Add-On Services That Provide Customer Conveniences
As self-storage facilities become more customer oriented, many owners and operators are seeking ways to provide one-stop shopping for their tenants. One way is to offer ancillary services. Two of the most popular services are safe deposit boxes and private post office boxes. For most facilities, the income doesn’t add up to a great percentage of the overall business, but it does provide selling points to people who like to see “big box” type multi-service offerings.
Safe Deposit Boxes Safe deposit boxes were once the staple of every American bank. People kept their fine jewelry, marriage licenses, birth certificates, deeds, wills, and other important papers in them for safe keeping. However, in the past decade, safe deposit boxes have been eliminated from some banks, and new banks are being constructed without the former service staple.
No one knows that better than Stewart Gallagher, owner/manager of Colorado Vault & Safe Deposit Box Co. in Centennial, Colo. A former banker, Gallagher decided, along with his partner, Frank Robinson, to open a new type of storage business dedicated to offering safe deposit boxes.
The business is located in a strip mall and looks like any other retail business on the outside. But, on the inside, it houses a bank vault that mirrors any found in financial institutions. The company also offers the service as a financial institution would, giving one key to the customer and retaining a key for their manager. Both keys are needed to access the box and, once opened, the customer is left alone to inspect the contents. Gallagher says that about 70 percent of the facility is safe deposit boxes; the rest is gun storage.
According to Gallagher, part of what makes his business so profitable, with an average 80 percent occupancy, is that they’re located in a region where a significant portion of the population doesn’t trust the government or banks. Gallagher also explains their first location and their second, for which they are currently scouting, had to be located in an area with an affluent demographic.
While Colorado Vault & Storage doesn’t offer traditional self-storage space, Gallagher does consult with businesses, including self-storage owners and operators, on making their facilities more profitable. In addition, he’d like to partner with a self-storage facility at some point.
Elmwood Self-Storage & Wine Cellar in New Orleans, La., which operates a 215,000-square-foot storage facility with over 1,500 rentable units, offers its customers use of one of the 178 safety deposit boxes located in the vault on the property.
Elmwood, located in the affluent area of the Elmwood Industrial Park, sees approximately 35,000 people pass through the area on any given day. The owners of Elmwood wanted to offer a one-stop shop for self-storage, wine storage, and safety deposit boxes, as well as antiques/collectibles and gun storage.
Elmwood is open seven days a week, offering their tenants more access to their boxes than a bank. Like most facilities that offer this type of service, Elmwood provides tenants the chance to access their boxes after hours for a fee. Security is the same as a financial institution, with the customer holding a key and the facility holding the other.
Unlike most facilities, Elmwood offers a unique (and sometimes controversial) service called the “Swiss type account” in which customers are allowed to rent boxes under an assumed name. They also are not required to provide their contact information or address. According to Al Gardes, director of operations at Elmwood, Tony Soprano and Mickey Mouse have rented boxes there. He adds that while very few people do it, there are customers who want complete anonymity.
Gardes’ definition of “very few” is an average of two to three people a year. He explains that it’s not their business to know what they’re storing in their boxes as Elmwood has no care, custody, or control of the contents.
The policy is somewhat complicated for owners, however. In the event of a payment default, the facility has no way to reach the tenant. Anne Ballard, president of marketing, training and development for Universal Storage Group in Atlanta, Ga., also points out that if your facility requires safe deposit key holders to log in and log out, it may present a security issue as the facility has no way of really knowing who is holding the key and who is accessing the box.
Gardes says Elmwood protects itself as best possible while still offering the high-end service to its customers. Swiss type rentals are paid for three years in advance, are required to have a $300 deposit, and pay a larger fee than other rentals.
Scott Zucker, partner with Weissmann Zucker Euster Morochnik in Atlanta, cautions facilities who may be thinking of setting up Swiss type safe deposit rentals. “I’m not familiar with the laws in all 50 states, but generally, I would caution operators not to be in the business of renting to tenants without ID,” he says. “It may invite potential criminal activity.”
In the event law enforcement seeks to gain access to the box with a search warrant or seeks information, that information has to be turned over. “It may be that if information is needed on who rented the box, the facility may be complicit in criminal activity,” Zucker says.
