Owning a UPS Store can be a lucrative business opportunity for entrepreneurs looking to run their own small business. UPS Store franchisees provide packing, shipping, mailboxes, printing, and other business services to both consumers and small businesses. But how profitable is a UPS Store franchise? What are the costs involved and how much income can you expect to make?
What is the average income of a UPS Store owner?
According to Franchise Direct, the average annual gross sales for a UPS Store location is $680,000. Franchise owners, known as franchisees, generally receive around 7% of their store’s gross sales as profit. So based on the average sales, UPS Store franchisees can expect to take home around $47,600 per year in profits on average.
However, profit amounts can vary quite a bit depending on the store’s sales volume, location, competition, local market conditions, and the franchisee’s business acumen. Some stores do over $1 million in annual sales, which could yield over $70,000 in profit for the owner.
Factors affecting a UPS Store’s profitability
- Store sales volume – Higher total sales means more profit for the owner.
- Franchise location – Stores in high foot traffic areas like shopping centers do more sales.
- Local market competition – Less competition means more customers and sales.
- Business experience of the franchisee – Strong business skills increase profitability.
- Add-on services – Offering additional services boosts sales.
In addition to the 7% profit percentage, store owners can increase their earnings through retail sales commissions and by offering additional services like notary, shredding, office supplies, etc. Overall store profitability depends heavily on the franchisee’s business management abilities.
What are the initial costs to open a UPS Store?
There are a number of upfront costs involved when opening a new UPS Store location. These initial investments include:
- Franchise Fee – $29,950 one-time fee to UPS
- Store Lease – Monthly rent & security deposit
- Store Build-Out & Design – $25,000 average for renovations
- Furniture, Fixtures & Equipment – $36,500 average for POS system, etc.
- Opening Inventory – $6,000 average for initial product stock
- Working capital – Funds to cover operating costs until profitability
- Grand Opening Marketing – Outreach to announce new store opening
- Training Expenses – Travel & lodging for training at HQ
- Legal & Professional Fees – Lawyers & consultants
- Business Licenses & Permits
- Business Insurance
According to the UPS Store’s Franchise Disclosure Document (FDD), the estimated total initial investment to open a new franchise location ranges from $152,470 to $392,297. This includes around $100,000 to $200,000 in initial franchise fees and fixed costs, plus $50,000 to $175,000 in working capital.
Typical costs for a new UPS Store franchise
| Expense | Low Estimate | High Estimate |
|---|---|---|
| Initial Franchise Fee | $29,950 | $29,950 |
| Store Lease | $6,000 | $18,000 |
| Store Build-Out & Design | $15,000 | $50,000 |
| Furniture, Fixtures & Equipment | $20,000 | $60,000 |
| Opening Inventory | $3,000 | $10,000 |
| Working Capital | $50,000 | $175,000 |
| Total Investment | $152,470 | $392,297 |
As you can see, total costs to open a new UPS Store can vary substantially based on real estate, construction, equipment, inventory, and operating funds needed. Opening a location in an affluent market in a large metro area will require more capital than opening in a small rural town.
What are the ongoing fees for a UPS Store franchise?
In addition to the initial franchise investment, store owners must pay ongoing monthly fees and expenses to run the business. These recurring franchise costs include:
- Royalty Fee – 5% of gross sales paid monthly to UPS corporate.
- Advertising Fee – Up to 2.5% of gross sales paid monthly to regional ad fund.
- Store lease payment.
- Utilities, phone, internet, and other occupancy costs.
- Employee wages and payroll expenses.
- Cost of goods sold – Supplies, packaging materials, and retail products.
- Store maintenance, repairs, insurance.
- Accounting and legal services.
- Credit card processing fees.
- Business taxes and licenses.
The ongoing 5% royalty and up to 2.5% ad fund fees allow the UPS Store to provide franchisees with national branding, advertising, training, support, and bulk purchasing discounts on supplies. But store owners are responsible for all location expenses needed to operate the business.
What is the earning potential of a UPS Store?
The total earnings potential for a UPS Store franchisee depends on several factors:
Revenue Sources
- Products and Services – Earn margins on services like shipping, printing, shredding, mailboxes, office supplies, notary, etc.
- Retail Sales Commissions – Earn commission selling UPS branded products.
- Rental Income – Earn rental revenue from mailbox customers.
- Interest Income – Earn interest on funds from customers.
Profit Factors
- Franchise Location – Store sales volume driven by area demographics and foot traffic.
- Competition – Less competition provides more customers and sales.
- Services Offered – Providing a wide range of services maximizes revenue.
- Business Operations – Lean operations and cost controls boost profitability.
- Add-On Services – Increasing profit centers with notary, office supplies, shredding, etc.
- Retail Sales – Higher retail product revenue means more sales commissions.
- Mailbox Rentals – More rented mailboxes increases rental income.
According to Franchise Direct, the top 25% of UPS Store locations bring in over $1 million in gross sales annually. At 7% profit on $1 million sales, the franchisee’s earnings would be $70,000. Stores with strong locations and owners who maximize revenue can potentially earn over $100,000 in profit annually.
What skills and traits make a successful UPS Store owner?
Owning and managing a UPS Store requires certain skills and personality traits to be successful, including:
- Sales and customer service skills – Must be comfortable selling services, products and upsells to walk-in customers.
- Physical stamina – Able to be on your feet serving customers most of the day.
