UPS franchisees unhappy with parent company

By Ryan Mahoney and Brent Adams

updated 12:54 p.m. ET Aug. 15, 2005

Four years after United Parcel Service Inc. bought Mail Boxes Etc. Inc. and its thousands of retail locations, many dissatisfied franchisees of what is now the UPS Store are wondering why Brown hasn't done more for them.

A growing coalition of several hundred store owners has banded together to form The Brown Board Owners Association Inc., a group that is carrying their grievances -- centered around concerns of declining profitability -- to UPS' door.

Brown Board president Larry Bowdoin, who owns a UPS Store in Prattville, Ala., said the company is undercutting its franchisees by offering online shipping rates that are lower than it allows the stores to charge.

He said UPS also is expanding efforts to sell shipping labels and services online, and customers then drop off their packages at a UPS store for delivery -- a low-margin service for store franchisees. And, he said, the company promotes direct pickup service for small businesses, bypassing the UPS Stores.

Brown Board chairman Mike Rodriguez, who owns a UPS Store in Lilburn, Ga., said that more than 60 percent of the estimated 4,000 U.S. stores are losing money and that many owners have gone out of business, sold their stores or gone bankrupt keeping them afloat.

"Have you ever heard of a franchisor that competes with its own franchisees?" Rodriguez asked. "Not only does UPS compete with us, but whatever we sell through them, they get a royalty on it besides. They're double-dipping."

UPS has refused to recognize the organization. Spokeswoman Brandyn Jennings said franchisees should express any concerns either directly to the company or through the existing owner-elected committees that represent their interests.

"Neither UPS nor (Mail Boxes Etc.) will be meeting with your association," wrote Don Higginson, senior vice president of franchise relations for Mail Boxes Etc., in a July 27 letter posted on the Brown Board's Web site. Mail Boxes Etc. "reserves all of its rights to remedy any damage or harm that your association causes, or threatens to cause, to (Mail Boxes Etc.), including to its valuable relationships with its franchisees."

The former Mail Boxes Etc. stores were changed to The UPS Store, but the subsidiary that oversees the stores retains the Mail Boxes Etc. name.

Board founded to bring complaints
If the Web site's forum, which is filled with angry postings, is any indication, many of those relationships already are damaged.

Regardless, said Rodriguez, a retired DeVry University dean who bought his own franchise in June 2004, the owner-elected committees are ineffective at conveying owner complaints and not truly independent; hence, the need for the Brown Board.

Bowdoin, who co-founded the group with Rodriguez in April, said his franchise also has been struggling.

"We're not a bunch of torch-bearing folks who want to go down the streets of Atlanta and burn UPS," Bowdoin said. "We wouldn't have bought this franchise if we didn't think it was a good business. But I support my store each month with my other businesses. There's no profit at the end of the day."

The problem also is being felt in the Louisville area, where some franchisees believe they aren't seeing the returns UPS touted when it bought Mail Boxes Etc.

According to the UPS Store Web site, www.theupsstore.com, there are 22 UPS Store locations in Louisville and Southern Indiana.

"Our shipping volume really hasn't increased like (UPS) said it would once we became a UPS Store," said Joyce Vallance, owner of the UPS Store at Highlander Point in Floyds Knobs. "Revenue has increased some (since the UPS acquisition), but so have costs, and volume hasn't increased enough to offset the loss of (profit) margin."

She declined to disclose revenue or net income figures, but she said she believes her business has been hurt because it is limited in what it can charge for shipping. It also must pay a royalty on each item shipped.

"It's not the shot in the arm we hoped it would be," added Vallance, who opened the store as a Mail Boxes Etc. in 1999. "Things are tough right now, but we're hanging in there."

Like many owners, Vallance said she is frustrated that UPS is trying to lure more businesses to use its direct pick-up service.

"We don't just cater to grandmas sending toys to their grandkids," Vallance said. "A good portion of our business comes from small businesses sending packages regularly. If you take that business away, that really hurts."

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