While most self-storage facilities offer safe deposit boxes as an ancillary service to its tenants, Ken Phelps, clerk at Pacific Highway Storage in San Diego, Calif, says don’t discount the stand-alone customer who is looking for an alternative to the disappearing safe deposit boxes at banks. Pacific Highway Storage’s safe deposit boxes average 90 percent occupancy.
Potential tenants who are looking for a specific type of storage are given a complete tour of the facility, so they know what other services the facility has to offer for future needs.
Cost And Security The largest expense with offering safety deposit boxes is the high level of security, which includes the expense of installing a bank-style vault. Special attention must also be given to camera surveillance, off-site security, and possibly after-hours private security patrols.
Ballard advises that if you’re going to take on the expense of a vault and security, other offerings, such as antique, gun, or wine storage, may make it more profitable.
Post Office Boxes We’ve all seen the report about the death of snail mail. Turns out, those reports might be greatly exaggerated. Ask almost any self-storage facility operator who offers private post office boxes and they will likely say it is a great ancillary service to offer tenants—in the right location and under the right circumstances.
Elmwood Self-Storage recently installed 120 private post office boxes in its facility. The boxes are just the latest in the facility’s quest to market the facility as a one-stop shop for some of the self-employed business owners who rent storage space at the facility, as well as some of the 200 businesses located near the facility.
Gardes explains that, for the facility’s pharmaceutical reps and other business owners who operate their businesses out of their home and cars, having an Elmwood 70123 ZIP code is like having a 90210 ZIP code.
The post office boxes were installed near the office and retail area on the opposite wall of the bank vault. An employee area is located on the back of the wall where the post office boxes were installed, allowing easy access for employees to distribute mail on a daily basis.
Elmwood has a construction manager on staff, but, even if you don’t, he says adding post office boxes to a facility shouldn’t be too expensive. Plus, Gardes doesn’t expect it will take staff much time to distribute the mail.
Amanda Clontz, manager of American Store & Lock #5 in Charlotte, N.C., says it only takes about 10 minutes to sort mail into the 46 post offices boxes the facility offers. The facility rents post office boxes to tenants of the 582-unit storage facility, but also offers the boxes for free to those who rent office space on the property.
While the income generated from post office boxes is minimal, it’s a valued service. Clontz notes that the post office rental is always at 100 percent occupied. If a tenant defaults on the rent, the facility simply sends back the mail. When offering private mail boxes, Clontz mentions that tenants should understand that they have to contact each individual and business to change their address; they can’t do it through the post office.
Contract Annex Reliable Self Storage, a 540-unit facility in Victorville, Calif., doesn’t offer post office boxes to its customers, but it has found a way to make an ancillary service very profitable. The facility is a contract post office annex.
It can meter scan stamps and outgoing mail for customers, many of whom are elderly residents of the city who still highly value snail mail. The results are scanning an average of 300 to 400 packages per day, which generates $45,000 to $50,000 in sales per month. The commission for the facility typically averages about $10,000 to $15,000 per month in additional income, or 20 to 27 percent of the net income. Martinez says it requires two to three people to run the post office service side of the business.
One caveat: While serving as a contract post office annex, the self-storage facility is not permitted to have post office boxes on site. In addition, the staff cannot process passports and change of address forms or issue money orders.
There is a main post office in the town, but the owners saw the need for an additional annex about nine years ago. The facility gained the proper designation from the U.S. Post Office, and two customer service windows were created. The facility is so popular and busy that they plan to open a third window this year.
Time Is An Investment Whether you’re planning to offer private mailboxes or would like to open a post office annex within your facility, it does require some paperwork and time investment through the U.S. Post Office. Private mailboxes offer tenants a great ancillary service with little investment. In fact, Elmwood even obtained their P.O. boxes for free from another business that was closing. However, if you’re looking to boost profits, building a post office annex into your business plan may be worth investigating.
Kerri Fivecoat-Campbell is a freelance journalist based in the Ozark Mountains. She is a regular contributor to MiniCo’s publications. Her business articles have also appeared in Entrepreneur, Aol.com, MSN.com, and The Kansas City Star.