Rebranding is a hot topic in franchising. Just look at the world’s most recognizable donut franchise system, whose locations continue to shorten its two-word name to just one: Dunkin’. This rebrand was actually announced in 2018 and began in 2019. But systemwide changes could not happen overnight and the rebrand continues today.
Overall, the Dunkin’ rebrand has been successful, perhaps because leadership learned from the mistakes of others. Let’s look back on a litigation in franchising that set a precedent on rebranding, and some key details NY franchisors and franchisees should know before changing a logo or condensing a name.
The UPS Rebrand Lead To Legal Tie-Ups
In 2001, United Parcel Service (UPS) purportedly acquired Mail Boxes Etc. (MBE) for $191 million. The acquisition marked UPS’s expansion into the retail business services market and is also an important, teachable moment in franchising.
The UPS Store franchise guidelines involved a rebranding process where franchisees had to adopt the new UPS Store branding, which notably included the brown color scheme associated with the carrier.
Transitioning to The UPS Store was not welcomed by many franchisees, who had developed a brand identity around the Mail Boxes Etc. name and logo. At least 200 former MBE franchisees filed a class action lawsuit against UPS less than a year later. They alleged UPS had violated franchise agreements by forcing them to convert to The UPS Store, which lead to significant financial losses.
The class action had a long journey in various courts and in arbitration and the terms of a resolution have not been officially confirmed, but it seems the dust has settled. Some franchisees remained in the system, while others sold their units or opted not to renew their contracts. On its site, UPS notes that since October 2012, Mail Boxes Etc., Inc., was officially renamed as The UPS Store, Inc. and “the centers remain locally owned and operated.”
Several lessons can be learned from this landmark franchising litigation. Before embarking on a franchise system rebrand, franchisors and franchisees should consider several factors and risks.
Franchisor Considerations
- Franchisee Buy-In. Franchisors should gauge the level of buy-in from franchisees. If there’s significant resistance, it might be necessary to provide more support, communication, or incentives to ensure cooperation.
- Costs and Support. Understand the financial implications for franchisees and provide support. Rebranding costs can be substantial, including signage, marketing materials, and remodeling. As suggested from the UPS takeover of MBE or from Dunkin’s rebrand, franchisors may need to offer financial assistance or phased approaches to ease the burden.
- Brand Identity. Ensure the new identity aligns with the franchise’s values and customer expectations. Franchisors should communicate the reasons behind the rebrand and the benefits it brings.
- Legal Compliance. Ensure that the rebranding process complies with franchise agreements and relevant laws. Franchisors should avoid actions that could be seen as breaching franchise agreements or engaging in unfair trade practices.
- Franchisee Support Programs. Implement training programs to help franchisees transition smoothly to the new brand. This includes staff training, operational changes, and marketing strategies.
Franchisee Considerations
- Customer Loyalty. Consider the impact on existing customers. Franchisees should anticipate any potential resistance or confusion among customers and strategize to retain their loyalty.
- Market Analysis. Evaluate how the rebranding will affect the local market. Analyze whether the new brand aligns with local demographics and customer preferences.
- Legal Review. Seek legal advice from a NY franchise lawyer to review the franchise agreement and the parties’ rights and obligations with respect to the rebranding requirements.
- Exit Strategy. Franchisees should collaborate with a NY franchise lawyer on their options, which could include an exit strategy, should they decide not to proceed with the rebrand.
Running On Reasoning
Before embarking on a franchise system rebrand, NY franchisors and franchisees should consider the associated risks by speaking with a qualified NY franchise lawyer.
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