- Organization and time management – Running a store requires handling many tasks and priorities.
- Business experience – Experience managing a business is strongly preferred.
- Entrepreneurial drive – Motivation to grow sales and profitability.
- Problem-solving – Logistics issues will need creative solutions.
- Multi-tasking – Juggling customers, phone calls, services, retail, employees.
- Communication skills – Explaining services to customers of all types.
Owning a UPS Store is ideal for entrepreneurs who like interacting with people, are highly organized and enjoy operating a retail-like small business. Strong salesmanship is also important to convert shoppers into paying customers.
What kind of customers do UPS Stores serve?
UPS Store locations serve two main categories of customers:
Consumers
Consumers make up around 50% of the customer mix at most locations. Consumers use The UPS Store for services like:
- Shipping packages, freight, and oversized items.
- Packaging items for shipping using boxes and packing supplies.
- Printing documents, photos, banners, business cards, etc.
- Mailbox rentals and package receipt.
- Document shredding and notary services.
- Passport photos.
- Faxing, scanning, and copying.
- Office and packing supplies – boxes, tape, bubble wrap, envelopes, etc.
Small Businesses
Small businesses make up the other 50% of UPS Store customers on average. Small business use The UPS Store for services like:
- Daily package drop off and shipment.
- Order fulfillment and shipping.
- Virtual mailbox and mail receipt.
- Printing of marketing materials – business cards, brochures, banners.
- Binding, laminating, engraving projects.
- Large format printing – blueprints, posters, signs.
- Notary, document shredding.
- Packing supplies – custom branded boxes, tape, envelopes, etc.
UPS Stores build ongoing relationships with small business owners to handle their recurring shipping, printing, mailbox, and other needs. Business customers also tend to spend more money on higher margin services.
How much employees and payroll will you need?
Staffing needs for a UPS Store franchise greatly depend on the store’s sales volume. According to the 2022 UPS Store FDD, here are the typical staffing requirements:
- Annual Revenue under $300K – Owner plus 1-2 employees
- Revenue $300K – $600K – Owner plus 2-4 employees
- Revenue over $600K – Owner plus 4-8 employees
Employees at UPS Stores typically include:
- Sales associates – Handle walk-in customers, packaging, shipping, and retail.
- Production workers – Handle printing, binding, design jobs.
- Drivers – Pick up/deliver packages and materials.
- Managers – Oversee store operations, staff, and sales.
Wages range from minimum wage for entry-level positions to $15-$18 per hour for managers in most markets. The total payroll expense, including the owner’s salary, generally ranges from 10% to 20% of total sales.
Staffing Tips
- Hire for customer service skills
- Cross-train employees on multiple tasks
- Keep payroll around 15% of sales
- Pay managers performance incentives
Hiring friendly employees with sales and customer service skills is crucial. UPS Store customers appreciate interacting with helpful team members.
How much space do you need for a UPS Store?
UPS Store locations typically range from 1,000 to 2,500 square feet. The average store size is around 1,500 square feet. Larger units are needed to accommodate production equipment for printing, sign-making, binding, lamination, and engraving. Here are some typical real estate specs for a UPS Store location:
- Size: 1,000 – 2,500 sq.ft.
- Layout: Retail storefront with production space
- Preferred: End cap or standalone building
- Zoning: Commercial
- Parking: Convenient customer parking
- Signage: Visible curbside and plaza signage
- Utilities: Electric, truck loading
Ideally a UPS Store should have good street visibility, parking access, and be located in a high traffic retail center. This provides convenience for customers to use your services.
Real Estate Tips
- Choose a retail center near homes and offices.
- Pick a location with little direct competition.
- Prioritize foot traffic over car traffic.
- Have space for future equipment upgrades.
The most profitable locations have a captive audience of nearby homes and businesses. Areas with lots of pedestrians, like a downtown setting, can also be very lucrative locations.
How long does it take to start making a profit?
A new UPS Store franchise location typically takes 6-12 months to start generating a net profit. It takes time to build customer awareness and sales volume. Pre-opening costs also impact initial profitability. Here are some of the factors that determine when a new UPS Store becomes profitable:
- Local marketing – Draws in initial customers.
- Grand opening promotions – Special deals help kickstart sales.
- Foot traffic – Walk-in customers start utilizing services.
- Ongoing advertising – Maintains customer awareness.
- Business relationships – Accounts with small business customers.
- Operational efficiency – Managing costs and staffing.
- Ramp-up period – Time to optimize service mix and prices.
Store owners should budget for 6 months of pre-opening costs plus another 6 months operating at a loss before the location turns the corner. Profitability can occur sooner in highly trafficked locations with fewer competitors. Patience is required before a new UPS Store begins throwing off cash flow.
Tips to Reach Profitability Faster
- Choose a prime high-traffic location.
- Start strong with marketing and grand opening promotions.
- Offer competitively priced services.
- Develop relationships with small business owners.
- Keep payroll and other costs lean.
With persistence through the ramp-up period, the store will gain momentum and become consistently profitable. The key is attracting customers and giving great service to build loyalty.
Conclusion
Owning a UPS Store franchise can be a rewarding small business opportunity but requires an initial investment plus hands-on work launching and operating the store. While profit margins are fixed at around 7%, total profitability potential exceeds $100,000 annually for top performers. With strong business skills and a prime location, a UPS Store can thrive and pay off for motivated franchisees.
