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.”
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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Related Articles:
- Mail Boxes Etc Franchisees Head to Trial with Crucial Exhibits in Hand
- Court Certifies Nationwide Class Action against UPS on Fraud Claims
| Attachment | Size |
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| BCG Partial Report.pdf | 1.21 MB |
- Franchise topic:
Jane??? Jane???? Are you out there? Are you reading here today?
Is Paul with you???
Welllllllllllllllllllll---Jane and Paul might not have signed on today afterall.
It sounds like there is a little housecleaning going on at Corporate Headquarters.
Yikes, all those great depos, I can't believe they are letting those good people go after them.
Bye Matt Roybal!
NEXT!!!!!!!!!!!!
Information has been circulated recently regarding a Canadian Arbitration that apparently was recently unsealed by the Canadian Court System.
IN THE MATTER OF AN ARBITRATION
BETWEEN:
MBEC COMMUNICATIONS INC.
- and -
DOUGLAS W. GABEL, 1261658 ONTARIO LTD., and
RASDA HOLDINGS LIMITED
Heard at Toronto on June 16 and 17, 2008
P. T. Galligan
Yes, I can address this decision and will do so shortly. It is an important decision and I do have an article forthcoming on the MBE and UPS situation.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Just interested to find out how many MBE and UPS stores have had recent UPS sponsored AMPC shipping centers suddenly opened up in their franchise back yard? Prior to January 1, 2009, efforts by this competitive shipping neighbor to acquire a UPS shipping services over the past 2 years were always denied by UPS. However after January 1, 2009, when AMPC lost their DHL domestic presence, 3000+ AMPC centers instantly became UPS APO’s with full services. Is this now the new UPS policy or strategy to bankrupt away the MBE/UPS Store problem? Anyway, efforts to remove the new UPS backyard competition were sternly overruled by UPS senior management. In the final document/decision from MBE legal, it was made very clear to us that our exclusive franchise area now only applies exclusively to MBE UPS Store service areas and UPS retains their brand right to open a UPS supported APO center any were they chose with or without a business case. The new UPS AMPC center stays. How does this new despicable UPS competitive action fit into the Average Store Profitability Feasibility Study? Is AMPC now the new UPS snake in the grass store front?
Another Disenfranchised UPS Store Owner
Why shouldn't an independent store be able to have a UPS account. Are you afraid of competition. As long as you are the one in your territory with the UPS Store sign over the door, you have the major advantage, do you not? As a UPS Store you get the maximum discounts in the industry without having to earn them based on volume. Did you not know when you signed on to be a UPS Store that the territory protections applied only to not having another UPS Store physically within your territory?
Might as well complain about Staples, Office Depot and Wal*Mart.
You are obviously one of these Kool Aid drinking, brainwashed, brown nosers. You have no idea how the Corporate Pigs at UPS operate.
I can give you Dozens, yes thats right, DOZENS of examples where companies with lower shipping volume than a UPS Store get bigger discounts on shipping from UPS. To make things worse, ASO can charge whatever they want for UPS shipping services, not true with The UPS Store, Stores are regulated by UPS communist management as to the maximum "retail rate" that they can charge. These margins simply are not good enough to sustain a shipping business. Its that simple.
We bought our store on the UPS commitmant by UPS "that no more ASO operators would be allowed". UPS told us they were committed to protecting the store system. What a bunch of lies and misrepresentations. UPS has done nothing to protect the store system and in fact has taken every step possible to destroy the network and the owners who invested life savings. Why should other shippers recieve for free what store owners paid for? As far as the BSG study that was in thier hands at the time we bought into this mess in no way would we have moved forward knowing any part of the BSG study results. Maybe thats' why UPs refused to let us see a copy?
Why shouldn't an independent store be able to have a UPS account. Are you afraid of competition. As long as you are the one in your territory with the UPS Store sign over the door, you have the major advantage, do you not? As a UPS Store you get the maximum discounts in the industry without having to earn them based on volume. Did you not know when you signed on to be a UPS Store that the territory protections applied only to not having another UPS Store physically within your territory?
Might as well complain about Staples, Office Depot and Wal*Mart.
What discounts does an aso status get you in relation to a ups store franchise discount. Is there really that much of a difference?
First, get your facts straight. Dominoes pizza franchisees pay less for a NDA than the COST of the same product to a UPSS owner. UPS made promises and has renigged on almost every one. Further, an MBE/UPSS has higher costs than an independent, Staples, etc.etc. ONLY UPS is making a profit on these stores, not the owners.
First, let me say that my post was somewhat tongue in cheek. UPS is contemptable! You should file suit immediately if they made promises that you can prove they made and broke!
First, get your facts straight. Dominoes pizza franchisees pay less for a NDA than the COST of the same product to a UPSS owner.
