Academic journal article Entrepreneurship: Theory and Practice

Mail Boxes Etc. or the UPS Store? a Decision from a Franchisee's Perspective

Academic journal article Entrepreneurship: Theory and Practice

Mail Boxes Etc. or the UPS Store? a Decision from a Franchisee's Perspective

Article excerpt

In 2001, the United Parcel Service (UPS) purchased the entire Mail Boxes Etc. (MBE) franchise system. After test marketing several new concepts in 2003, the corporation strongly encouraged franchise owners to reposition their MBE outlets as "The UPS Store." Joseph and Courtney Morris, owners of a thriving MBE outlet, faced a quandary: should they retain their well-established MBE identity, adopt the new UPS brand name, or sell their franchise outright? The case incorporates both family issues and business factors as the franchisees struggle with a decision that could have significant impacts on their financial future.

Introduction

In the summer of 2004, Joseph and Courtney Morris sat at their kitchen table in the prosperous Chicago suburb of Evanville, (1) pondering the future of their Mail Boxes Etc. (MBE) franchise. Business had been going very well, with year-over-year sales increases and improving profits. Joseph enjoyed the rewards and challenges of running his own local business and the children had gained many benefits from working at the store. However, nothing stays the same and their personal life was no different: The kids were growing up and moving out, Joseph's health was uncertain, and Courtney's professional career was too demanding for her to pick up the resulting slack. Courtney reflected, "The changes happened gradually, but it seemed like all of a sudden we were at a decision point regarding the future of the business."

There were business-related issues that surfaced around this time as well. The company that owned the MBE franchise system, U.S. Office Products, had expanded too quickly into new business ventures and had to file for bankruptcy in 2000. As a result, United Parcel Service (UPS) was able to purchase the highly profitable MBE franchise system in 2001. UPS purchased the franchise to expand its retail presence--a potentially more profitable segment than their customary business-to-business (B2B) target--in the package shipping industry. After UPS test-marketed several retail brands and store formats, corporate headquarters strongly encouraged current MBE franchisees to convert their existing outlets to a new retail concept: The UPS Store. The UPS re-branding entailed shifts in pricing strategy, a different emphasis in product offerings, and changes in store decor. "We had heard a lot about the proposed UPS-branded stores and, as with any major change, some aspects seemed favorable, but others did not," Courtney recalled.

Joseph saw the three alternatives open to them as fairly straightforward, but deciding among them certainly was not:

   Our first option was to take the incentives offered by the
   franchisor and convert our operation to The UPS Store.
   Alternatively, we could retain the MBE concept, or, more
   accurately, we could retain it until our current franchise
   agreement expired in about 6 years. At that time, we would be
   required to re-brand in order to renew the contract, but we
   probably wouldn't get any assistance or incentives for the
   changeover at that point in time. Or, we could just sell the
   franchise to someone else right now.

Each alternative had its pros and cons--it certainly was not easy to decide. Moreover, with two children in college and one in graduate school, and with retirement on the horizon, the decision was of critical importance to the entire family and its financial future.

The Initial MBE Franchise Acquisition

As Joseph Morris had approached his 50th birthday in 2000, he had taken the opportunity to reflect on his life, family, and career. He had worked in downtown Chicago for over 20 years, eventually earning a coveted partnership in a large, international accounting firm. His job was very demanding and included long-term overseas assignments to places such as France, Greece, and South Korea. While he found the work challenging and interesting, Joseph felt that the travel had really taken a toll on his family life. …

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