5 Reasons to NOT Invest in the Amazon Delivery Franchise (DSP Business)April 11, 2022
Amazon is offering a new franchise opportunity. For as little as $10,000 aspiring entrepreneurs can start their own delivery business for Amazon packages. The Amazon DSP, or Delivery Service Partner business looks great at first glance, but is it really as good as most people think? We’ll look at that today on Franchise City.
You have a very low investment starting at $10,000. You don’t need any experience and Amazon, a company we all know and trust and one of the biggest in the world will help you get started. Amazon’s own estimates suggest you’ll be running a business with between 20 to 40 trucks, up to 100 employees, grossing between 1 million to 4.5 million and profiting up to $300,000 a year. They’ll help you set up your business, help you build your team, you’ll get big discounts on the vans and all the tech you need to get started, they’ll give you 3 weeks of training and ongoing support leveraging their 20 years of technology and logistics experience.
But what are the negatives? Well – let’s start with the curious fact Amazon is specifically looking for people with no experience. Why is that? If you had a choice of hiring someone who had a ton of experience or someone who had no idea what the heck they are doing – who would you hire? I know who I would hire. So why is Amazon, this massive company focusing on people with no experience? Well one possible reason, purely speculation and only Amazon knows why, but its possible because people in the industry, who have experience, don’t want to do it. People that understand what is actually involved, the margins, the risks, the expenses, and we’ll cover those shortly, are just saying no. According to Peter Schlactus, he is the co-founder of the “Association for Delivery Drivers” and was recently interviewed by CBS news – that is very likely the case. Here is what he said:
“The costs of working with Amazon are so substantial that independent delivery companies are increasingly turning away Amazon’s business, The reason: Amazon requires that delivery companies hire their drivers as employees, rather than work with independent contractors. “The challenges of doing delivery work for Amazon have taken many dozens of delivery owners by surprise,” Schlactus says. “My read is that Amazon is doing this to address a dwindling supply of independent delivery companies who are willing and able to work with them.”
And that big $300,000 a year in profit. Keep in mind that is the absolute best case scenario provided by Amazon themselves. This is the top end of what you can earn, and likely that number will be less. Amazon states you’ll be operating 20-40 trucks so obviously you’ll need those 40 trucks in this example to make the highest amount. So let’s Divide $300,000 a year by 40 trucks – that is $7,500 profit per truck per YEAR. $7500 per route per year. Anyone in the logistics industry knows that it doesnt take many unexpected expenses to quickly take this route from positive revenue to losing money. When you look at the numbers from that perspective you realize how slim these margins really are. You have this big truck, very expensive to operate, you have fuel prices all over the map, employee minimum wages changing, lot’s of variables and a razor thin profit potential of $7500 a year. That works out to about 28 dollars per working day in profit per truck. Any fluctuation in expenses could impact you in a big way. So reason Number two – very tight margins. (complete article at http://www.franchise.city)
So is the Amazon franchise a good opportunity? That is up to you to decide. We like to give aspiring entrepreneurs both sides of the story so they can make an educated decision. don’t forget to like and subscribe and hit that bell for updates.