How to start a parcel courier franchise

Running a parcel courier franchise might deliver the goods for you. Find out how to become a franchisee and grow your courier franchise here…

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The most important steps to follow when starting a parcel courier franchise are:

As the UK population embraces the convenience of ordering things online, parcel courier and delivery services are now busier than ever.

From clothes to furniture to food, we’ve grown accustomed to having what we want delivered directly to our doors. And from a business perspective, we’re happy to entrust documents and packages to couriers who can take them where they need to go.

Thanks to this constant demand, the parcel courier industry is heavily competitive, dominated by big names like DPD and Hermes. But the good news is that you don’t have to launch and grow your own brand to capitalise on the sector.

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1. What is a parcel courier franchise?

Many of the parcel courier companies operating in the UK are franchised, so aspiring business owners like you can purchase and run your own branch as a franchisee.

From this arrangement, the franchisor – that is, the franchised brand – is able to expand across new locations without having to foot the bill and manage each franchise (or branch) itself.

Meanwhile, the franchisee is able to run their own business while benefiting from instant brand recognition, a tried and tested business model, a pre-devised branding strategy, and guidance and training from the franchisor.

Generally speaking, parcel delivery, courier and haulage franchises fall into two categories:

  • Depot-based franchises: Suited to those with managerial experience, in running one of these larger franchises you’ll be responsible for coordinating a network of drivers (your employees) and vehicles, based out of a depot.
  • Courier franchises: This smaller business model will likely see you picking up packages and making deliveries yourself in your own territory. You’ll often start as a solo operation, working from your home until you have the opportunity to expand.

Depending on whether your franchisor is looking to expand its operations or not, you might launch a new franchise in a new territory, or you might take over an already-established territory from a departing franchisee.

There are a great number of UK franchisors with opportunities available for wannabe-franchisees to join their brand, including:

  • InXpress
  • Mail Boxes Etc.
  • Speedy Freight
  • Parcelforce
  • World Options
  • Agency Express
  • Diamond Logistics
  • Pack & Send
  • DOR-2-DOR
  • Coffee-Bike
  • Courier Post

To name a few!

Each franchisor will offer a different franchise package, with different costs and benefits to you – and each will vary in terms of the territories it has for sale, so do your research and get in touch with those you’re interested in to learn more.

Alternatively, if you’re looking to start your own courier brand from scratch, check out our comprehensive guide to starting your own courier company.

Who is a parcel courier franchise suited to?

Because many franchisors offer training and business coaching as part of their franchise package, most will not require you to have prior experience in the parcel delivery industry. However, if you’re setting up a depot-based business it’s likely that you’ll need some managerial experience.

And, rather than any specific qualifications, you’ll need to show that you are an independent and committed hard-worker who understands good customer service.

A delivery franchise will often be open 24/7, offering same-day, overnight and sometimes international delivery to stay ahead of the game – so flexibility is key. You’ll need to be willing to work unsociable hours and lengthy shifts, especially at the start.

2. Costs

There are several costs involved with buying and running a parcel franchise. These include…

The initial franchise fee

In order to become a franchisee, you’ll need to pay an upfront lump sum to the franchisor. These costs can vary considerably depending on the brand you’re joining.

Generally, a depot-based franchise will cost between £20,000 and £60,000, while a smaller courier franchise will cost between £6,000 and £20,000.

This franchise fee is charged to cover benefits such as the rights to use the firm’s name, branding and business model, training, and any equipment or marketing collateral the franchisor may supply to you.

Ongoing fees

Also referred to as a management services fee or a royalty fee, most franchisors will charge an ongoing fee which it’ll take on a monthly basis.

This will either be a fixed amount each month, or – and this is far more likely – a percentage of the revenue you make while running the franchise.

Just think of this as payment for the ongoing guidance a franchisor will give you – after all, it’s in their best interests that you succeed. The more you’re able to pay them, the more incentivised it’ll feel to support your growth.

