Disadvantages of a UPS Store Franchise

Time and effort to operate a UPS franchise may serve as a potential drawback. to some investors.
Time and effort to operate a UPS franchise may serve as a potential drawback. to some investors. (Image: Jupiterimages/Photos.com/Getty Images)

In 2011, UPS stores were rated the 46th best franchising opportunity available in "Entrepreneur" magazine's annual Franchise 500 Rankings. This means they're generally regarded as a good opportunity for an entrepreneur wanting to franchise in the postal and business services industry. However, potential investors in this franchise should consider the disadvantages associated with this investment opportunity.

Total Investment Costs

One of the more common disadvantages of many franchise opportunities from the perspective of entrepreneurs is the required investment. The total investment in a UPS franchise store ranges from $150,196 to $371,022, according to "Entrepreneur," a variation attributable to building acquisition costs, equipment, and other associated fees. This is much higher than many other franchise opportunities on the "Franchise 500." Lower cost franchises ranked higher than UPS include 7-Eleven, Subway, Jan-Pro, Kumon Math & Reading Centers and Jazzercise Inc., all of which require an initial investment of less than $100,000.

Cash Requirements

While entrepreneurs can finance some of the investment in a UPS store, the company requires a minimum of $60,000 in cash or liquid assets from potential investors, according to "Entrepreneur." This makes it difficult for those who may not maintain such liquidity, but would have the credit-worthiness to get financing. Franchisors typically require a cash investment as a show of commitment and the ability to afford the upfront and ongoing costs of running the business, but UPS's is on the high side. As a comparison, 7-Eleven shows no specific liquid cash requirement and and Vanguard Cleaning Systems requires just $2,800 to $9,000 in liquid cash.

Direct Competition

Some UPS store franchisees have criticized the nature of the franchisee setup, which seems to have UPS commonly competing directly with franchisee operations. According to the "Unhappy Franchisee" website, criticisms include establishing corporate stores near franchised locations that allow customers to conveniently print off labels from their computers at home for certain services that aren't available at franchise stores.

Operations Requirements

While franchise owners typically understand them ahead of time, strict operational rules are a common concern with certain franchises. UPS store franchise owners must maintain standard hours of operation, for instance, typically Monday through Friday, from 9 a.m. to 7 p.m. and Saturday from 9 a.m. to 5 p.m. Standard sizes of store locations, from 1,200 to 1,800 square fee, may inhibit the ability of prospective franchisees to find suitable locations.

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