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Mail Boxes Etc.


6060 Cornerstone Court West
San Diego, California 92121-3795

Telephone: (619) 455-8800
Fax: (619) 455-8961

Public Company
Incorporated: 1980
Employees: 185
Sales: $59.1 million (1996)
Stock Exchanges: NASDAQ
SICs: 6749 Franchises, Selling or Licensing

Company Perspectives:

To develop an international distribution system for providing postal, business, and communication services to consumers and businesses of all sizes.
To make this distribution system available to governments and private sector businesses seeking a cost-effective alternative to the establishment of their own chain of retail outlets.
To manage the operation of the MBE network to provide the highest quality of service to our customers and an excellent return on investment for MBE franchisees and shareholders.

Company History:

Mail Boxes Etc. is the world's largest franchise network of postal, business, and communications retail service centers. Nearly eight times larger than its nearest competitor, the Mail Boxes Etc. (MBE) system consists of about 2,600 U.S. outlets (as of 1996) and another 449 units in 51 foreign countries. The chain continues to grow at the brisk pace it established almost from its birth in 1980. From its origins as an alternative to the U.S. postal system for both sending and receiving, MBE has expanded its line of services to include copying, faxing, passport photos, office supplies, and a wide range of other conveniences. The bulk of MBE's revenue comes from franchise royalties and marketing fees, as well as from sales of new franchises.

MBE was founded in 1980 by Anthony DeSio, a former aerospace executive whose résumé included stints with Lockheed, General Electric, and Western Union. Desiring a business of his own, DeSio and three partners envisioned an establishment at which people could conduct their postal business in an environment somewhat more agreeable than that of the typical U.S. Post Office--for a premium price, of course. They opened the first MBE store in Carlsbad, California, with an initial investment of $25,000 from each partner. Initially, the company's core business was mail box rental with 24-hour access. Among the other services offered were sales of postage stamps and wrapping and shipping of packages via independent delivery services such as Federal Express and United Parcel Service (UPS).

Franchising Sparks Growth in Early 1980s

Within a short time, there were three MBE outlets in operation. Funds for further expansion proved hard to come by, however. Since banks and venture capitalists failed to grasp the potential of the concept, DeSio and his partners turned to franchising in order to finance their company's expansion. The first MBE franchises were sold during the company's first year of operation, and by 1982 MBE was selling area franchises for multiple outlets. Despite the company's quick growth, squabbles arose between the partners. As a result, DeSio paid about $900,000 for controlling interest in the company in 1983. He has remained at MBE's helm ever since.

It was not long before MBE began to evolve from a chain of surrogate post offices into a chain of surrogate offices for small business operators. Early on, DeSio realized that mail boxes and shipping made a pretty small hook on which to hang an entire franchise network. One of the first new services he added was sending and receiving faxes. From the beginning, an individual could pass an MBE postal box off as an office suite number on a business card or letterhead. Now that person was able to list the fax number of an MBE location as his or her own number. In addition, MBE could provide the cards, stationary, rubber stamps, and other business identification items that contained those numbers.

As the 1980s continued, MBE was able to take advantage of the explosion of home-based businesses in the United States. MBE outlets were able to provide tiny firms that could not afford their own support staffs or equipment with the kinds of services that larger companies had in-house. In 1986 DeSio took the company public, selling most of the 51 percent of company stock he then owned, and raising about $5 million in capital to fuel further expansion. That year, MBE earned $900,000 on sales of $4.6 million.

By 1987 there were more than 400 MBE franchise locations in 37 states. Service continued to be the company's main competitive edge over the U.S. Post Office. For one thing, MBE could receive packages for rental box customers, a service regular post office boxes did not provide. And in addition to simply providing a wider array of services, MBE outlets were likely to be staffed by the franchisor, whose very livelihood depended on getting customers to come back. To do that, many operators offered such conveniences as allowing customers to check on their rental boxes by telephone. By 1988 MBE stores were in 43 states, and numbered more than 700. It was one of the fastest-growing franchisors in the United States, and nearing the head of the pack among non-food franchisors. Company revenue had grown to $12.4 million by this time, with after-tax earnings reaching $1.85 million.

Late 1980s Bring International Expansion

MBE went international in 1988 as well. This was done by selling a master franchise for all of Canada to a company called Can-Mail Inc. for a licensing fee of $500,000, plus a share of the royalties it received from its Canadian franchisees. MBE was not the first American mail center chain to cross the border, however. A year earlier, Colorado-based Pak Mail Centers had opened a store in Canada. The fact that MBE was beaten into Canada by Pak Mail--a chain a fraction of MBE's size--reflected DeSio's conservative approach to financing. His aim was to expand quickly without sinking deeply into debt and without overburdening the parent company's management or corporate structure.

By 1990 the MBE chain was over 1,200 outlets strong, compared to only about 230 for its nearest competitor, Pak Mail. Stores were located in Mexico and Japan by this time. The company continued to add new services to its line, including electronic tax filing at many locations. As the popularity of MBE and other retail postal centers grew, the company began to agitate for a better deal from the Postal Service and private carriers such as UPS and Federal Express based on the volume of business the centers were generating for the carriers. MBE finally broke through in 1990 with an overnight carrier called DHL Worldwide. In exchange for a discount that allowed MBE to charge customers the same rate as if they had gone to DHL directly, MBE began serving as official drop-off sites for DHL.