Be wary of ongoing fees which seem very low. While this might look like a plus initially, it could mean the franchisor doesn’t plan to offer you much support in return.

Advertising fees

Many franchisors also charge a regular fee which contributes to the marketing and promotional activities of the brand as a whole – benefitting both you and the franchisor.

Alternatively, a smaller franchisor might instead ask that you spend a certain amount each month on marketing your franchise in your local territory.

Additional fees

Depending on the brand you join and what is included in your franchise package, you might also need to pay for the following:

  • Vehicles, maintenance and fuel. Leasing the vehicle(s) you’ll use to carry out pickups and deliveries will likely be down to you – and will be your main outlay initially. You’ll also need to keep it/them on the road, so factor in the cost of regular fuel, plus any repairs or maintenance work as needed (you may benefit from having a fuel card – you can find out more on our fuel cards for small business page).
  • Space and equipment. If you’re running a depot, it might fall under your responsibility to pay to have it kitted out with furnishings, equipment and anything else you’ll need. Similarly, you might need to pay for the space you’re using.
  • Employees. If you decide to hire drivers or other managerial staff to join your operation, it may be up to you to cover any costs incurred by the recruitment process, as well as paying their salaries (see Section Six).
  • Marketing. Whether you pay advertising fees or not, it’ll still be your job to market your franchise and pay for any costs this may incur (see Section Five).
  • Insurance. It’ll likely be down to you to pay for all the insurance you’ll need to run the business safely (see Section Four). Your franchisor should be able to advise on this.
  • Franchise renewal fees. When it comes to extending your franchise contract, you may be asked to pay a franchise renewal fee.

It’s important to be clear on what you’ll be expected to pay for, so read your franchise agreement carefully before signing it.

Remember, you’ll still be able to apply for start-up funding from the likes of high street banks; who may be able to cover up to two thirds of your costs. Banks will be more likely to give a loan to a franchisee than a lone entrepreneur – operating under an established brand name makes you much less of a risk.

3. Your parcel courier business plan

Though you’ll be working to the franchisor’s established business model, it’s still a good idea to pull together a business plan detailing how you’ll run your own franchise.

Writing a business plan is a long process, but it’s an infinitely worthwhile exercise as it’ll push you to actively plot out how you’re going to tackle each aspect of business ownership.

To get going, try following this simple template:

  • Executive summary: Introduce your franchise and summarise the key points you’re going to address in your business plan.
  • The market: Think about the parcel courier and delivery market and the condition it’s in, both in your local territory and UK-wide. List the competitors operating in your region and examine how your franchise will be positioned among them and how it will compete.
  • Your target market: Research the customers who typically use your franchisor’s services and your local competitors’. Are they businesses? If so, what type and size? If they’re individuals, what type of people are they? What do they use the service for?
  • Marketing strategy: Put together a marketing plan, exploring all the methods you’ll use to attract customers to your franchise (see Section Five).
  • Management plan: Write an overview of yourself, your skills and your experience. If you plan to hire employees (see Section Six), explain the roles they will fill and how the team will work.
  • Financials: This vital section should include: a profit and loss statement covering the next three to five years; monthly sales forecasts and cashflow forecasts covering the first year (and then annual forecasts covering the following two to five years); a break-even analysis; and a capital requirements budget outlining the funding you’ll need to obtain, for example from banks, and what you’ll use it for.

Download our free business plan template.

The beauty of being a franchisee is that, while you are your own boss and responsible for your own success, you’re not in it alone. If you’re unsure about anything, your franchisor should be able to advise you.

4. Parcel courier franchise regulations

As with any business, in order to operate smoothly and avoid costly legal trouble you’ll need to be adequately insured.

Your franchisor will inform you of the specific insurance you’ll need to run the business safely. It’s likely that it will have a regular insurance provider to recommend to you.

