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SAN DIEGO – After meeting with company officials last week, The UPS Store Franchisee Advisory Council voiced its concerns in the FAC meeting minutes.The two-day session allowed council members to receive from headquarters updates from various departments and to discuss company changes with Mail Boxes Etc’s senior management team. FAC members also received information regarding performance related to certain programs and changes that can be expected in the coming year.
The UPS Store/Mail Boxes Etc. Meeting Minutes, received from an undisclosed source, are below:
Discussion with Don Higginson regarding UPS changes
The changes at UPS are quite significant. Going forward UPS will shift from 46 to 20
districts. UPS has always been an operations driven company, however, that will now
shift to a marketing driven operation. Each district will be responsible for its own
financial performance and be more directly aligned with its customers. Changes will take
effect April 5th. The expectation is that this realignment will be beneficial to The UPS
Store network as our revenue contributions to each district will add to their performance.
Corporate Retail Solutions (CRS) with Jeff Gibboney, Kim Kleis and Jay Bautista
2009 performance was above $50 million, over twice the revenue of 2008. This
performance translates to an average of $12,000 annual revenue per center. AAA
accounts for much of the transactions. AT&T returns in 22 states contributed
significantly with over 400,000 transactions. MBE and the rest of the network are
hopeful the AT&T program will expand into more states in 2010. The network is now
averaging about 1,000 Apple transactions per day and customer service performance has
been excellent until some recent issues surfaced (further details in Mgmt Meeting
section). CRS sales efforts continue with additional customer opportunities though none
are anticipated to be added in the immediate future. Efforts to further align MBE efforts
with UPS sales efforts may be benefited by the recent changes at UPS. FAC recognizes
that attainment of additional corporate accounts is critical to our network's future
performance. Delivering excellent customer service has been and remains an advantage
of our network.
Technology Fee discussion with MindaMcAllister
Franchisees continue to be concerned with the nearly $1,000 technology fee, particularly
with the limited results to date for on-line printing revenue as this was a principle
rationale for last year's significant fee increase. FAC discussed the technology fee with
Minda and suggested a Notes & News article may be beneficial to describe how the funds
are allocated to support the network's technology requirements.
Network Financial Performance with Justin, Rick and Efrain
For the 12 months of 2009 STR declined 5.7% and customer count declined 2.6%. The
performance for the fourth quarter was down 2.6% and 1.0% respectively. Preliminary
January, 2010 performance is comparable to that of the fourth quarter.
For the past six months all profit centers have shown declining performance with the
exception of Mailbox Services. A portion of the gain in Mailbox Services appears to be
attributed to the electronic notification of renewal reminders – a feature of Mailbox
Manager. Shipping has been declining consistently in revenue. Packaging is still
performing stronger than Shipping, but is down from the previous year. Document
Services is also showing slight declines.
The 2009 financial performance for centers will begin to be assessed in the second
quarter. 2008 financial performance was slightly improved in comparison to 2007. The
number of centers submitting data to Financial Planner for both years is comparable at
The available cash flow is revenue less all expenses prior to debt service, owner’s salary
or owners draw. Performance of centers that have submitted data to Financial Planner for
the past four years (a subset of 1000 centers) shows steady gains for Available Cash Flow
in 2006 and 2007 and a flat performance for 2008.
Available Cash Flow begins to show sizable gains when a center grows above $250,000
Adjusted Gross Sales.
The submitted P&L data is composed of approximately 67% single-center franchisees,
21% two-center franchisees and the remaining franchisees with three or more centers.
Based on Financial Planner submissions, performance for single or two-center
franchisees is comparable to the overall average center performance. Performance for
franchisees owning three or more centers shows slightly higher average center
Corrugate Purchasing with Daniel Castillo
Pratt is continuing to operate from two distribution center locations in the Midwest.
