UPS Denies Existence of Feasibility Study, Now Unsealed as Evidence

ATLANTA – In an interview last October with United Parcel Services, spokesperson Norman Black emphatically stated that he could not confirm that UPS or Mail Boxes Etc. (MBE) had engaged the services of the Boston Consulting Group to conduct a major study (pdf file, 15 pgs) on the financial health of the system. When informed that a deposition of MBE in-house counsel Rich Kolman revealed the alleged results of the feasibility report showing “77 percent of the network, meaning 77 percent of the stores, were operating at “either an at risk or worse status,”  Black replied, “We don’t need an outside consultant to tell us the health of our network. I want to be very clear here. I have no idea what you are talking about.”

Trial exhibit, top of slide 8. Source: Boston Consulting Group study of the Mail Boxes Etc., UPS Store chain

Now as franchisees prepare for trial in the Morgate LLC v. Mail Boxes Etc. case, the 2006 Boston Consulting Group report that Black says he knew nothing about will be a focus in the litigation, highlighting areas related to franchisee profitability or the lack thereof. Fifteen pages of the report have been unsealed by Judge Highberger, who is presiding over the trial.

But Black went farther saying that even if they had hired a vendor to perform such a study, they would not discuss the results. When asked if a study did show that 77 percent of stores were at risk, should that information be disclosed in the franchise disclosure documents for prospective franchisees, he said, “I can’t discuss it. Again, I can tell you as a general matter that UPS/MBE does not need an outside consultant study to tell us the health of our network.” Black said he did not have time to “start fishing back to something that had happened in 2006.” When asked if someone else in the corporation could answer questions about the study, Black firmly stated no.

But the Boston Consulting Group study actually did exist in spite of Black’s comments.  

When Mail Boxes Etc/The UPS Store franchise advisory council met in February 2008, the report was one of the main topics of discussion, according to the council’s agenda. MBE vice president of marketing Tom Crockett reviewed the activities of the consulting group, which he said was hired to evaluate the current status of the network and help identify future growth opportunities for The UPS Store.

Currently they are still in the evaluation stage, and are looking at every possible parameter to understand the business. They have interviewed franchisees, MBE and UPS retail management, visited TUPSS [The UPS Store] and competitor’s stores, and conducted a franchisee survey. They are reviewing and analyzing all of our factual data and trends (i.e. our numbers), industry data and trends, competitor data and trends and franchising data and trends. They are looking at individual store metrics such as product and service issues (challenges and opportunities), refining customer “segmentation” i.e. trying to understand customer needs, and which customers contribute most to our business. They are trying to define our core customer, how to communicate with them, how to motivate them and how to capture them. In short they are taking a “deep dive’ into our business in order to help move the TUPSS network to the next level.

The work should be completed in approximately six more weeks when a full slate of recommendations should be available. The results will be evaluated by MBE and UPS and plans of action developed to implement the selected recommendations. At that time, decisions will be made regarding how to communicate the findings.

According to one undisclosed source, UPS spent approximately $3 million to engage the Boston Consulting Group to do the study.

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