In general, though, you will need the following:

  • Public liability insurance – This is to cover you in the event that a third party makes a claim against your business, for example if they have suffered an accident or property damage due to your service.
  • Employers’ liability insurance – An absolute necessity if you choose to hire staff, this will cover you if an employee makes a claim against you.
  • Vehicle insurance – You’ll need to make sure the vehicles you use to perform pickups and deliveries are insured to be on the road, and are covered in the event of a breakdown or theft.
  • Equipment cover – Likewise, you’ll want to ensure that any expensive equipment you use – more so if you manage a depot – is protected.

5. Marketing your parcel courier franchise

Your franchisor may provide you with sales guidelines, but ultimately, it’ll be down to you to attract customers and keep them coming back to your service.

Attracting customers

When it comes to drumming up interest and attracting new customers to your business, the following marketing strategies are a good place to start:

Making calls

If you’re taking over from a departing franchisee, call the franchise’s existing regular customers and introduce yourself, assuring them they’ll still receive excellent service.

If you’re starting a new franchise, try calling target businesses in your area and introducing your franchise, telling them what you have to offer.

Sending mailshots

These are emails which you can send out to hundreds of recipients at a time, introducing your franchise and perhaps even offering a special deal or discount.

Taking out adverts in local publications or radio

These traditional marketing techniques have stood the test of time for many businesses. However, it’s key that the advert you put out is high in quality.

Hire a freelance designer to whip you up an advert for print, or get in touch with your franchisor to see if it has any ads you can take inspiration from.

Capitalising on word-of-mouth

When it comes to courier and delivery services, word-of-mouth is as powerful an endorsement as any – so be sure to ask satisfied customers to spread the word.

You might also maximise on this by offering special rewards or discounts to customers who successfully recommend you to a peer.

Getting listed in directories

Many consumers will search for courier services online, so it’ll be worth your while to have your franchise listed in online directories for your local area.

Keeping customers

Attracting new customers is one thing, but keeping them is something else; hinging on the quality of service you provide. Here are a few tips for encouraging loyalty:

Be consistent

It’s impossible to know how significant each package may be to its sender or recipient. So, treat every parcel as equally important and strive to provide a consistent level of service.

Remember, you’re only as good as your last job – even if you’ve done an excellent job for a client many times, this may not stop them from dropping you if you give them one bad experience.

Get to know them

It almost goes without saying, but customers will be more inclined to keep using your service if you’ve built a friendly relationship with them. Learning your main point of contacts’ names and roles will give them the sense that they’re valued by you.

Keep in touch

If you go for a while without hearing from your regular customers, get in touch for a chat. If you find they’ve turned to another service, try to find out why, and what you can do to win them back.

Keep your employees happy

This may sound irrelevant, but if your drivers and staff seem uninterested in what they’re doing customers won’t be impressed.

If employees appear demoralised, offer perks like bonuses for attendance, commission for finding new customers, and team social events.

Be proactive

If there’s a problem – for example, an order is not delivered on time – investigate why it happened and implement changes to ensure it doesn’t again.

Be apologetic and reassure the affected customer. You might even offer some form of compensation, such as a discount on their next order, to make sure they come back.

Offer the opportunity to provide feedback

Obtaining feedback from your customers is a great way to find out how you can improve your service. Many customers will also appreciate being given the option.

6. Hiring staff

As time passes and you secure more customers, you may find that there are suddenly too many parcels whizzing through your depot or too many clients demanding your services.

Or maybe you want to take a step back from driving and spend more time on managerial and administrative tasks, or perhaps you need someone else to manage your marketing.