Although plans were to have Pratt expand nationwide as an approved box vendor, the
company has not expanded to other area and likely will not until sufficient demand is
realized for its Dallas, TX location. Nelson JIT has been added as an approved vendor
for the Arizona market. Similarly MBE is considering other local vendor additions in
other markets not currently serviced by an approved vendor. FAC is pleased by this new
approach contingent on the attainment of competitive pricing.
Product Development and Management with Christa Martin
The overall 2010 MBE revenue objective for the network is about a 4% increase. The
document services/print profit center is anticipated to deliver higher growth as is the
Online Printing launched about three months ago and results to date show revenue is
slight, but increasing. Over 73% of the network is set up for online printing with two
thirds of these centers having completed at least one print job. The average print job
transaction is $28. The customer experience appears to be smooth, but the center
experience is a bit more cumbersome. One modification being assessed is a shift of
customer registration from the beginning of the process to the end at check out. FAC
agrees with this change as it may encourage more customers to fully complete a print job
Expansion to other offerings and capabilities is in process. House Account, Corporate
Account and Couponing/Discounts capabilities are projected to be added to the online
printing site in the second quarter. Expansion to offer Wide Format Printing, Tabs and
"Blanks" is also projected for the second quarter.
InventPrint by Standard Register is also continuing to expand with Business Card
magnets and stickers, Door Hangers and Bookmarks. A customer facing InventPrint
portal is also being established for the second half of 2010.
Mailbox Services is being promoted as security against identity theft with advertising
currently in place. New marketing materials have been created for introducing a center's
other capabilities to new mailbox holders. The USPS has plans to close 163 post offices
and more are likely to follow. MBE is in contact with USPS should there be
opportunities to communicate our mailbox service to affected PO box holders. Mailbox
Manager is in use by almost all centers for at least one of its functions. No changes are
planned in 2010 for Mailbox Manager.
eBay Selling Station continues to be developed. Another vendor is being considered that
not only sells on eBay, but also posts listings on other websites. An alternate financial
compensation structure is being considered. The challenges with eBay's rating model
still exist, but an alternate financial compensation plan for participating centers may be a
Two luggage boxes are near completion for a May launch to the network. The sizes are
approximately 22x14x9 and 26x16x12. The package may include a piece of tape to seal
on a ‘return’ shipment along with a return label pouch that can hold a return shipping
label. The boxes come with handles for easy transportation.
Electronic fingerprinting is an up and coming initiative for which The UPS Store network
may be well positioned. Two vendors are being assessed. Many organizations and
companies are just now beginning to require further identification confirmation for staff
and employees. Access to accomplish electronic fingerprint scans is limited and thus our
network of 4,400+ locations is attractive.
Activity in the Freight profit center includes: UPS SCS assessing our network as a
possible corporate account, a new auto/car shipping vendor and investigation of other
international freight carriers.
Shredding as a category has had some activity. Currently the only approved shredding
option for the network is You-Shred. There are currently 39 machines now placed in the
network. MBE is also in discussions with a major shredding service as there have been a
couple of breakthroughs specific to insurance and legal concerns.
Checks on Demand is the online check ordering initiative on the front page of
www.theupsstore.com. The Order Checks Online Now icon was established 12/1/2009
and in 45 days there were 345 orders placed. The ‘click-through’ sales rate has been
excellent with just over $3,000 generated to date for our National Advertising Fund. The
test has been a success and substantiates that ecommerce can work for our network.
The new retail impulse item initiative has generated almost 250 orders from franchisees.
As expected sales are not huge, however, revenue generated is acceptable. The two
vendors are E-filliate and Wellspring.
Wednesday, February 3rd
Management meeting with:
Apple Returns Program
Tim Davis provided further detail on the Apple customer service concerns for a limited
number of franchisees. Apple has been pleased with the overall program, however, a few
recent incidents of franchisees not servicing the returns has created a significant concern.
