If you’re looking to start a small business, Amazon allows you to have your own delivery franchise using Amazon’s logistics methods with its program Delivery Service Partner.
We’ll discuss what an Amazon delivery franchise is and how it works, the costs associated with it, and how you can apply to start offering Amazon logistics services.
- What is an Amazon Delivery Franchise?
- How Does an Amazon Franchise Service Work?
- How Much Does an Amazon Franchise Cost?
- How Much Can You Earn with Amazon Delivery Service Partner?
- How to Get Started with an Amazon Logistics Franchise?
- Is Amazon Delivery Franchise a Good Investment?
- Summary: Pros and Cons of Having an Amazon Delivery Franchise
- Final Thoughts
What is an Amazon Delivery Franchise?
The delayed delivery of packages was probably the great Achilles' heel of the e-commerce giant, as it continued to rely on courier companies such as FedEx and UPS.
Thus, Amazon launched a program called Amazon Delivery Service Partners, which allows small businesses to operate and have their own Amazon logistics business franchise. Now, the ecommerce giant has its own logistics franchise to avoid depending on UPS and FedEx.
This program has been Amazon's checkmate in its particular war with the carriers companies, thus gaining more solvency to progressively depend less on them. It is the same reason that led Amazon to launch Amazon Flex.
Amazon has been looking for ways to have more control over how it delivers its goods. With the Delivery Partner program, launched in 2018, contractors across the United States and other countries can start services to deliver Amazon packages.
Indeed, the Amazon delivery franchise program’s goal is that the packages go from the Amazon center or a franchise station to the customer, so that everything remains within the company, without a third-party action.
How Does An Amazon Delivery Franchise Service Work?
Amazon Delivery Service is currently available in the US, Canada, UK, Spain, Germany, Italy, Ireland, Brazil and India.
The program provides delivery vehicles for its operations, through a “flexible lease” option that allows entrepreneurs to lease Amazon-branded vans.
The number of Amazon-branded vans and employees will depend on the volume of packages your business delivers, the shopping events coming up and the performance of your business. After the training and once the business is launched, you can start with 5 vans and a few employees. Over time, you could manage between 20 and 40 vans and 40 to 100 employees.
Of course, limitations on fleet size and employees are to avoid any delivery franchise from gaining too much logistics power against Amazon.
However, if you already have an existing fleet of vehicles, you can use them as long as these vehicles meet their requirements.
The Delivery Van Cost and Profit
The upfront cost and the liquid asset that Amazon requires when applying for this program, cover the price of the first 5 leased Amazon vans.
The first weeks after your training and when launching your business, you’ll lead your first 5 vans and drivers.
One of the most important reasons why Amazon requires entrepreneurs a 30K on liquid assets is because you will be the one who is in charge of these lease payments on those 40 trucks, as well as the insurance liability and employee liability.
There is no obligation to handle the 40 trucks offered for this program, but you'll need those trucks to make the highest yearly amount. Moreover, a delivery company may not achieve revenue within the range until it operates a fleet size of 20 to 40 delivery vehicles.
Let's say you make $300,000 a year as Amazon estimates and you drive the maximum number of trucks Amazon allows, which is 40. This would mean that each van is making $7,500 a year.
If the margins are already low, imagine if some of your drivers have accidents, then this margin will be reduced as the insurance premium will go up.
How Much Does an Amazon Delivery Franchise Cost?
The first rule for joining the Amazon logistics franchise program is pay-to-play.
According to Amazon, startup costs begin at $10,000, and you’ll receive three weeks of hands-on training, along with two weeks in the field.
The upfront cost covers licensing, services like accountant and lawyer fees, set up supplies (such as a laptop and timekeeping software), first 5 Amazon-branded vans, recruiting costs such as job postings and driver training, and owner training, but as mentioned in the section above it doesn’t include delivery vehicles.
