Shipping and packaging franchises have been around for a long time, and the lineup of products and services they provide has expanded significantly over the years.

Most often classified as business-to-business service providers, shipping and packaging franchises actually straddle multiple categories today. A number of positive trends in both the business and consumer sectors are driving the growth of shipping and packing franchises, and that bodes well for their future.

There are more than a dozen companies offering franchises listed under the heading "Shipping - Packaging/Mail Services" in The Franchise Handbook. Franchise fees in this segment range from about $15,000 to more than $275,000, and the assortment of products, services, training, support and marketing varies from franchise to franchise.

The average franchise fee in the shipping and packaging category is between $25,000 and $30,000, according to listings in The Franchise Handbook, and the total capital investment required averages just under $100,000. Royalty fees typically run about 6% of sales, but at least on franchisor, Packaging and Shipping Specialists, charges its franchisees no royalties.

Franchising is a major force in this industry, accounting for at least 70% of the revenues generated by all types of packaging and mailing businesses, according to the Dept. of Commerce. Analysts say franchising also accounts for nearly all of the shipping and packaging industry's growth in terms of new units launched.

While independent operators do compete successfully in the shipping and packaging industry in a handful of markets-mostly major metropolitan areas-the economies of scale and marketing clout provided by the leading franchise chains make the thought of entering this business through the independent route today a truly daunting prospect. Franchising's dominance of shipping and packaging is likely not only to continue, but to increase.

Mailing and packaging stores have become the de facto shipping departments for thousands of other businesses, both large and small. The industry has been a major beneficiary of outsourcing, the practice of turning responsibility for non-core business activities over to outside specialists. Outsourcing has emerged as one of the dominant trends in business over the past 15 years.

"Outsourcing increases value and lowers costs for companies that use it strategically," says outsourcing expert Dr. James Brian Quinn, a professor at Dartmouth College's Amos Tuck School.

According to the Outsourcing Institute, the top reasons companies give for turning to an outside provider of business services such as shipping and packaging are: to improve company focus (55%), to reduce and control operating costs (54%), to free up resources for other purposes (38%), because resources are not available internally (25%) and because the function is difficult to manage or out of control (10%).

Historically, outsourcing relationships have involved a third-party provider assuming almost total responsibility for the administrative and transactional aspects of the function being outsourced. In effect, the outsourcer operates and manages that part of the client company's business as a sort of satellite division.

What is emerging as the latest trend in outsourcing is more of a utility-based model, with client companies using the outsourcer's services only when needed and paying only for what they use. This pay-as-you-go approach is a good strategic fit with the pricing models used by most packaging and shipping franchises.

That is important to franchisees and prospective franchisees in the shipping and packaging sector because it expands their universe of potential clients. Many franchised business services firms are too small to assume full responsibility for a function such as shipping and mailing at large companies. However, the services-on-demand model makes it possible for them to go after new clients regardless of size.

Another trend favorable to shipping and packaging franchises is a definite downward migration in the use of outside business services providers in terms of the size of client companies. According to a recent Outsourcing Institute report, demand for these services is exploding among mid-size and smaller companies.

These smaller companies are seeking to capture some of the same benefits they have seen larger firms capture through outsourcing. By hiring outside providers to do work such as packaging and shipping and other non-core activities, major corporations are slashing overhead and paperwork.

Many have been able to cut total costs for outsourced processes by 10% to 40%, resulting in hundreds of millions of dollars in saved expenses at each company, according to the Outsourcing Institute.

"Now there are indications that middle-market companies are also getting on board the bandwagon," a spokesman for the Outsourcing Institute reports. "This mid-tier of companies-those with 100 to 1,000 employees and revenues under $2 billion-represents a massive piece of the American business pie."

Research also suggests that relatively few mid-market firms adopt the approach of their larger counterparts by outsourcing entire functions such as finance and accounting or human resources. Instead, they favor a piecemeal strategy, something that fits nicely with the diverse menu of products and services offered by shipping and packaging franchises.

A recent survey by Gartner Group shows that 73% of middle-market firms currently rely on outside providers for some of their enterprise business processes. More than half rely on third-party suppliers for some benefits administration services, and 25% turn to outside firms for services such as accounting and tax management.

Analysts say mid-market companies represent a tremendous growth area-a development of key importance to those considering a franchise business in the shipping and packaging industry.

While almost 30% of large companies contract with an outside supplier for services in the packaging, shipping and mailing segment, just 13% of mid-size companies currently avail themselves of those services. As a result, the growth opportunity for franchises in this area is huge.

