MBE franchisees excited about what UPS can deliver

“Being part of UPS gives us a tremendous growth potential,” he said.

Franchise Times
April 1, 2001

MBE franchisees excited about what UPS can deliver
Julie Bennett

After she learned about the sale of Mail Boxes Etc., to shipping giant UPS of Atlanta, NBE franchisee Cathy Thomas of Paoli, Penn., had her first good night’s sleep in three years.

Like owners of MBE’s other 4,300 franchises around the world, Thomas had been worried about her system’s distressed parent, US Office Products, of Washington, DC, which had been losing money fro years and finally declared bankruptcy on March 5, 2001.

“I’m proud of the business I’ve built here,” she said, “but USOP had been draining us. Just adding the name UPS gives my business credibility and increases the value of my investment.”

“We’re euphoric,” said MBE’s CEO Jim Amos from his office in San Diego.

For the entire week before the $191 million purchase was announced on March 2, Amos had grinned his way around the International Franchise Association convention in Las Vegas, where he was installed as chairman of the trade group. MBE had been on the block since last summer and Amos knew the UPS deal was imminent, but, of course, SEC regulations prevented him from talking. When he finally could announce the sale to about 100 area franchisees who had joined him in Vegas for a meeting, “We had two standing ovations and half the room was in tears,” he said.

The celebration had a tinge of irony, because MBE founder Tony DeSio, of San Diego and Reno, had wanted to sell his chain to UPS in the first place. DeSio had started MBE with one store in Carlsbad, Calif., in 1980, took it public in 1986, and opened a new franchise almost daily for over a decade. But in 1997, when he needed quadruple by-pass surgery, DeSio decided it was time to retire. He called in Amos the former CEO of the Brice Group, whom he had known from IFA activities, to be the new president, and put the company up for sale.

“I tried to get UPS interested then, but they turned me down,” he said.

The top bidder was Jonathan Ledecky, the founder of US Office Products, a company he had created by rolling up about 200 small office supply companies, and the price was in the form of a stock swap, of $277 million. DeSio said recently that he opposed the sale, but the MBE board voted for it.

DeSio is not a big fan of Ledecky. “He built a house of cards, and then got out,” DeSio said. USOP stock, once worth $60 a share, fell to 3½ cents just before the company sold off MBE and other assets and filed Chapter 11 early last month.

DeSio was able to sell some of his stock in 1998, “but I still have about 200,000 worthless shares,” he said.

Purchase pleases most franchisees
Franchisees had been concerned that their businesses would be worth just as little. John Moran, who has MBE stores in Franklin and Needham, Mass., said he’d been watching independent packing and shipping stores go out of business around him and noted that growth within MBE had been stagnant for the last four years.

“Being part of UPS gives us a tremendous growth potential,” he said.

John Boyd, a franchisee with a store in California, Md., said he’s also hoping the UPS purchase will help end dissension between franchisees and the San Diego corporate office. A year ago when their franchisor announced that MBE would abandon its red, white and blue format for and expensive, sleeker look, Boyd rebelled and formed IAMCO, the Independent Association of Mail Box Center Owners, and tried to buy the company. That move failed, and MBE corporate has backed away from the store re-design plan, but the 500-member association still has issues.

Boyd and other franchisees complain about a costly technology system that has never worked right and about their relationship with Amos.

“He never understood us,” said one franchisee, who also believes that UPS will want to put in their own management system.

UPS spokesman Steve Holmes, however, said that MBE management, logos and even that red, white and blue color scheme will stay in place. Franchisees can continue their relationships with Federal Express, the U.S. Post Office and other carriers.

“We intend to keep franchisees operating as independent business centers,” Holmes said, “and we’ll be selling more franchises.”

Holmes said the alliance will help the shipped reach customers in the small business, home office marketplace, and that together the two companies can offer these customers even more services, like equipment leasing, financial products and COD services. In addition, MBE will become a drop-off and pick-up point for Internet purchases and returns.

Jeffrey Medford, a logistics analyst with William Blair & Company in Chicago, has even bigger predictions. “MBE give UPS another distribution point in the global supply chain,” Medford said. UPS operates in 200 countries now and MBE had stores in 27 of them, with 70 more signed on.

Eventually, franchisees will help their customers do business around the world, by leading them through the red tape of customs regulations and cash conversions, he said.

Back in Paoli, Cathy Thomas is looking at more immediate benefits. “Just putting up that UPS sign will bring more people in the door,” she said. “The UPS drivers we see every day are always respectful and I want UPS customers to see me in the same way. I believe UPS will see the value of that.”

Risks: International Franchise Association, Franchise show, Can’t talk to media, Franchisee association, independent, Mergers and acquisitions, United States, 200100401 MBE franchisees

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