MBE redesign sparks association formation

“Most of us have put our life savings into our business,” Boyd said. “We just want this to work.”

Franchise Times
August 1, 2000

MBE redesign sparks association formation
The new MBE 2000 store design is the source of conflict between some franchisees and the Mail Boxes Etc. corporate office
Wendy Webb

No one said the franchise relationship would always be smooth sailing. But what happens when a franchisee has a concern that isn’t being addressed by the franchisor? And on the other side of the coin, what recourse does a franchisor have when franchisees refuse to get on board with changes the franchisor wishes to make in its system?

When franchisors and franchisees disagree, it’s like a family quarrel. The expectation is that they are both on the same side, both working toward the common goal of mutual success. So when disputes escalate, it’s more than a little unsettling because of the domino effect. One franchisee’s concerns can sometimes start off a chain reaction.

That’s what’s happening at Mail Boxes Etc., the San Diego-based franchisor with 4,000 units worldwide. About 500 disgruntled MBE franchisees recently formed a new franchisee association, the Independent Association of Mailbox Center Owners, Inc. (IAMCO), through which they hope to communicate with their franchisor about decisions the company has made that affect their investment.

MBE, however, has no plans to talk to the group, claiming they already have addressed the concerns through the appropriate channels, the Franchisee Advisory Council.

Most of us have put our life savings into our business. We just want this to work. – John Boyd

“We have 4,000 franchisees,” said Don Higginson, MBE’s vice president of franchisee relations. “If you don’t implement some type of process to handle issues like this, you have chaos because there are so many different people and ideas. We have a process in place to handle these types of things, the Franchise Advisory Council.”

When he received the association’s letter from its attorney Michael Einbinder, Higginson said he didn’t refuse to talk to the group, he referred them to the Franchisee Advisory Council – the forum MBE set up long ago to handle franchisee concerns.

“I told them to go back an contact the FAC,” he said. “If you try to circumvent the process, it causes problems because our network is so large.”

That may seem perfectly logical to corporate, but it didn’t to the newly formed franchisee group that felt it was being labeled a “splinter group.”

How it all started
John Boyd, an 11-year MBE franchisee in Pennsylvania, listened to the company tout its new remodeling plan at their annual convention last year called MBE 2000, but he didn’t like it.

“That renovation plan really hit my hot button,” said Boyd, who is now president of IAMCO. “To go from our easily identifiable red white and blue to brown and back? It was terrible.”

But more than aesthetics, MBE 2000 concerned Boyd because it would seriously cut back on his available retail space.

The remodel project also had another effect on his business.

Although Boyd renewed his franchise agreement, he was in the midst of talking with a prospective buyer for his business. He says MBE 2000 squelched the deal – Boyd didn’t want to invest an additional $75,000 to renovate his store before selling it, and the buyer didn’t want to pay additional costs to renovate the store on top of the purchase price.

“I called the corporate office to talk about it,” Boyd said.

Boyd claims MBE corporate told him he just wasn’t getting the message behind the renovations plans – MBE 2000 was a done deal. It was happening, period. He needed to comply with the changes, or get out of the network. Boyd had other ideas.

“I wasn’t about to give them my equity without a fight,” he said.

Boyd sent faxes to approximately 120 MBE owners in the Northeast, asking if they, too, were upset about MBE 2000.

“We got back 300 responses,” Boyd said. “We got them from as far away as Texas and California. We only sent out 120 faxes to owners in the Northeast, but people passed the word. I was wondering if I wasn’t just a malcontent – somebody alone, disgruntled with things. But those responses validated by concerns.”

Not all franchisees, however, are unhappy about the new MBE 2000 program.

“The company is rolling out new technology on innovative ways to do business and there might be a few potholes, but I have total faith in MBE in accomplishing their goals,” said Bill Anderson, the head of the company-sanctioned Franchisee Advisory Council. “They have invested $15 million and have made a commitment to it.”

Anderson said that after the IAMCO sent out its survey, the advisory council received letters from franchisees who were concerned that IAMCO’s letter would be distracting and negative for the whole system.

