UPS plan for Mail Boxes Etc has some franchisees mulling lawsuit

Some Mail Boxes Etc. franchisees are upset about United Parcel Service's plans to convert the retail outlets to the UPS Store, and they may attempt to block the move in court.

MBE franchise owners by the hundreds are calling "frantic and paranoid" about their futures, said Hanover, Mass.-based attorney Alec Sohmer.

Sohmer and his partner, Andrew Palmer, expect to file a suit within weeks and plan to petition the court for class-action status.

"They feel like they are being bullied into signing," Sohmer said of the MBE franchisees. "It's like they can convert now or die later."

Two years after buying Mail Boxes Etc., Atlanta-based UPS is asking the franchisees to sign an amendment within a month that would make the outlets UPS stores.

To sweeten the deal, UPS is offering the franchisees a 20 percent reduced rate over what the average Mail Boxes Etc. now charges.

But FedEx, which has long served Mail Boxes Etc., will bow out if the stores rebrand with a competitor's name, said Howard Clabo, FedEx spokesman.

In market research, UPS showed significant business gains for MBE when the UPS name was added and when price was reduced, said UPS spokesman Steve Holmes.

"Lowering the price is absolutely critical for these franchisees to grow their businesses," Holmes said. "Why would we acquire a company and do things that we know are not in the best interest of franchises?"

Don Abee, a regional MBE franchiser with more than 30 stores in the Mid-South, including 15 in Memphis, is pleased with the UPS offer.

"We operated many, many years without FedEx," Abee said.

MBE corporate spokesman Jessica Bongers would not comment on a possible lawsuit. She said MBE intends to offer its customers a variety of carriers, including the U.S. Postal Service.

The U.S. Postal Service did not return calls.

"This is not mandatory," Bongers said. "The franchisees are being offered the chance to change. If they don't want to, they don't have to."

Sohmer says the choice is misleading because at franchise renewal time, the MBE franchises will not be renewed.

"The overwhelming majority are all expressing these concerns," Sohmer said. "This certainly is a major problem. Franchisers signed up to be an MBE store, not a UPS store. These are overwhelmingly mom-and-pop operations, and these people are afraid."

Abee disagrees.

"We have 3,250 stores nationwide," he said. "By and large, all of our stores are extremely excited about the change."

– Jane Roberts: 529-2512

Copyright 2003 The Commercial Appeal, Memphis, TN

From: [email protected]
>To: [email protected]
>Sent: Friday, March 07, 2003 7:57 AM
>Subject: [retiredups] Shipping stores ensnared in carrier battle
>
>Shipping stores ensnared in carrier battle
>
>Kelly Johnson There's a storm brewing in the shipping business, with
>thousands of small outlets potentially caught in the middle.
>
>United Parcel Service Inc. wants its 3,300 Mail Boxes Etc. franchisees to
>change their name to The UPS Store and charge customers less if they ship
>by UPS. The change could start as soon as April.
>
>Some stores are accepting the change. But hundreds of other franchisees,
>including some in Northern California, are considering a class-action
>lawsuit to block the switch. And rival shipper FedEx Corp. says it'll end
>its ties with any store that takes the UPS name.
>
>UPS bought Mail Boxes Etc. two years ago. The stores typically cater to
>individuals and small businesses that don't produce enough volume to obtain
>a regular UPS account but need competitive prices and personal service.
>
>There are at least 65 Mail Boxes Etc. stores operating in the East Bay
>region, according to figures from the company's Web site.
>
>Some of the Mail Boxes Etc. franchisees worry that their business could be
>hurt or ruined if they switch to the new name and pricing. But they also
>fear damage if they stay with the vanishing Mail Boxes Etc. brand. As their
>numbers dwindled, they would have less market presence and receive less
>support and marketing.
>
>Massachusetts attorney Andrew Palmer said on Feb. 27 that he expected to
>file a class-action lawsuit on behalf of the franchisees "within a few
>days." Hundreds of franchisees all over the country have expressed interest
>in participating, he said.
>
>Palmer, a franchise law attorney since 1987, said he hasn't decided which
>federal court he would file in. Most likely, he will choose Atlanta, the
>headquarters of UPS.
>
>The franchise agreement promises that Mail Boxes Etc. will support and
>enhance the brand, Palmer said, but dissolving the Mail Boxes Etc. identity
>is a fundamental change and franchisees are "terrifically concerned about
>it," Palmer said. Their concerns include falling profits, loss of branding
>and loss of franchise territory protection, he said.
>
>If the change goes through, the suit would seek damages for injured
>franchisees.
>
>Mail Boxes Etc. spokeswoman Brandyn Jennings would not comment on the
>threatend litigation. With 3,300 centers, she said, "it's not surprising
>that some of them might challenge the effort."
>
>United Parcel Service and Mail Boxes Etc. would not go to the franchisees
>with a program they hadn't researched and found valuable, Jennings said.
>"Most people are very enthusiastic" about the proposal, she added.
>
>Sue Sidwell, along with her husband Randy, owns the Mail Boxes Etc.
>franchise territory radiating from Sacramento to such cities as Reno,
>Sonora, Turlock and Fairfield – a territory that has 100 Mail Boxes Etc.
>stores. They wholeheartedly support the change, Sidwell said.
>
>UPS and Mail Boxes Etc. have been meeting with Northern California
>franchisees to discuss the switch. Franchisee Larry Lacy of Sacramento
>doesn't know if he'll convert.
>
>Lacy's concerns include the fact that Mail Boxes Etc. is a 23-year-old name
>that's recognized nationwide. Also, FedEx represents one-third of his
>shipping business at his some of his stores. "One of the concerns we have
>is FedEx isn't real happy with this arrangement," Lacy said.
>
>Existing franchisees can opt to switch from Mail Boxes Etc. to The UPS
>Store starting April 7. Any new locations will carry the UPS name. Whenever
>existing owners sell their stores, the name will convert. Ditto when
>franchisees' 10-year contracts come up for renewal.
>
>Competitors to Mail Boxes Etc. are worried about the change. Lynn
>Christensen has owned, along with his wife Laura, PDQ Parcel Dispatch in
>downtown Davis for more than two decades. He says he's had a good
>relationship with UPS over the years but worries about its new plan.
>
>"I don't see any winners in what's happening right now," Christensen said.
>
>Christensen worries that some customers who shipped by UPS at independent
>stores such as his might take their business to UPS Stores, where they can
>pay less. This is business UPS would have received anyway, he said.
>
>Palmer said some franchisees fear that eventually UPS would offer only its
>own shipping at UPS Stores. Mail Boxes Etc. spokeswoman Jennings says
>that's not the plan.
>
>"We want to continue our multicarrier platform."
>
>But rival carrier FedEx of Memphis, Tenn., won't be participating in that
>platform. FedEx shipping will no longer be available at stores that switch
>to The UPS Store brand, said FedEx spokesman Howard Clabo.
>
>UPS announced the rebranding program this month after a yearlong pricing
>test in San Antonio, Texas, and Phoenix and a four-month branding test in
>four other markets.
>
>"While the new pricing program showed positive results in all test markets,
>it was The UPS Store name … that fueled the strongest customer response,"
>the company said.

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