Dominoes is not in the same industry, they do not retail shipping, therefore they get a better price. what do they need with next day air anyway. Maybe they get a good deal because Stuart Mathis used to work for them. Or maybe it is a matter of competition, they have a choice. Domino'e could choose to give their business to Fedex. You do not have that choice, so of course you have to pay more.
UPS made promises and has renigged on almost every one. Further, an MBE/UPSS has higher costs than an independent, Staples, etc.etc. ONLY UPS is making a profit on these stores, not the owners.
Show proof that UPS made these promises, if indeed they did, then they may have been acting in bad faith! Why would they favor captive business over gaining new business, it would not be a smart decision.
The higher costs of operating a MBE/UPS Store are irrelevant. I am an ex-MBE, now independent, UPS screws me every way they can. Thus, most of my packages go Fedex. They refuse to give me an ASO account, they charge me full published price plus all of the surcharges like address correction and Saturday pickups that are waived for others. It is stupid on their part, but no one every said they had integrity or good business sense!
Show proof that UPS made these promises, if indeed they did, then they may have been acting in bad faith! Why would they favor captive business over gaining new business, it would not be a smart decision.
I think franchises have been trying to show the proof since 2003. It's very tough for sampson to go up against goliath in todays legal system.
Remember this:
“We know from speaking to other franchisees that are fighting UPS that this company will pull every bullying tactic in the book to put us out of business. They filed frivolous TRO’s (temporary restraining orders) for trademark violations in Federal Court. It is the kind of tactic often used by big business to drain the small businessperson of all their financial resources so they can’t obtain justice in the courts. Unable to face us in a fair court fight, they rely on dirty tricks. They are totally indifferent to the pain and suffering that they have inflicted on their franchisees. Our lives are no more than collateral damage in their drive for more corporate profit,”
INTEGRITY! WHO UPS?
ASK ANY TUPSS CO-OP ADVERTISING GROUP IN AMERICA THIS QUESTION; THE FRANCHISE AGREEMENT STATES THAT "CO-OP MONIES WILL BE PLACED IN AN INTEREST BEARING ACCOUNT AND THE PROCEEDS RETURNED TO THE CO-OP" HOW MUCH INTEREST ON DEPOSITS HAS YOUR CO-OP RECIEVED?
ANSWER-NOT ONE ADVERTISING CO-OP HAS RECIEVED ONE PENNY OF INTEREST PAYMENTS FROM TUPSS.
SO MUCH FOR THE CONTRACTUAL COMMITMANTS AND INTEGRITY OF TUPSS AND UPS.
this is indeed important as I feel the judge really got it regarding renewal and articulated very well the essence of the argument we have pursued for over 6 years. At times our message may have been less clear than that expressed by Mr. Gabel and picked up on by the arbitrator.
This never was a renewal case, UPS mothballed the MBE trademarks. They didn't modify them for use upon renewal. UPS simply substituted its trademarks for the MBE trademarks. To see this you have to review the bankruptcy materials and figure out the new corporate structures that emerged - the MBE trademarks, but not the contracts, were assigned to a company that could not lease them to any North Americans. This is a case about substitution of marks and not a renewal or modification of old marks.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Information has been circulated recently regarding a Canadian Arbitration that apparently was recently unsealed by the Canadian Court System.
IN THE MATTER OF AN ARBITRATION
BETWEEN:
MBEC COMMUNICATIONS INC.
- and -
DOUGLAS W. GABEL, 1261658 ONTARIO LTD., and
RASDA HOLDINGS LIMITED
Heard at Toronto on June 16 and 17, 2008
P. T. Galligan
It is common sense that this fact needed to be disclosed to the future zees in their disclosure documents. I don't understand how zors get away with this. If the zee's don't win in court I am sure not only the zees will be dissappointed but many zees across the country. If the lawyers say it doesn't have to be disclosed than no one should trust an FDD.
Perhaps the franchisee associations should make up an addendum for zee wannabees. Every zee has the option to join a franchise assoiciation regardless if the FDD says an zee cannot join. In the addendum should be things that will protect the zee from a one sided contract. This is one way to grow franchise associations. In other words you cannot buy a franchise unless you are apart of an association. I believe this will make people feel safer going the franchise route.
jd, you have to be careful here. The 2006 full report may well establish that UPS knew of problems with its Gold Shield conversion program back in 2003. The fact that UPS refused to disclose information is troubling: if there was no link to the past, why not disclose?
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
time tracking - especially if they had the tracking information to give to the study group. If there were significant problems, they would have been known. If you have a Quiznos model, they continue to sell in the teeth of a system failure storm.
In some companies, knowing there are problems leads to the delusion that they can fix it and that there is no need to stop selling until the fix is completed. J&J did that with their early cat scanners, so why not other companies having similar management attitudes.
