudulent use of personal identification without consent, even some RICO act (Racketeer Influenced and Corrupt Organizations). In defense of UPS they do state they intend to vigorously defend against these allegations.
Initial fees listed in their FDD beyond franchise fees s a software license fee of $4,750, an annual Technology Development and Support Fee of $1,299, a one time POS vendor software fee of $500 and a training fee that honestly is presented in such a complicated manner I have no idea what it costs but it looks like a few thousand. Now once again buried in the 550 pages is a clause that if you don't finish the training in time - UPS has the right to start charging you an ongoing fee every 90 days ranging from $50-$1,000 - so you better get that training done.
Ups stores show nothing but growth in their FDD. Only one store closed in a 3 year period! wow that's amazing. But once again if you know where to look you can see that there were over 700 stores changing hands over 3 years. Now in UPS defense that is not in and of itself a huge deal - but if you are exploring a UPS franchise you should definitely make a plan to speak with those owners that sold and ask them why they did. Remember all franchisees who recently left the system, whether they closed the doors, sold their business or anything else must by law be listed in then FDD. That stands true for any franchise you buy
As brokers we have the benefit of hearing directly from owners and sellers of UPS stores what their sentiments are and frankly many are not happy. So much so that quite a few took to the internet to voice their concerns. If you want to see the other side of the UPS story beyond what their sales reps might say take a visit to this website, and I will place the web address below in the description. http://www.unhappyfranchisee.com/how-much-ups-store-franchise-owners-make/
There are many franchisees who will cover things that allegedly UPS did not disclose. This comment from a 30 year owner of a UPS franchise states he will likely be closed in a few years because of UPS changes. His final comment "Don't let UPS fool you". Several franchisees state the business model around printing is flawed and you just cant make money. This franchisee states before they invested they were only shown stores doing very well, and that after buying they found many owners made only $40k a year. Their experience with UPS after a few years of ownership they did not make a penny.
There are very insightful and in depth comments on operational issues including dimensional weight pricing and Access Point Programs. This UPS franchisee left a long list of problems he felt are adversely impacted him. he sold his UPS store a few years ago.
THis next franchisee outlines how the royalties actually work out higher than you think, and how his location closed after he sold it. If it did those should be shown on the FDD if this happened over the last 3 years.
The point being as always these franchises will give you the rosy side of the picture, most buyers don't know where to look to find potential problems, and end up buying a nightmare. We try and give you the other side of the story so hopefully you can balance the bad and the good and make an educated decision.