To download the PDF of the charts and lists for the 2012 Annual Franchise Review, click here.
As you will see in this year’s numbers, the franchise print segment is still a pretty good bellwether of the economy, and not just in North America. As we continue the slow recovery that first began to percolate in last year’s Annual Franchise Review, our counterparts on the other side of the world have been dealing with their own set of recessionary blues. Since four of the six US-based print franchises also have interests in other parts of the world, they give us a glimpse into the business conditions outside our borders. This also allows us to make some comparisons, even if they are quite general.
Of course, the big news in the franchise world this year is the acquisition of AlphaGraphics by Blackstreet Capital Partners II, which closed on January 11, 2012. The Maryland-based private equity fund bought the franchise from UK-based GA Pindar & Son Ltd. The initial transition period saw the ouster of Kevin Cushing, who had served as CEO since 2004. Art Coley, who came to AlphaGraphics from ICED, was promoted from senior vice president to president of the system. It is still too early to know how these changes will affect the system and its franchisees. The numbers reported in this year’s Franchise Review reflect 2011 performance, so are not affected by the acquisition.
In 2011, the franchise segment of the printing industry produced total sales of $1,583,383,512. That was down 3.5 percent from 2010 figures, but most the losses are attributable to franchise interests outside North America. On this continent, franchise print sales rose by 0.57 percent to $1,318,243,174.
Average system-wide sales were $263,897,252; mirroring the overall 3.5 percent dip. Franchise Services, franchisor of Sir Speedy, PIP, Signal Graphics, and Copies Now, maintained the highest system-wide sales with $431 million; 2.49 percent less than the previous year. Minuteman was close behind at $420 million, reflecting a dip of 0.94 percent. AlphaGraphics reported a total of $286,308,129, which is an 8.73 percent gain. The Allegra Network posted $226,105,000 overall; down 2.2 percent on the year. ICED, home of Kwik Kopy Printing, Kwik Kopy Business Centers, Franklin Printing, and Ink Well, suffered a loss of 32.21 percent in system-wide sales with a total of $133,224,234. CPrint International, which currently only has affiliates in the US, saw system-wide sales grow by 3.51 percent to $86,746,149.
This year, Minuteman posted the highest North American sales with $350 million, down 0.94 percent on the year. Franchise Services followed with sales of $330 million; a 1.46 percent gain. AlphaGraphics’ 7.99 percent gain to $231,330,553 put it in third place. Allegra, which has no franchisees outside North America, slipped by 2.2 percent with sales of $231,200,000. ICED saw the largest gain; jumping 35.32 percent to post sales of $94,061,472. And CPrint’s $86,746,149, being both North American and total sales, reflected the same 3.51 percent gain.
Oddly, although every system reported an increase in average system-wide sales per shop (SPS) for shops that are more than one year old, the overall average was down by a slight 0.3 percent to $615,623. (This is one of those odd statistical quirks that forces me to re-examine the numbers repeatedly.)
Two systems reported average sales per shop in excess of $1 million: CPrint with $1,125,246 and AlphaGraphics with $1,001,123; gaining 5.33 percent and 2.81 percent, respectively. Allegra Network reported the strongest growth in SPS with a 26.12 percent climb to $973,200. Franchise Services saw SPS rise by 1.46 percent to $751,000. Minuteman’s average SPS of $483,000 marked a gain of 0.62 percent. And ICED’s system-wide average SPS rose by 6.26 percent to $463,809.
SPS for North American shops more than one year old rose by 3.7 percent to an overall average of $650,021. Allegra Network’s and CPrint’s average North American SPS are the same as their system-wide figures because they have no overseas locations. AlphaGraphics’ average SPS for its North American locations was $948,076. Next is Franchise Services with $750,000, followed by ICED with $511,204 and Minuteman with $453,368.
All Over the Map
The number of locations that are part of US-based printing franchises continues to decline, with a total of 2,572 shops in 2011. That is 86 fewer than 2010, representing a 3.2 percent loss. Out of that total, 2,028 shops—78 percent—are located in North America. All but three of them are franchisee owned. Allegra has one company-owned location and Franchise Services has two.
Every system but one declined in numbers during the past year. The sole exception is AlphaGraphics, which added 12 locations to post a total of 284 shops in 2011. That’s a 4.23 percent gain.
Minuteman is still the largest system with 917 locations; down from 926 (0.98 percent) in 2010. Franchise Services has 574 shops; falling by 4.18 percent from the 598 it had in our last report. ICED, which lost 43 shops (10.51 percent) now maintains 409 locations. And Allegra, with 303 locations, is down by 16, or 5.28 percent.