Besides the $10K, when applying for the delivery business program, Amazon requires entrepreneurs’ to have liquid assets of $30K, so they make sure you have sufficient funds to cover the upfront cost as well as your expenses while you are training and growing your business.
How Much Can You Earn with Amazon Delivery Service Partner?
Truly, anyone who wants to join the Delivery Service Partner program will end up paying more than $10,000 for a full-time job as we mentioned before, and, consequently, entrepreneurs won’t know what the minimum earnings exactly are going to be.
Even though Amazon on its page says that a delivery franchise could realize annual profits of $75,000 to $300,000, also, according to its Amazon DSP brochure, these revenue and profit projections are unproven estimates.
We do not guarantee results of any kind, including that what a delivery company earns will exceed the owner’s investment in his or her business.
How to Get Started with An Amazon Logistics Franchise?
First, comes the work of building and growing the business: getting the required licenses; interviewing and hiring employees; organizing business services; setting up a pay structure, and coaching your employees to exceed Amazon's expectations for every delivery.
Subsequently, to get started, entrepreneurs will need to have at least five delivery vans, with the goal of reaching a fleet of 20 over time if you want to reach Amazon’s profits estimates.
In the long run, each franchise will be able to hire 100 employees and have a maximum of 40 vans, which according to calculations by the ecommerce giant can generate $300,000 in annual profit, although the reality may be different.
According to the retailer, this program is near its 75 shipping stations, which are located all across the US.
Is An Amazon Delivery Franchise a Good Investment?
If Amazon is the only client or business you own, you're putting your eggs in just one basket and, therefore, your risks are higher.
For example, if Amazon decides to restructure their business by closing down a warehouse near your station because they’re not having enough demand or just changing the strategy because they don’t need as many of these partners as they previously thought they did, could significantly impact your business and your profit.
Similarly, Amazon sellers have constantly been hit with high selling fees every year and Amazon can get more of that profit margin through the efforts of these.
Also, every time an Amazon seller has products performing well, Amazon decides to make an in-the-house similar product which it’ll be put under the Amazon brand's umbrella, and cut prices low enough so sellers won’t have any chance to compete against its giant monopoly.
Likewise, the Amazon Flex program was made with practically the same purpose as Amazon Delivery Service Partner, to decrease its reliance on third-party delivery companies. With this type of business model, Amazon drivers run their own business on their own vehicles and their income only depends on Amazon’s demand.
Thus, if you choose Amazon Delivery Service Partner as your business model, you will be entirely dependent on Amazon.
Summary: Pros and Cons of Having an Amazon Delivery Franchise
The following table summarizes the perks and pitfalls of becoming an Amazon delivery service partner:
Pros of Having an Amazon Delivery Franchise
- No logistics or transportation experience is necessary.
- Access to Amazon’s technology and logistics.
- Amazon provides you with all the tools and resources.
- Amazon provides you with training.
- Potential revenue and profit.
- On-demand support.
Cons of Having an Amazon Delivery Franchise
- A minimum investment of 10K to start the franchise.
- You’ll be responsible for hiring and managing your own employees.
- A full-time job.
- No control.
- High-stress environment.
- You’ll need to meet Amazon’s strict delivery requirements with an ultimate customer experience.
- Amazon doesn’t guarantee your earnings.
- The number of employees and vans is limited.
- If Amazon's volume goes down your work could be severely impacted.
Anyone in the countries and territories mentioned above, and with a liquid asset requirement of $30,000, can set up a parcel company under the umbrella of Amazon. But like all investments, you must consider the pros and cons, along with the risks before investing in any business opportunity.
Amazon Delivery Service Partner Program can look like a good opportunity for some entrepreneurs looking for a reliable and low startup cost business model. However, it’s important to do some research and consider all the facts before making a decision.
One of the most important factors you have to consider is that your volume of work will depend on the retailer, so you will run the same risks or more than a contractor does.
Do you own an Amazon franchise business? How is your experience? Share your opinion with us in the comments sections below!