The addition of secretarial, answering, and other services made MBE even more of a one-stop business services center by the early 1990s. The company's success spawned a wave of new competitors, with names like Postal Annex Plus, The Packaging Store, and Mail 'N More, but MBE remained the clear leader in this emerging industry, with several times as many outlets as the next largest chain. As the national "downsizing" trend among corporations heated up, MBE was able to take advantage of the growing SOHO (small office/home office) market, which was composed to a large extent of former professional employees of shrinking companies.

Despite the growing range of services being offered at MBE stores, shipping services remained the company's core business. While each outlet was able to emphasize its own strengths, it was its connection to the big shippers, especially UPS, that made MBE attractive to many potential franchisees, and franchise fees remained by far the most important source of revenue for the company. In 1991 franchise fees made up 27 percent of MBE's $25.7 million in revenue. That year the company's ongoing alliance with UPS was cemented when UPS purchased 9.5 percent of MBE's stock, with warrants that gave UPS the option of increasing its holdings to more than 17 percent over the following three years. The transaction was mutually beneficial. For MBE, it ensured that UPS would not set up its own retail network, as Federal Express had done, thereby depriving the chain of one of its biggest revenue sources. And for UPS it provided a low-cost, wide-ranging distribution system that was already intact and fully operational.

As the 1990s continued, MBE took on even more roles in its attempt to become a provider of every business service imaginable. The MBE network soon began functioning as customer service or distribution centers for a wide variety of business equipment companies, which found it more economical to use MBE than to set up their own outlet systems. Among the companies that used the MBE chain in this way have been Nintendo, Acer Computers, Xerox, Panasonic, Toshiba, and Hewlett-Packard. Another service the company began to experiment with around this time was airline ticket distribution. For fiscal 1992, MBE's revenue grew to $36 million, with the majority again coming from franchise fees, royalties, and the sale of supplies and equipment to franchisees. The franchises themselves, by this time numbering nearly 2,000, were generating a total of about $570 million in sales.

Toward 5,000 by the Year 2,000

By 1993 MBE was well-enough established on both the national and international levels that it was able to introduce its "Big or Small. We Ship It All" program, in which participating MBE stores had the capacity to ship just about any item to just about any destination in the world. MBE also forged an alliance with the Staples chain of office supply superstores, giving rise to the appearance of MBE "boutique" stores inside of Staples outlets. Before the end of that year, there were more than 2,100 MBE Centers throughout the world, over 130 of them outside the United States. The chain was growing at the rate of about one store a day. Italy, France, the United Kingdom, Spain, Greece, and Turkey, to name just a few, were all home to MBE stores by the mid-1990s. MBE's international expansion was accomplished through the sale of master licenses, which gave a company the rights to subfranchise MBE stores for a whole country. The MBE concept was particularly appealing in countries with historically poor mail service, since customers there were generally eager to skirt the existing national postal monopolies.

MBE reported revenue of $43.7 million for fiscal 1994, a moderate increase over the previous year. Around that time, the company launched its first-ever national advertising campaign. The campaign was supported by the creation on a trial basis of a National Media Fund, which derived its money from an additional 1.5 percent monthly charge to participating MBE Centers. Because of the program's success, the fund was made permanent in 1996, and MBE has maintained a strong national advertising presence since that initial campaign.

The company's international expansion continued to move quickly during the next couple years. In June 1995 MBE's 100th European location was opened in Paris, and by the year's end there were 327 centers operating outside the United States. By that time, the company had sold a total of 47 national licenses for foreign countries. Development remained strong in 1996 as well. Among the international areas for which master licenses were sold that year were Israel and South Africa. Italy became the second country outside the United States (following Canada) to open its 100th center. Domestically, 287 new MBE Centers were sold in 1996, as the company surged toward its goal of 5,000 centers by the turn of the century.

Market research indicated that one in five U.S. households had used MBE by 1996. By this time, the success of the MBE concept was clear even to the U.S. Post Office, which sought to win back some of its lost business by offering its own version of "pack and ship" service. This attempt at vertical integration by the Post Office met with resistance on the part of the private postal service industry, which felt that the Post Office was competing unfairly by using money from its first-class mail monopoly to subsidize its Pack and Ship operation. In addition, shippers UPS--which by this time owned 15 percent of MBE--and Federal Express, both major allies of the mail centers, were infuriated by the Post Office's use of their logos and images in ads that they called misleading. In spite of the Post Office's counterattack, MBE seems poised for several more years of growth, especially in Asia and other areas where wheeling and dealing are common and methods of sending and receiving packages quickly and securely are hard to come by.

Further Reading:

Benford, Noonie, and Diane Gage, "Out of the Woods, into the Forest," Venture, August 1988, pp. 24-25.
Byrne, Harlan S., "Mail Boxes Etc.: It Builds Earnings through Rapid, Global Growth," Barron's, April 5, 1993, pp. 50-52.
"Call Me Usmail," Economist, August 20, 1988, p. 59.
Gendron, George, "A Sweet Deal," Inc., March 1991, p. 12.
McLeod, John A., "Consumers Pay More but Get More at Private Postal Centers," Marketing News, October 1, 1990, p. 8.
Page, Paul, "Retail Delivery Outlets Decry New Move by 'Customer-Friendly' Postal Service," Traffic World, June 3, 1996, p. 26.
"Reinventing the Post Office," Fortune, January 19, 1987, p. 8.
Schlax, Julie, "Rain, Sleet, Snow and Franchising," Forbes, November 26, 1990, p. 224.
Tannenbaum, Jeffrey A., "Mail Boxes Etc. Delivers Profits but Not to Everyone," Wall Street Journal, October 13, 1993, p. B2.

Source: International Directory of Company Histories, Vol. 18. St. James Press, 1997.

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