Copy — Business Services — Mail Center

Business Services

Copies, Mailing, and Office Supplies

Amsterdam FedexKinkos

Photo of Copy Center in the Netherlands.  Photo Credit (cc)  Chris Sobczak

This business really started when people became frustrated with the Post Office and needed a place to make copies.  The Iconic business in this category is Kinkos.  This business was formed in 1970 and was the best known place people went to make copies and have materials printed.  In later years, they started to offer other services including desktop publishing, scanning, and selling office supplies.  The business was taken over by the shipping company FedEx, which changed the name to FedEx Office.  The basic concept was simple, most small businesses and home owners do not have the capital to invest in photo copiers, fax machines, … so why not offer them a place where they could do a little work and make the documents they need.

This book tells the story of how the business got off the ground. As we have pointed out in other parts of this web site, you need to be smart to succeed in business–but not necessarily smart in the classroom. Kinko’s founder was not held back by ADHD, dyslexia or people who said his ideas were not going to succeed.

¿ Is this a Business of the past or Future?

  • On one hand, in the long run this business may go the way of the One Hour Photo Shop as e-mail, tablet computers, and affordable home office equipment make a trip to the business center obsolete.  (-) Some would argue that we are becoming a paperless society; and communicating with paper is what these businesses are all about.  If you want to communicate, you send an IM followed up by an e-mail with the document attached.  Some people do everything on line and only check their mail box once a week.  And not too many people even have real fax machines.  Of corse people have been talking about the paperless society since the 1970’s.   (-) Another issue is internet competition from companies like VistaPrint which are eating into the higher margin services that these business provide.
  • On the other hand, the internet has meant thousands of people are working out of their home.  They have set up home businesses or they tele-commute.  They don’t have a mail-room for shipping or equipment to make the occasional document.  Homeowners and small businesses do not have the room or capital to invest in this equipment.  The all-in-one machines are great for small jobs, but not practicable  for larger jobs–they take too long and ink is expensive.  And some people will still need a mailing address.  Another factor is that the USPS will have to scale back for budget reasons.  Post offices are cutting back on hours; and when you get to a post office you can expect a long line.  Because of political considerations the Post Office cannot “right size” as much as they need to and allocate resources where they are most needed.  It should also be noted that the cost of color printing has come down so much, copies are less expensive than traditional off-set printing for smaller quantities.

Four businesses are often combined in a retail location:

  • Shipping with UPS, Fed Ex and through the post office,
  • Providing a good location to make copies, color copies, sending faxes, and printing services (usually subbed out)
  • Providing a mailing address.
  • Selling shipping supplies and office supplies.
  • Miscellaneous services such as selling money orders, Notary Services, Send/Receive Faxes for $$$/page, Desktop Publishing work

Location Location Location

The key to this business is location.  A consumer can get every service offered by a Business Center at a lower price.  It’s hard to beat the Post Office on shipping/mailing costs and PO Box rental.  The big box office supply stores offer discounts of copies and of coarse office supplies.  What these Business Centers do is offer customers a way to save a great deal of time.  Post Offices were set up a long time ago, and in many areas they have not added new locations to keep up with population growth.  So you have to deal with parking issues, take a number, and then wait your turn.  And driving to the office supply store parking, finding what you need, and checking out can take a long time.  An ideal location would have residents and small businesses that are not too price sensitive.  There is not a nice way to say this, but you don’t want to be in an area where people have lots of time and lower income.   They will be standing in line at the post office.  The other thing you need to do is scope out your competition.  See if there are other business centers near by–and don’t forget about the post office.  Some post offices are not that impacted.

Providing a Mailing Address

More people than you would think need a mailing address.  Doctors, landlords, prison guards, police officers, sports/entertainment stars  might not want to have their home address to become known for obvious reasons.   It is worth a few bucks to rent a post box.  Also people who tend to move a lot or travel a lot need to have one place to receive their mail.  When you move, some of your mail always ends up at the previous address.  This can result in bills going unpaid.  And people who travel need a place to receive mail when they are away from home.  Mail boxes in most apartments can only hold a few day’s mail before the post office starts holding your mail at the office.