Whatever your reason, it’s likely you’ll eventually need to hire more drivers or office staff. Recruitment can seem daunting, but it’s easier when split into different strategies…

  • Advertise on online job boards. Websites like Indeed and Reed are free to use and get plenty of visitors. It’s also worth looking for sites that only list specific job types – for example administrative roles or couriers.
  • Share the vacancy on social media. Your social followers will be interested in your service and eager to keep up with what you’re doing, so be sure to tell them you’re hiring – some may be keen to join you!
  • Advertise in local newspapers. While candidates increasingly seek jobs online, plenty still check the local paper for vacancies, so it’s worth placing an ad there.
  • Seek word-of-mouth recommendations. Consult your professional network and your friends and family. If you already have employees, you could try a referral scheme in which you reward them for recommending a successful candidate.
  • Build a careers page on your website. If you’ve the budget, create a dedicated space where you advertise your vacancies. If you already have employees, post testimonial articles or videos in which they talk about what it’s like to work with you.

When it comes to selecting candidates and interviewing, having a clear list of the values, experience and qualifications (if any) that you’re looking for will help you cut the wheat from the chaff – though sometimes it’ll be a case of going with your gut.

Think about whether you can offer training or whether your new employee will need to jump in as soon as they start, as this will help you decide on the level of experience you’re seeking.

You should also think about setting up an employee induction process to integrate new employees smoothly.

Remember, before completing the hire you’ll need to:

  • Register as an employer with HMRC.
  • Decide on their salary – at the very least, this must meet minimum wage.
  • Confirm that they have the legal right to work in the UK.
  • Enrol them into a workplace pension scheme, if they will earn more than £10,000 annually and are aged between 22 and the state pension age.

7. Selling your franchise

It may seem a long way off, but it’s a good idea to think about your exit strategy from day one. When it comes to franchises, exiting will most often consist of selling the business on to an aspiring franchisee who, after being authorised by the franchisor, will take over.

Preparing for sale

When preparing to sell, take the following steps:

Examine your franchise agreement

Your franchisor will have set out terms for exiting the business, and you’ll need to make sure you meet these. It’s also vital that you make your franchisor aware of your plans to sell the business on – some may want to be heavily involved in the process.

Decide when you should sell

Picking a time when the market is expected to be in good condition and your business is forecasted to do well will result in a better sale.

Speak to a solicitor

A solicitor may be required to carry out the legal transference of the business. Just be sure to use only those who are experienced in franchise resales and approved by the bfa.

Value your business

Your business’ valuation will depend on factors such as turnover, profit, growth potential, cashflow and size. Ask your franchisor what similar franchises in similar territories have sold for recently for guidance.

Investigate weaknesses and make improvements

Any problems or oversights in your business will be uncovered during the buyer’s due diligence and could be used to drive your price down, so work to rectify them in advance.

You might employ independent professionals to conduct a review and highlight such issues.

Create a prospectus of sale

This should contain an explanation of what your franchise does and how it works, its staff, details of the property and any equipment you own or lease, its sales history, up to date and accurate financial accounts covering the last three years, and your asking price.

Prepare a non-disclosure agreement

After finding an interested buyer, you’ll need them to sign an NDA so that they are legally prevented from sharing any of the information in your prospectus of sale with another party.

Remember: Don’t tell the world that you’re selling up; this will only cause confusion and doubt among customers and anxiety among staff. Once it’s time to tell your employees – i.e., when you have secured a deal – be sensitive but clear and answer their queries truthfully. Be careful not to breach their employee rights.

Finding a buyer

Finding the right person to take over your franchise is key, and as the franchisee there are a couple of ways you can go about this:

  1. Consult your franchisor. The brand might already have wannabe-franchisees lined up, but be wary that it may charge a fee if it secures the buyer. Your franchisor will have the final say on who the next franchisee will be, but that doesn’t mean it’ll ignore a buyer you recommend.
  2. Use a broker. While a broker will charge a fee (typically 10%), they’ll take the hassle of finding a buyer and negotiating prices away from you, giving you more time to keep running the franchise. Just be careful when selecting a broker – many will promise the earth without delivering, so make sure you meet with several and don’t just sign off on the first one you meet.
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