FedEx Renounces Any Plans for Franchising in U.S. after Joining IFA
DALLAS (Blue MauMau) - Some in the package shipping franchise sector are wondering what FedEx's next move will be with its struggling Kinko's network. FedEx acquired the chain in 2004 for $2.4 billion dollars. On June 2, FedEx announced that it was changing the Kinko's trademark to FedEx Office to better describe the wide range of services available at its retail centers, and to take advantage of its own recognized name. Now adding more curiosity to the mix, FedEx has joined the International Franchise Association, according to an announcement made by IFA in its recent issue of Franchising World magazine. The burning question asked by competing chains is whether FedEx is positioning itself to franchise Kinko's retail outlets in the U.S.?
But a spokesperson for the Dallas-based FedEx Office headquarters said in an interview today, "We joined IFA because we have 20 franchise locations outside the U.S. and we just see it as a good resource in helping to service our franchisees. We do not have plans at this time to start franchising inside the U.S."
In addition to its strategic decision to minimize the use of the Kinko’s trade name, FedEx announced in June that it would record a charge of approximately $891 million in its fiscal fourth quarter, which ended May 31. It stated that the charge relates predominately to a one-time, non-cash impairment fee associated with the decision to use the Kinko’s trade name and goodwill resulting from its acquisition.
They also stated that the goodwill impairment charge "reflects a decline in the current fair value of the FedEx Office unit in light of current economic conditions, the unit’s recent and forecasted performance and the decision to reduce the rate of store expansion."
Brian D. Philips was named president and CEO of FedEx Office after the senior management staff was reduced and restructured to better support execution of the company's strategy and to control costs. Earlier this year, the company reduced future capital commitments by slowing the rate of expansion from about 300 locations in fiscal year 2008 to about 70 in fiscal 2009.
In their announcement they said that these changes at FedEx Office are the latest in a series of moves designed to more sharply focus the division on profitable core revenue growth and incremental shipping volume, which contributes about $1 billion of revenues annually to FedEx Express and FedEx Ground.
FedEx Office touts that it is the world's leading provider of document solutions and business services. It has a global network of about 1,900 digitally connected locations in 11 countries.
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Bridge For Sale
If you believe that a worldwide transportation company with a market cap of $25 Billion is joining the IFA in order to better support a couple of dozen foreign franchisees - I have a bridge in Brooklyn for sale.
We'll see how this plays out.
This is all simple speculation but it is an interesting notion to do a reverse roll-up of the Kinko's network and place the local management and partner/operator back into the communities they serve – which is the key to success in this industry.
Now that they've written down most of the premium paid to the VC's, think of the opportunity to raise capital while sharing in the ongoing risk/reward and maintain their retail presence. They already have the support and marketing models in place...and it would do wonders for their forward earnings/share price.
To say that the Kinko’s debacle has been a drag on FDX earnings and the share price is an understatement. If it wasn’t for the price of oil and the general downturn in the economy that was used to mask the write-down, FDX announcing the $800MM write-down of Kinko’s would have been much bigger news.
A hybrid model should deliver all of the benefits of the UPS/franchise model - without most of the downside associated with not being able to choose your partners and legacy operators. Kinko's was never stronger when they had the 51/49 partnership model in place. Maybe they are thinking about bringing back a modified version of the good old days?
Sorry - I meant "FedEx Office" instead of Kinko's ;-)
acting chair of ifa
Isn't the acting chair of IFA CEO of Postnet? hummmmmmmmm
What are you insinuating?
How about, "Catherine Monson, President of PIP Appointed to IFA Board"
Fedex's 10K
There are some clues in the recent 10k, but I fail to see how the impairment to the trademark is worth almost a $1 billion charge. This smacks of earnings manipulation, when Fedex franchises FedEx Office and finds out that there change in the trademark wasn't impaired at all.
Who is going to stop going to FedEx Office because it is no longer called "FedEx Kinko's"
Doesn't make a lot of sense to me.
Michael Webster PhD LLB
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