One reason why the use of outside service providers has been slower to take off among smaller companies has to do with the size of the firms providing those outside services. "It's just been hard for smaller companies to find business services providers that are the right size to meet their needs," says Robert Brown, an analyst with Gartner Group.

Most suppliers in the business services outsourcing arena have focused their efforts on very large companies because that is where the greatest demand for outsourcing has been found. From an economy-of-scale standpoint, those vendors cannot justify bidding on contracts to supply services such as shipping and packaging to mid-size and small companies.

However, shipping and packaging franchises are smaller, nimbler and more flexible than the typical outsource services providers targeting large companies. Those qualities make them much more attractive to a clientele of medium- and small-size businesses.

On a broader scale, global trends and global demand are driving important changes in the business and consumer sectors both at home and abroad, and a number of those changes are relevant to shipping and packaging franchises.

Technology and globalization are reshaping companies and the way they do business. Partly as a result of corporate restructuring in many industries, growth in the small-business and small-office/home-office (SOHO) sectors is skyrocketing, driving booming demand for the products and services provided by shipping and packaging franchises.

At the same time, lifestyle factors are driving significant changes in consumer behaviors around the world. People everywhere are trying to do more with less-and to do it more quickly. "Multi-tasking" has become the mantra for millions of people. They want quality service and time-saving convenience, especially when it comes to mundane but important tasks such as packaging and shipping.

The burgeoning popularity of online auction sites such as eBay has provided another important demand driver for services offered by shipping and packaging franchises. Some leading franchises have added specialized services in this area, and several new companies have been launched specifically to meet the packing and shipping needs of online buyers and sellers.

The UPS Store franchise system last year began testing a service that allows customers to drop off merchandise they would like to sell on eBay, such as used cameras, sporting goods, household items, etc. UPS Stores package the items and send them to AuctionDrop, a California Internet auction house that sells through eBay.

Formed through the 2001 acquisition of Mail Boxes Etc. by shipping giant UPS, the UPS Store system is the largest franchisor of shipping and packaging stores in the world, with more than 4,500 locations in 40-plus countries. With some 450,000 people making all or most of their living by selling items on eBay-and generating more than $24 billion in online sales in the process-the partnership between the franchise system and the Internet bazaar seems a logical match.

The products, services, training and support offered to franchisees varies from franchise to franchise in the packing and shipping category, as it does in most industries. Some things franchise consultants say prospective franchisees should look for include:

One of the greatest advantages to owning a shipping and packaging franchise is that the franchise's customer base includes virtually every resident and business in the local community, says one veteran franchise consultant.

"Franchises in this segment are retail-based, but they provide tremendous opportunities for franchisees to establish, develop and grow long-term relationships with local small and mid-size businesses," he says. "At the same time, franchisees offer services for which there is strong and growing demand in the consumer sector."

Included in the menu of products and services offered by most shipping and packaging franchises is mail box rental, which contributes to their position as a cornerstone of the local business community in many neighborhoods.

"Many people, both business owners and private consumers, prefer to deal with a shipping and packaging outlet for their mailing needs, especially for bulky or unusual items," the consultant says. "Mail box rental service adds another layer of convenience, since most franchises are open longer hours than the local post office."

When shopping for a franchise in the shipping and packaging industry, the same rules apply as when conducting a franchise search in any other industry. "To form a successful, ongoing relationship with your new franchise partner, one that has the potential to give you the profit and fulfillment you want, you must be extremely careful that you are making the right decision and handling the transaction properly," says James Meaney, a long-time franchise attorney and author of "How To Buy A Franchise."

Meaney says that before you consider buying any type of franchise you should ask yourself some very fundamental questions: How much of a team player are you? Can you accept direction from others and play the role of follower to get your business up and running? How do you feel about sharing your profits and credit for your success with a franchisor?

He also stresses the importance of being aware of what it takes to run your own business-even under the protection of a franchise system. In most cases, you have to be willing to put in long hours, especially in the beginning, he says.

"The message is clear," Meaney says. "Before you consider buying a franchise or starting any other business, you should first conduct a thorough self-analysis of your goals, aspirations, abilities, weak points and personality traits, both good and bad."

"Be candid with yourself about your level of ability, and own up to those traits that are undesirable in a franchisee or any other type of small business owner," he adds. "The value of this self-analysis cannot be overstated. First, know thyself."