Boyd disagreed. Armed with what he saw as a swelling need for a new association, Boyd contacted Michael Einbinder, a franchise lawyer with Rosen, Einbinder, & Dunn, PC in New York, to talk about the possibility of forming an association. In January, IAMCO held its first meeting and Einbinder helped the group come to a consensus about their shared concerns – the renovation, apparently, wasn’t the only thing that was upsetting franchisees.

According to Einbinder, franchisees were unsettled by a modification in MBE’s franchise renewal agreement that would require owners with exclusive territories to allow MBE to sell limited operations centers within their areas.

“A major selling point for a lot of these people was the fact that they were near a university or a military base or something that would require their services,” said Einbinder. “And 10 years later when their contracts are up for renewal, the company is saying they’ll give them the ‘opportunity’ to buy another MBE store on campus or on the base, but if they don’t choose to buy it, MBE will sell it to somebody else. They were taking away the franchisee’s reason for getting into the business in the first place.”

MBE’s corporate office says that is not the case. “We’ve never opened up a new MBE store in protected territory, and we never will,” said Higginson. “At the time of transfer or renewal, if there’s a campus or military base or something like that in the territory, we’ll carve it out of their territory – but not if they’re servicing it. Why would we want to take away territory I they’re servicing it?”

Another IAMCO concern involved the system-wide implementation of a new, computerized point-of-sale device. Boyd paid for the computerized system and had it installed, but claims he never received any training in how to use it.

“The guy installed it, handed me the manual and walked out,” Boyd said. “I paid $5,000 for this thing, and I’m not really sure how to use it.”

As a result, he views the investment as a waste of money – without proper training, the device is useless to him.

Einbinder drafted a letter to MBE outlining IAMCO’s concerns and requesting a meeting to discuss tem. MBE refused.

“They labeled us a ‘splinter group.’ And wouldn’t talk to us,” said Einbinder. “And that’s where it stands.”

That’s not how the company sees it
The company reiterated that it expects franchisees to address franchisee issues through the Franchisee Advisory Council.

Boyd said he tried to go through the FAC, but couldn’t get the kind of cooperation or communication he wanted. He felt stonewalled.

“IAMCO is intended to fill a communications void that exists between franchisor and franchisee,” Einbinder said.

Boyd says he and the other IAMCO members are wondering why their franchisor is determined to stand on ceremony when so many people are upset about these issues. Higginson said he hasn’t done anything of the kind.

“The FAC did come to us and asked us not to mandate renovations for existing stores,” said Higginson. “They said we ought to think about doing it only in the new stores, over time. We did that. So Boyd’s issue was listened to. That’s what’s so ironic about this.”

Higginson said MBE’s current policy requires only brand new stores to implement MBE 2000.

“You can’t even choose to do MBE 2000 for a transfer or renewal unless you petition MBE,” said Higginson. “We can only do so many of these renovations at once.”

It’s not IAMCO’s concerns that bother MBE, Higginson said, it’s the fact that IAMCO refuses to comply with proper procedures for airing those concerns.

“You need to work within the process or there’s anarchy,” said Higginson. “We can’t function without strong franchisees.”

Boyd’s skeptical about corporate’s reaction to the group.

“Change always begets fear and discomfort,” Higginson said. “We’re reinventing MBE. We’re not a small mom-and-pop anymore. We’re upgrading our look, we’re connecting our network with technology. But these changes can provoke fear.”

For Boyd’s part, he just wants to resolve these disputes.

“Most of us have put our life savings into our business,” Boyd said. “We just want this to work.”

But, then again, with an investment of millions in the system, couldn’t the company also claim, they, too, just want this to work?

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Risks: Tied contracting, Independent franchisee association, Happy serf, Company man, Happy serfs, Disgruntled, Encroachment (too many outlets in area), Franchisee advisory group (lap-dog), Life savings lost, Can’t talk to media, Refusal to acknowledgei ndependent franchisee association, Right to associate but refuses to acknowledge, United States, 20000801 MBE redesign

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