Last week MBE attempted to contact every franchisee by phone to inquire if they do
Apple returns. 95% of those questions answered “yes”. About 4 ½% of responses
demonstrated confusion that was later rectified. Twelve centers responded adamantly
they do not service Apple returns. While this only represents 0.25% of the network the
situation is unacceptable. MBE has warned these centers that they are required to service
national accounts, and if necessary MBE will initiate legal action against non-compliant
franchisees. FAC supports MBE’s action as the Apple contract and potentially other
accounts could be in jeopardy if these franchisees do not reverse their stance.
While the Apple revenue per transaction is only $4.25, there are other benefits as follows:
1) New customers have been visiting our locations. With customer counts declining for
the past couple of years the network needs new opportunities to attract new customers
2) Apple is closely tied to AT&T with the iPhone exclusively available from AT&T.
The AT&T returns program is indirectly influenced by Apple’s experience with our
network. To date the AT&T returns program – in only 22 states – has generated in
excess of $7 million revenue to the network
3) Additional Apple product return opportunities are in discussion pending resolution of
this current problem
4) Attainment of the Apple contract has increased our network’s attractiveness to other
potential corporate accounts
Business Plan Discussion
The discussion regarding our current business mix and the future business plan was all
encompassing and included some of the following discussion points:
1) September, 2009 was the first month with the volume of pre-labeled packages (dropoffs)
exceeding the volume of manifested packages
2) Shipping accounts for over 60% of a average center’s revenue. Objective is to grow
other profit centers to 50% of revenue
3) Package count declines experienced in the network mirror those of UPS. Package
count declines for ASO’s and UPS Alliance Partners have been greater than our declines
4) Printing is a big opportunity, yet we have had difficulty gaining traction. 35 Doc
Squad initiatives have now been established in the network. Franchisee and franchisee
consultant training in this category is an ongoing need. A print center help desk may be
an idea for consideration
Pack & Ship Promise
Holiday marketing shifted away from Pack & Ship Promise to our packaging expertise,
tracking and quick, convenient service. Pack & Ship Promise in-center advertising
continued. Packaging as a profit category had a slight decline in December, comparable
to Document Services.
FAC was pleased with the change in holiday marketing and recommends that the Pack &
Ship Promise identifier on theupsstore.com site be replaced with Certified Packaging
Expert. The latter phrase is more readily identified by consumers as to our capabilities.
The message of Pack & Ship Promise has not brought new customers into our centers and
is a more difficult message to convey as well as for customers to retain.
Tom Crockett provided FAC with some likely changes to the spring advertising
campaign. The message focuses on The UPS Store network’s printing capability whether
online or in-store. FAC is pleased with the message content.
Online printing has been a major investment for the network and all parties are
disappointed in results to date. MBE is also concerned about jobs waiting to be printed
over an extended period of time. Franchisees should note that centers may call the MBE
Help Center for any questions about on-line printing.
Don Higginson provided details regarding this summer’s convention. This will be Mail
Boxes Etc.’s 30th anniversary. UPS’s CEO Scott Davis will speak. There will be a video
contest for the first time and more time has been spent planning the workshops. To date
the number of registered attendees is tracking ahead of this same time frame for the last
convention in 2007. FAC encourages all franchisees to consider making the investment
to attend this summer’s convention.
UPS Items for Discussion
One area of concern for FAC is that recent UPS price increases have substantially
increased the cost of shipping. Over the past three years UPS and MBE has taken general
increases of 4.9%, 5.9% and 4.9%. Likewise there have been significant increases for the
Residential and Commercial Delivery Area Surcharges, 15.7% and 25.9% respectively
over the past three years. The average UPS shipping price in 2010 is now 16.5% or
higher than in 2007. With the economy is such a difficult downturn it is quite a contrast
to see the price of UPS shipping dramatically increase. FAC is concerned the price
elasticity of demand has been stretched to the point of customers opting not to ship or at
the very least to ship less items.
