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Mail Boxes Etc.

 


Address:
6060 Cornerstone Court West
San Diego, California 92121-3795
U.S.A.

Telephone: (858) 455-8800
Fax: (858) 455-8961
http://www.mbe.com

Statistics:
Wholly Owned Subsidiary of U.S. Office Products Company
Incorporated: 1980
Employees: 300
Sales: $81.1 million (2000)
NAIC: 488991 Packing and Crating; 561431 Private Mail Centers


Company Perspectives:


Mail Boxes Etc. strives to make business easier worldwide through its service and distribution network and by delivering personalized and convenient business solutions with world-class customer service. The company's core values include caring, honesty, fairness, integrity, trust, respect, commitment, and accountability.


Key Dates:


1980: Mail Boxes Etc. is established and the first store opens in Carlsbad, California.
1982: The first area franchise is sold.
1983: Founder DeSio gains controlling interest in the firm.
1984: The company becomes partners with the United Parcel Service.
1986: The company goes public.
1988: MBE opens its first international outlet in Canada.
1990: More than 1,000 franchise locations operate worldwide.
1992: Revenues reach $36 million.
1993: The company launches 'Big or Small. We Ship it All' shipping program.
1995: The company introduces first-ever national ad campaign, 'It's not what we do, it's how we do it.'
1997: U.S. Office Products acquires MBE.
1998: The company opens the 3,000th outlet in the United States.
1999: The company's on-line business center is launched.
2000: More than 4,000 outlets operate worldwide.


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 4,300 franchise locations worldwide. The chain continues to grow at the brisk pace it established almost from its birth in 1980 and has master licenses for international franchise locations in 70 countries. 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 mailbox rentals, packaging, shipping, copying, faxing, passport photos, office supplies, money transfers, computer workstation rental, and a wide range of other conveniences. The company's on-line business--www.mbebiz .com--caters to the small and home office market and offers an array of business services.

Company Origins

MBE was founded in 1980 by Herb Goffstein and Pat and Mimi Senn. The group was later joined by Anthony DeSio, a former aerospace executive whose resume included stints with Lockheed, General Electric, and Western Union. DeSio and his 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 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. DeSio mortgaged his house and used his wife's engagement ring as collateral to secure nearly $900,000 in funds used to purchase controlling interest in the company in 1983.

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, stationery, 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 1984, the company formed a key partnership with the United Parcel Service (UPS). 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. In addition to simply providing a wider array of services, MBE outlets were likely to be staffed by the franchiser, 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 nonfood franchisors. Company revenue had grown to $12.4 million by this time, with after-tax earnings reaching $1.85 million.

International Expansion in the Late 1980s

MBE began to foray into international markets in 1988. 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 more than 1,200 outlets strong, compared with 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. Whereas 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. 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 were 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.

Continuing Growth in the Mid-1990s

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 Staples outlets. Before the end of that year, there were more than 2,100 MBE Centers throughout the world, with more than 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, 'It's not what we do, it's how we do it.' 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 remained a strong leader in the industry.

New Management, New Ownership: 1996--97

In 1996, James H. Amos, Jr., joined the company. DeSio, recovering from quadruple-bypass surgery, named Amos as his predecessor and decided to sell the business. One year later, U.S. Office Products (USOP), a company catering to the SOHO market, acquired MBE. USOP, a firm that had spent the last three years acquiring nearly 200 companies, planned to use MBE's outlets to sell its office products and services. In a November 1997 issue of Discount Store News, Jon Ledecky, chairman and CEO of USOP, stated, 'We want to make Mail Boxes Etc. a one-stop shop for the small business person. Think about all the different things that we can provide.'

Under new leadership, MBE continued to grow rapidly. The firm developed a new marketing slogan, 'Making Business Easier. Worldwide' and its 500th international outlet opened in Italy. In 1998, MBE began working with IBM Corp. and Infoseek Corp. to create MBE Online, an Internet site catering to small business owners. The new venture, officially launched in 1999 as www.mbebiz.com, offered many services designed to entice business owners to use MBE for all of their professional needs.

MBE also made a strategic move in 1998 by partnering with long-time competitor United States Postal Service. The two firms began to develop a program in which MBE outlets would offer postal products and services and eventually become U.S. Postal Service Authorized Retail Outlets. The company also made important strides in the Asian market by obtaining a master franchise license in Japan. By the end of this year, more than 3,000 MBE outlets were operating in the United States.

As e-commerce became increasingly popular in the late 1990s, MBE began to forge key relationships with web-based companies. A partnership was formed with popular web auction-house eBay and iShip.com in 1999 to provide shipping and delivery options to its members. The company also began utilizing a new point-of-sale computer system in its domestic outlets that would allow for the integration of e-commerce operations. MBE's franchise locations also received a new look as MBE 2000 was introduced to franchisers offering new in-store design and marketing tools.

Continued Growth in the New Millennium

MBE entered the new millennium with more than 4,000 outlets across the globe, making it two times the size of its next five competitors combined. The company continued to see strong growth in all aspects of its business interests. The firm's pilot program with the U.S. Postal Service expanded in markets across the United States and was well received by consumers. In May 2000, MBE and Innotrac Corp. announced their investment in Return.com, a full-service on-line return service that would allow consumers to return items purchased on-line or through catalogs to participating MBE outlets for packaging and shipping. The company also began its foray into Internet banking by teaming up with National InterBank and Juniper Financial. Under the terms of the partnership, bank customers were able to deposit checks at MBE locations.

While MBE continued to prosper, its parent USOP began to feel the financial pains of rapid expansion. In August 2000, the firm announced plans to spin off MBE. Its uncertain future did not hinder MBE expansion plans, however, and the company continued to pursue growth options. In January 2001, the firm landed master license agreements in the Dominican Republic and the Caribbean. MBE also continued to look for Internet partnerships in hopes of capitalizing on e-commerce growth. Entrepreneur magazine named MBE the number two franchiser in its Franchise 500 list, recognizing the firm as one of the fastest-growing business opportunities available. As its future with its parent company remained up in the air, MBE's success and growth appeared to remain a constant in the upcoming years.

Principal Competitors: Kinko's Inc.; Office Depot Inc.; U.S. Postal Service.





Further Reading:


Adler, Carlye, 'The Man Who Launched 4,000 Businesses,' Fortune, February 5, 2001, p. 180.
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.
Hoover, Kent, 'Postal Service Expands Mail Boxes Etc. Program,' Orlando Business Journal, February 18, 2000, p. 13.
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.
Rodrigues, Tanya, 'Promotion Ties MBE Shipping to eBay Auctions,' San Diego Business Journal, November 13, 2000, p. 33.
Reosti, John, 'Banking Services Lure Mail Boxes Etc. Chain,' American Banker, October 6, 2000, p. 1.
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.
Troy, Mike, 'Growing USOP to Acquire Mail Boxes,' Discount Store News, November 3, 1997, p. 6(2).
Zion, Lee, 'Mail Boxes Etc. Predicts Expansive Growth in 2000,' San Diego Business Journal, March 20, 2000, p. 28.
------, 'Stamp-Edge to the Top,' San Diego Business Journal, February 5, 2001, p. 41.

Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.




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