Franchisees: UPS needs a better return policy

For many small business owners, franchising sounds like the perfect option–it allows you to own and operate a business while having the support of a well-established brand behind you. Yet, there is a darker side to franchising, one that often gets lost in years of court appeals and settlements. If you are looking to franchise, it’s important to pay attention to the fine print.

A David and Goliath battle between United Parcel Service and its franchisees recently turned into a win for the small business owners. In a case that has been going on since 2002, the former franchisees of Mail Boxes Etc. are suing UPS for contract and franchise agreement violations; saying the shipping giant failed them when it forced them to convert to UPS stores or to go private.

UPS bought Mail Boxes Etc., then a chain of 4,300 packing and shipping centers, in 2001 in an all-cash transaction for USD 191.0 million. Its previous owner, U.S. Office Products, had declared bankruptcy.

The California Appellate Court said on Friday that it would reverse the previous decision that was in UPS’s favor. The decision requires that the two parties now face each other in front of a jury.

“The Court of Appeals gave us a total victory. The court reversed every single claim that UPS/MBE made, and awarded costs on appeal to the plaintiffs. This is a complete repudiation of UPS’ and MBE’s position and was the last major hurdle for us,” said Howard Spanier, a former franchisee of Mail Boxes Etc. “UPS blocked my renewal as an Mail Boxes Etc. despite my franchise agreement allowing me to do so. They would only allow me to renew as a UPS Store. I considered that option to be financial suicide, since under the UPS Store business model profit is totally controlled by UPS.”

UPS’s annual revenues went from USD 29.7 billion in 2000, just prior to the acquisition of Mail Boxes Etc., to USD 49.7 billion in 2007. There are currently 4,647 UPS Stores worldwide and 1,306 Mail Boxes Etc. stores.

For many small business owners, franchising sounds like the perfect option–it allows you to own and operate a business while having the support of a well-established brand behind you. Yet, there is a darker side to franchising, one that often gets lost in years of court appeals and settlements. If you are looking to franchise, it’s important to pay attention to the fine print.

A David and Goliath battle between United Parcel Service and its franchisees recently turned into a win for the small business owners. In a case that has been going on since 2002, the former franchisees of Mail Boxes Etc. are suing UPS for contract and franchise agreement violations; saying the shipping giant failed them when it forced them to convert to UPS stores or to go private.

UPS bought Mail Boxes Etc., then a chain of 4,300 packing and shipping centers, in 2001 in an all-cash transaction for USD 191.0 million. Its previous owner, U.S. Office Products, had declared bankruptcy.

The California Appellate Court said on Friday that it would reverse the previous decision that was in UPS’s favor. The decision requires that the two parties now face each other in front of a jury.

“The Court of Appeals gave us a total victory. The court reversed every single claim that UPS/MBE made, and awarded costs on appeal to the plaintiffs. This is a complete repudiation of UPS’ and MBE’s position and was the last major hurdle for us,” said Howard Spanier, a former franchisee of Mail Boxes Etc. “UPS blocked my renewal as an Mail Boxes Etc. despite my franchise agreement allowing me to do so. They would only allow me to renew as a UPS Store. I considered that option to be financial suicide, since under the UPS Store business model profit is totally controlled by UPS.”

UPS’s annual revenues went from USD 29.7 billion in 2000, just prior to the acquisition of Mail Boxes Etc., to USD 49.7 billion in 2007. There are currently 4,647 UPS Stores worldwide and 1,306 Mail Boxes Etc. stores.