Likewise the price competitiveness of UPS shipping has been reduced by the USPS
promotion of Priority Mail flat rate shipping and the economic cost of Parcel Post or
Media Mail (no increase in 2010). FedEx Ground continues to be on average 11% less
expensive than UPS Ground. This premium price position is a cause for concern for FAC
and is reminiscent of Mail Boxes Etc shipping prices prior to the Gold Shield conversion
to The UPS Store. At that time our UPS shipping prices dropped significantly and the
shipment volume per store rose dramatically. FAC is concerned the opposite may now
be occurring for our network due to UPS’s premium pricing.
Sean O’Shaughnessy of UPS countered these concerns. Priority Mail remains higher
priced than UPS Ground in general. The rate differential is significant and the network
needs to capitalize on it. UPS’s assessment is that the USPS flat rate shipping is
predominantly eBay shippers, not the general public. Third, The UPS Store is UPS’s
premiere retail channel offering ‘Full Service Premium’ service. The observation and
opportunity is to identify and market to a segment of customers seeking out a higher
customer service offering and are willing to pay a higher price. FAC disagrees with this
assessment and anticipates a significant portion of our losses in customer counts are due
to the significant UPS price increases over the past three years.
Sean also reviewed the very early results of the price change on NDA letters over 8
ounces. In the first three weeks of January there was a net increase in both volume (1%)
and revenue (11%) of NDA letters in the network. The pricing now matches that of
UPS’s performance this past season was at 96% to 98% on-time for air shipments. Sean
does not see an exemption being made for the network in 2010. MBE is exploring an
alternative option that may alleviate this issue for the network.
The UPS Store as an Alternate Delivery Location has gained some traction at UPS.
Proposals have been countered back and forth between UPS and MBE. FAC submitted
an initial proposal last year and will likely hear further details in the next few months.
FAC believes this could be a good opportunity for the network to gain incremental
customers so long as the revenue benefit to franchisees warrants the effort.
UPS Customer Counters are now giving out more packages than they take in. The
economic benefit of customer counters has been reduced and we will likely see
consolidation of customer counters and/or reduced hours of operation.
A different type of operations is a Commercial Customer Counter. This type of operation
was established long ago for commercial establishments such as hardware stores to take
in UPS packages for shipping. UPS has been phasing out commercial customer counters;
however, there are some rural locations where a new commercial counter may be
established. These locations are typically remote and far removed from the nearest The
It is on a rare occasion that FAC will voice concern regarding advertising as this is the
responsibility of MAC. However, the recent and, at least perceived, effective advertising
from USPS for flat rate shipping relative to The UPS Store advertising for many
franchisees is concerning. Tom Crockett explained that in the last four months the USPS
has spent three times the amount spent annually for The UPS Store. Tom does not know
how long the advertising campaign will continue, but the investment by the USPS (which
continues to lose money) is significant. The UPS Store holiday advertising was adjusted
and tweaked. Some adjustment is also planned for the upcoming spring advertising.
Perks and Paydays was delayed due to mechanical failure of the scratch pads. The
vendor has taken responsibility for the issue and the promotion is planned for
reintroduction in the near future.
This project is ongoing with at least a couple of vendors being considered. MBE is
hopeful that an offering will be available to the network by mid this summer. The vendor
will manage all unsubscribe responses across the network to ensure legal compliance as
to the email marketing platform for each franchisee.
Customer Relationship Management (Customer Loyalty Marketing)
This effort has been delayed due to budget constraints. The initial development effort
was to be funded by MBE, however, that has not yet occurred. MBE is going to assess
the development effort with MAC for consideration of the NAF to fund the pilot effort.
If there is agreement then a pilot effort could be in place later this year. The ongoing
execution for the program will be borne individually by franchisees that sign up to
Customer Experience Survey (CES)
The CES program was favorably received by the network in 2009. The feedback was
welcomed by franchisees for conveying strengths and opportunities for improvement.
FAC believes this is a good program and is pleased it is being continued in 2010. FAC
did suggest that perhaps the program could be run intermittently throughout the year
rather than for the full year. An intermittent execution would keep the program ‘fresher’
for both customers and centers.