Renting Mail Boxes

How much you can charge for your mail boxes really depends on where you are located.  Business people may pay more for a prestigious city, and residents will have a bit more money to spend.  They take up little space, and can earn a big return.  Each mail box can rent from $8/month to $20/month.  The USPS is very reasonable with it’s rental costs at only a few dollars a month for the smallest box, but this is not an attractive option for most customers because they don’t realize how cheep it is, there will be a waiting list to get a box in busy locations, and it’s a hassle to make the drive to your city’s post office.   These are just estimates–stores are unwilling to publish their rents on-line.

The best know maker of post office boxes is Salsbury Industries which runs the website MailBoxes.com  They even have a model that you can roll into the back of your store to stock with mail.  So, let’s do the math.  It’s hard not to earn a generous payoff if you can rent them out.  A nest of thirty basic mailboxes costs $485 if you buy four nests.  So four would cost $1940.  Assume that it costs $200 for shipping, and you need to install them in a 2×4 wall that is framed to fit the nests.  So let’s say your handy-person charges you $500 to build the wall.  That comes to $2,640.  Just to be on the safe side, let’s round that up to $3,000.  So the installed cost of a mail box is $3,000/120== $25.00.  Let’s say that you rent them out for $10./month.  And assume that you have on average a 20% rate of vacancy and flaky people who don’t pay.  So the revenue per box is $8/month.  That’s a great mark-up.  $96/year for each box.  If you look at your cost as a bank deposit, you would be earning 384% per year.  Plus these people come into your store every day so they have an opportunity to buy other things.

Of coarse there are other costs we didn’t factor in such as employee time sorting mail–the post office does not deliver to mail boxes in business centers–and dealing with people who don’t want to pay.  Also, there is a limit to the number of mail boxes a location can support.

Make money on Shipping

  • FedEx Affiliate Program.  You are set up to take packages in at your location.  You can print the shipping stickers, and digitally connect with Fed EX.  The truck comes and picks up your customer’s packages and over night letters.  You get paid a flat commission.
  • UPS Affiliate Program.  Well we know it exists because we see a lot of businesses more than happy to ship a UPS package.  But they have not put up any info we could find on the web.  One could assume that the commissions are similar to the discounts offered to big companies like AIG.  According to this document that popped up for some unknown reason, there is a 39-56% discount on overnight letters.
If anyone knows were we can get info about mark-ups and how the affiliate programs work, please let us know.  

Additional Shipping Services — Ebay fulfillment .  Another side business at one of these stores is e-bay consignment.  People who sell on e-bay may not have the room or time to box everything up and ship it to their customers.  Some stores specialize in taking in sold e-bay goodies.  They box them up, add packing materials along with the receipt and ship it off to customers.

Make money on Copy Machines

Typically these machines are leased from a major company; and the rent is based on the number of copies made.  Copiers are still sold via a sales person, and rates are not readily available on the net.  From what we have seen, you can charge about 4 per copy depending on if you are in an area with competition, and around 65cents for a color copy.  According to what we have seen on the web, the cost of a laser copy is around 1.5-2.5 cents and the cost of a color copy is around 20-30cents.  (We usually cite the website where we get data, but we were not sure how accurate this was.)

And someone found an interesting insider web page from the University of Colorado Procurement Service Center to the departments of the university based based on their copy costs.  Remember that they may be getting a great deal because college kids love copies.  Exclusive of paper, it looks like it costs about 1/2 a cent per copy on a old fashion black and white Xerox machine.  And it costs between $72 and $114 per month to rent that machine.  Color copies cost about five cents a page plus around $220/month for the machine.   And those prices include toner and repairs.  Of coarse California tends to be a higher cost state, you will have to pay taxes.  We are not sure why there is such a difference in color copies between these two examples.

To estimate the cost of paper we looked at what

markup on copies 

Well, when looking at basic office supplies we have found that Cost Co is hard to beat.  They sell a 5000 sheet case of good quality copy paper for a bit less than $40.00.  Remember if you have a California Resale License, you can buy it without paying sales tax.  So assuming 1% wast–papers jammed in machine or customers messed up–that comes to $40/(5000-50) =   $0.0081/page.  So using the University’s numbers–which may be low–the cost of making a copy exclusive of fixed leasing costs is $0.0581.  In the table below, we have assumed no electrical costs and that there will be on average 22 business days per month.