Troubled systems that need to get fixed are known through the system amongst the franchisees, but the franchisees don't tell prospective franchisees when they make due diligence inquiries, in most instances. If Quiznos franchisees told about the troubles, there probably wouldn't be several thousand sold but unopened stores. Franchisees become the abettors of the franchisor in these situations. Did people calling these franchisees get told about the problems? Hmmmm.
How many class members knew of the problems and didn't tell franchise investors about it before they bought into the difficulties? We will probably never know. If the knowledgeable franchisees told about the problems, would there even be a class of subsequently defrauded franchisees?
This is somewhat speclative, but franchisees are often complicit in frauds that are committed by witholding information investors would want to know before making their investment decisions. They often see a difference between telling an outright porky and not telling about something that someone would want to know.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
pre investment due diligence. It is only a starting point - nothing on which to base an investment decision.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Contacting existing franchisees is a waste of time; contacting past franchisees is often just as much a waste of time if they have gag clauses enforced and they won't tell you if they do.
I don't see a problem with contacting any of the above as long as the person evaluating the information knows what to ask and how to interpret the information. The average excitable prospect will interpret anything to validate a potentially disasterous decision. There is much more reliable information than you will get from franchisees.
Seriously; there should be a law stopping most, if not all franchisees from conducting there own due diligence. If due diligence was only performed by franchising professionals then scams would not survive long and we could all play more golf ... or whatever ..
The more things change; the more they stay the same.
You raise some good points but we are on the wrong BMM thread here. Would it be possible to post your comment to the Aisa Pacific Centre blog and when I get back from meetings I would like to get into this with you.
One point: we don't have ANY practicing franchising due diligence experts in this country that can vet the agreement, the franchisor, the concept, the franchise model AND the franchise financial model. We have some great people that can perform part but not all and not many at all that perform in the best interests of the prospective franchisee.
The more things change; the more they stay the same.
This is a potentially major event for the franchise industry. Rumor has it that the SBA was investigating this matter even before the Cuppy's debacle, but the only news outlet to discuss this was the BMM story .
If franchisees start to compare notes as Oldsword suggests, this may become too large of an issue for the SBA and the oversight committees on the Hill to ignore.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
resource to be located in your country.
Most lawyers can't doesn't mean that no lawyers can.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
And some lawyerrs go both ways.
You have to ask them what they can do,
To whom, with what, on which days.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Standard Operating Procedures for franchisees and franchisors. Richard is right as is Guest.
But to do nothing is to maintain the franchisors system of non-disclosure - churning. People in such systems should not be doing nothing - they should either be creating a franchisee group power source or they could sell to one of those unsuspecting prospects for the greater economic good. The cycle is maintained ...
The more things change; the more they stay the same.
jd writes: "I looked at the 15 pages of report, and this is something that all franchisors should be doing. Why? Because they want to figure out what that 'goal' number is and try to get as many of the people to that goal as possible. is it something that needs to be shared with the franchisees? In my opinion, no."
Well, in Ontario if you were buying a UPS franchise or converting, you would want to know how many stores were not making a profit. The report's details are arguably required to conform with the Ontario disclosure rules.
You should also wonder why the existence of this report was so strenuously denied by UPS.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
jd; Ontario requires the disclosure of all information which is material to the purchase of a franchise. An internal document which shows that most of the network is not profitable is material - whether a management tool or not.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
JD: Your point and Michael's as to the substantive issues are both well-taken.
As to "smoking gun" matters:
Not to be superficial here, but from a public relations standpoint it does not play well that UPS lied, and that is something which will have broader ramifications for the UPS public relations effort in the future.
Why Mr. Kolman did not correct the statement from headquarters or at least give them a heads-up as to the documents submitted to the court is no doubt a touchy subject right about now.
The UPS Store franchise is a pimple on the butt of UPS, run out of an office on the left coast. At some point, UPS needs to assess whether the incremental revenue is worth the hassle. If they are serious about integrating UPSS into their corporate strategy, then they should consider taking control of this mess and start by putting the UPSS honchos within supervisory range.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Why Mr. Kolman did not correct the statement from headquarters or at least give them a heads-up as to the documents submitted to the court is no doubt a touchy subject right about now."
Paul is right about this: the appearance of lying may well prove to a bigger problem for UPS than what was actually lied about. Once the press senses that your public relations people will lie, your company is in for a great deal of skeptical reviews.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
John A. Gordon Chain Restaurant Earnings and Economics Experts www.pacificmanagementconsultinggroup.com
It amazes me that spokesmen for major corporations lie to the press about matters where documentary evidence exists.
A foolish thing to do with any reporter.
But to lie to a trade industry reporter who likely knows that the evidence exists is like waving a red flag in front of a bull. Don't let that grandmotherly appearance fool you Norman--she's been doing this for a long time and has a long memory and a big rolodex.
Norman, say hello to Stephen .
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
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