Canada Post cuts franchisees’ stamp sale commissions

Commissions on stamp sales dropped yesterday from 17.5 per cent to 5 per cent for the 3,500 franchises that sell postal services out of privately owned outlets in pharmacies, corner stores or malls.

The Globe and Mail
December 2, 1998

Canada Post cuts franchisees’ stamp sale commissions
Owners say restructuring will slash profits and kill their business
Heather Scoffield

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Canada Post Corp. has restructured the commissions it pays to postal franchises in a way that franchise owners say will wipe out their profits and drive them out of business.

Commissions on stamp sales dropped yesterday from 17.5 per cent to 5 per cent for the 3,500 franchises that sell postal services out of privately owned outlets in pharmacies, corner stores or malls.

To make up for the loss in revenue, Canada Post is increasing commissions on other services such as holding customers’ parcels and renting postal boxes. Stamps, though, account for up to 70 per cent of franchisee’s postal-service-related sales.

The Crown corporation is also granting franchises a subsidy that varies, depending on how big the postal outlet is. The maximum subsidy is $25,000, which will be paid in monthly installments to outlets where sales are more than $300,000 a year. Annual revenue for rural outlets is guaranteed.

“We believe the new plan is fair and equitable to all,” said Michel Tremblay, vice-president of retail business at Canada Post.

But franchise owners say the restructuring gives huge benefits to rural post offices, while many urban outlets will find it unprofitable to continue in business.

The restructuring “will encourage mayhem,” said Jean Paul Sirois, president of the Canadian Associates of Postal Franchisees, which the franchise owners formed to fight the changes to the commission structure. “Certainly a lot of them will go under.”

He said urban outlets earn the majority of their revenue in stamp sales, especially in selling stamps at a discount to so-called stamp shops that just sell stamps but don’t offer other postal services.

But now, Canada Post is offering to sell stamps to these shops at the same discount, robbing franchises of a key market, Mr. Sirois said.

And since the revenue of rural outlets is guaranteed, rural franchises will be able to sell stamps at a much steeper discount than urban outlets, and will take over much of their business, he said.

“It’s not fair,” said Rod Beatty, a co-owner of a postal franchise in Ottawa’s Rideau Centre. “It’s becoming financially unviable for us.”

He said his revenue will likely fall about $40,000 a year, which will wipe out his entire profit.

But Canada Post says it has consulted widely and does not believe the changes will drive franchisees out of business.

“We don’t know of instances where that’s going to happen, and if it is going to happen, we want to talk to these people,” spokesman John Caines said.

Postal franchises were never meant to be big money makers for the stores that set them up, he said. Rather, they were meant to complement the existing business by drawing in traffic.


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