 $     0.03  $      0.04  $      0.05 Cost Per Page
416% 588% 761% Gross Markup %
 $ 0.0242  $   0.0342  $  0.0442  Profit per page
 8,267.88    5,849.66   4,525.91 Copies needed to cover $200/month Rent
    375.81      265.89      205.72 Copies per Day needed to cover $200 Rent

To point out the obvious, you can make a great markup if you have people making a lot of copies.

Franchises

In the 1990’s this was a really popular franchise opportunity.  After Kinko’s expanded by opening locations with partners–their version of Franchising–companies like Mail Boxes ETC started to enter the market.  The successors to Kinko’s and Mail Boxes ETC are still dominate this industry.

The hard question to answer is what is the franchise worth.  The shipping companies will still do business with independent chains, and customers are looking for what’s works for them.  Location, friendly service, and services that meet their needs.  This is just speculation on our part, but it seems like your typical customer is not brand loyal to a Business Center.  They won’t drive past a Business Service Center to get do business at a well know centers.  Shipping is shipping; and copies are copies.  On the other hand, there are a lot of franchise operations out there, so they must have something to offer business owners.

 

  • Mail Boxes ETC was purchased by UPS and re-branded The UPS Store.  According to their website, to start a franchise you need to have $80,000 – $100,000 in liquid assets and franchises cost between $150,000 and $375,000 to get started.  Since California tends to be a higher cost state, we would assume the higher ends of these ranges apply.  As with many businesses, they have figured out that veterans make great partners and offer discounts to vets.

Note, it has been pointed out by the Small Business Administration that the UPS Store Franchise has the a very high failure rate with 12% or about one out of 8 franchises Failing.  See this CNN Money Story.  Although some of this may be because of problems that occurred when UPS took over from Mail Boxes ETC.    And some Franchisees complain that there is a conflict of interest.  Franchisees and the franchisor are selling the same product directly to customers.   Unlike say a McDonald’s hamburger, customers can pay for the same service over the internet and at the store.  And it might be more cost effective for the parent company to do business via the web.  It is alleged that UPS undercuts the franchise locations when customers print their own labels at home from the UPS website.  See a list of complaints at the website Unhappy Franchisee.  The two sides will settle this issue in court.

  • Kinko’s has been reformed from a partnership model into a franchise model  FedEX has re-branded the operation under the catchy name FedEx Office.  But their locations are company owned and they do not offer franchising.
  •  The Mail Box Stores.  They have been around since 1992.  They offer a turnkey setup; but are not a franchise–no ongoing franchise fees.   They say you can get started for less than $85,000.  This fee includes help getting financing, selecting and leasing your location, building out your store, training, some equipment, and the right to use their trademarks–goodwill.    Basically, this works best for someone who feels they can run a business, but deal with setting up your business.
  • PostNet postnetfranchise.com was featured on the CBS show Undercover Boss.  They were started because it was hard to get a PO box at the post office and people needed a place to make copies and mail packages.  Today they are targeting small businesses.  They can print up anything a business needs, do e-mail campaigns and even set up websites.  This is inaddition to their mail and copy business.  According to their website, you need to have time to work in your franchise, 60,000 in liquid assets, There is a 35,000 franchise fee, a 85,000 store development fee and they charge 5% of gross sales for overhead and 2% for their national advertising fee.   So, according to their website, it takes between $160,000 and $200,000 to start a store.  They have not yet opened up Southern California for franchise development (that’s why you haven’t heard of them) and it’s unclear when it will open up.  But if you are interested in this type of business you might want to give them to call.

 

 

© 2012 OCBusinessStartUp.com

 

1 Comment

  1. Wow, I had no idea about that the founder of Kinkos overcame ADHD and dyslexia — what a great achievement! My nephew also has dyslexia, and this is really inspiring. Amazing what people can attain through hard work and dedication.

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