Franchise Owner Alleges UPS Destroyed Her Business

(FranchiseeMarketing.Com) Source: PR Newswire

Denver UPS/MBE Franchisee Blames UPS for Destroying Her Business Plan With Inferior Model

DENVER, March 25 /PRNewswire/ — Suzy Meadows had a plan. After a successful career in the oil and gas industry, Meadows and her husband, Joel, in 1991 chose Mail Boxes Etc. as their future, and over the next decade it worked. In fact, it worked so well that the couple once owned and operated a chain of five Mail Boxes Etc. (MBE) stores in the Denver area.

(Photo: http://www.newscom.com/cgi-bin/prnh/20080325/LATU506A)

Then in 2001, Suzy and Joel Meadows’ plan received a near-fatal blow when Atlanta-based United Parcel Service purchased Mail Boxes Etc. and replaced the successful MBE business plan with an unprofitable system under which, as Suzy Meadows said, “only UPS makes any money.”

“And the reason I can say that is we have one of each — an MBE store in Cherry Creek that still makes money under the old Mail Boxes identity, and a converted The UPS Store® in Denver that does not,” Suzy said. In an orchestrated presentation rolled out across the country in February 2003, UPS told franchisees the MBE model was broken and could only be fixed by converting to the UPS Store model.

As this program spread, the Meadows had three stores in Denver, and were forced by UPS to immediately convert two of the stores to the UPS identity. A potential sale of one fell through and for a time the couple ran two UPS units and the Cherry Creek MBE store. “UPS coerced us into converting the other stores, even though we later learned their demand was unjustified,” Suzy added.

“The bottom line, so to speak, is that we have been able to compare the two business models side by side, for almost five years, and believe us, the Mail Boxes Etc. system UPS said was broken beats the UPS store in every respect,” Meadows declared.

Across the U.S., many former MBE franchisees were given the same 2003 ultimatum by UPS: Convert to the UPS Store format within 30 days or risk paying a steep bill for later conversion. Furthermore, MBE was a dying brand. In order to sell a store or renew a franchise agreement, the store owner had to sign the UPS Store® agreement, which relinquished most of the owner’s control — most significantly retail pricing — to UPS and become a The UPS Store®.

“We had no real idea about the new business model,” she added, “and while UPS ran some market tests in St. Louis and Seattle, we franchisees never got any detailed reports on how those tests turned out and why their system was better than MBE’s. All we had was UPS’ constant claim that their system was better. Well, if that was true, why does UPS have a flat growth record (in stores opened) the last couple of years and a falling ranking in the U.S. franchise industry?”

The contrast between MBE, which the Meadows had chosen for its strong but flexible business model, and UPS was evident from the outset, they said. “We very seldom, if ever, hear from regional UPS representatives,” Suzy Meadows noted, “and there is no opportunity to suggest changes in our franchise businesses. For a time after the conversion, they asked me to be a member of the Franchise Advisory Committee, but that turned out to be a powerless group, as UPS clearly did not want any input from us franchisees and eventually stopped communicating with us and cancelled the advisory committee meetings. Basically, when UPS purchased Mail Boxes Etc., they bought 4,000 mom-and-pop franchises and turned them into staffed UPS package drop off counters. They commandeered the investments of small business men and women, most of whom had financed their franchises with their pensions or by borrowing on the equity in their homes.”

Today, the Meadows still have two stores, Mail Boxes Etc. of Cherry Creek, at 191 University Boulevard, and the UPS Store at 820 S. Monaco Parkway, both in Denver.

“We’re still open and taking good care of our customers,” Suzy said, “but our store profitability has dropped significantly since UPS eliminated shipping discounts for MBE stores and surrounded our territory with UPS stores.”

The anger and frustration shared by the Meadows and their MBE associates in a group called the Platinum Shield Association (PSA) led to these franchisees filing a lawsuit against UPS in 2003. That suit, one of four brought by various UPS franchisee groups, is now in Los Angeles Superior Court. Last October a California appellate court certified a national class action on behalf of the UPS Store franchisees.

“Our primary goal is to get our day in court and make UPS answer for the way they have treated their franchisees since the acquisition;” Suzy declared, “many of our people have lost their savings, their homes and even their health just to stay in business since we started this legal action five years ago. It’s been a very tough time.”

Suzy Meadows added that many of her customers still ask whether her Cherry Creek store is a UPS store, and she always replies with a firm, “No. Last holiday season, we probably shipped a total of over 2,000 packages, and only about 20 of them went via UPS. I guess that says we think UPS needs to change its ways.”

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