UPS, Mail Boxes Feud Heads to Court

The Atlanta Journal-Constitution reported this morning that the six-year feud between franchisees of Mail Boxes Etc. (MBE) and United Parcel Services was headed to court in Los Angeles on August 3. Two key issues were listed.

The first involves the 175 franchisees who did not convert their Mail Boxes Etc. stores to UPS Stores after the shipping giant’s $190 million purchase of Mail Boxes Etc. in 2001.

UPS didn’t require franchisees to convert to the UPS Store nameplate immediately. But when franchise agreements expired, conversion was mandatory as a condition for renewal.

The second is over the issue that UPS did not supply franchisees with pertinent information about converting to The UPS Store brand. The article states,

In particular, they highlight a 2006 study Boston Consulting Group did for UPS examining the profitability of the stores. Though that study identified several strategies for increasing the stores’ profitability, it also highlighted problems, such as per-store revenue, slowing new customer growth and the reliance on shipping alone to increase sales.

When asked about its 2003 rebranding program known as “Gold Shield”, UPS explained it was looking at ways to increase revenue at both the converted stores and the ones that remained under MBE. UPS spokesman Rich Hallabrin stated,

“Our position is that the Gold Shield program in no way violated the terms of the agreement and when we look at the performance of the network since 2003, it validates that decision.”

As for the study, he said only a portion of it was made public in earlier court hearings and the intent behind hiring a consultant was to look for opportunities to increase stores’ profitability.

That report goes back several years and that report cannot be taken in isolation,” he [Hallabrin] said. “When we brought Boston Consulting Group in 2005 it was to help us get a handle on the things that we were going to have to do. We said, ‘What’s the information we need to know to help us continue the momentum since the rebranding in 2003?’ ”

Although Hallabrin stated that store profitability had increased since the acquisition by UPS, he declined to say by how much.  He also said the controversy had not stemmed interest in potential franchisees.

In response to the article, Joe Wightman, an MBE franchisee in New York, stated, “This is the first time that UPS has been forced to address the substance of our case. If the BCG report was so wonderful why did they deny its existence and then fight to the death in court to have it suppressed? They should have released it to the network so that they could work with their franchisees for its implementation.

Wightman also questions, "If they had the BCG report in 2005 that said 77% of UPSS were at risk financially then why in May 2006 did Mike Eskew and Scott Davis tell me at the UPS shareholders meeting that they did not know if the UPS Stores were profitable? Why did they tell Wall Street analysts that the network is okay?  And, why did Norman Black deny the existence of the report in October 2008. Let them release the whole report. What are they afraid of."

But he adds, “Then again, if 77% of my premiere retail network were collapsing financially I'd cover it up too."

UPS, MBE franchisee feud heads to court (AJC)