CPrint went from 91 to 85 locations; a dip of 4.18 percent, but the nature of that non-traditional franchise dictates that its numbers will fluctuate more often than the others. It is not a franchise that fosters start-ups, but rather a stepping stone to higher performance for established printing companies. That is also why its entry and total investment costs are far lower than those of the traditional franchises. CPrint affiliates don’t have pony up the cash for new equipment or real estate when they join the franchise. It operates more like a conversion program, but even in that it differs from the other systems because it fully expects its franchisees to leave the system once they reach a certain level in sales performance.
As mentioned before Allegra and CPrint are located only in North America, although Allegra has Canadian franchisees and CPrint is currently operating only in the US. Franchise Services has locations in 13 countries, ICED affiliates can be found in 10 nations, AlphaGraphics is in seven, and Minuteman is in six. None of the systems operates in all 50 states. Minuteman is in 45, Allegra is in 44, AlphaGraphics is in 42, Franchise Services is in 40, and ICED can be found in 25 states.
Working Hard for the Money
Any way you slice it, $1.58 billion is a lot of money. Even single-color offset printing, which has been in decline for years and counted for only three percent of sales, brought in more than $47 million. Here is the complete breakout of sales percentages and dollar values:
Category Percent of Sales Dollar Value
Prepress 7.1% $112,420,229
1C Offset 3% $47,501,505
Multi-Color Offset 13.8% $218,506,925
4C Offset 4.6% $72,835,642
B/W Digital 10.7% $169,422,036
Color Digital 26.7% $422,763,398
Wide-Format 5.1% $80,752,559
Finishing 8.2% $129,837,448
Mailing Services 6% $95,003,011
Brokered/Other 14.9% $235,924,143
These numbers are even more impressive when we remember that these sales amounts are spread between only 2,572 locations. This is why we consider the franchise segment to be such a significant microcosm of small commercial printing in general. This small corner of our industry is identifiable and quantifiable, which makes these statistics invaluable for anyone who wishes to gauge the overall health of the larger industry segment.
In on the Ground Floor
So how can you get in on all the benefits of belonging to a franchise system? While start-ups are not unheard of, they are not nearly so common or plentiful as they once were. The most prevalent way that franchises keep fresh energy flowing into their systems today is through reselling existing franchises and bringing in independent printers via conversion programs.
Conversion programs provide an exit strategy for existing franchisees who are ready to retire or wish to leave their businesses for various other reasons. Often, independent printers who are struggling with the changing face of the industry and the rapidly shifting customer demands find the support offered by a franchise to be quite attractive. And while all the systems have certain similarities, their business practices and philosophies are different enough to make it worth the time to investigate all the options before making a decision.
In addition to more esoteric considerations, such as corporate culture, prospective franchisees will want to examine the more practical considerations. Specifically, the cost of getting into a system. Taking conversion programs off the table, let’s examine what it would cost to start a brand new franchised print shop.
As mentioned before, you can’t buy into a brand new CPrint franchise because such a thing doesn’t exist. For those who are interested in that particular limited term agreement, the initial investment is a flat $5,000. The maximum total investment is $12,579.
If you are considering a more traditional start-up, here is what it would cost to get into the various franchises in 2012:
• Allegra Network requires $200,000 in start-up capital and its total investment ranges from $172,348 to $455,784.
• AlphaGraphics requires $150,000 in start-up cash plus a net worth of at least $500,000. That figure excludes your real estate purchase. The total investment required is between $257,500 and $406,000.
• Franchise Services requires start-up cash of $150,000 and a total investment of $288,000.
• ICED requires $65,000 in start-up cash. It’s total investment figures range from $219,578 and $248,626.
• Minuteman Press requires start-up cash in the amount of $50,000. It’s total investment is placed at approximately $483,000.
The cost to open a new franchised print shop held fairly steady over the past year. These figures never seem to vary significantly from year to year, but there are occasional tweaks. The only changes in this Franchise Review are that Allegra dropped its maximum total investment number by a fairly significant 15.09 percent and AlphaGraphics adjusted its total investment number downward by 1.48 percent.
On the Right Path
The slight improvements experienced by the North American printing franchise concerns in 2011 should continue to trend upward this year as the economic recovery strengthens. Economists, both inside and outside our industry, predict slow and steady growth over the next few years. (See “Economic Recovery Requires New Mindset” by Andrew Paparozzi on page 28.)
Having survived the Great Recession, all printing companies, not just franchise affiliates, are working to add the new services and products that customers want. The transition may be easier for franchisees, though, because they do not have to go it alone. All of the franchise leaders have turned their attention to the addition of marketing services—a widely accepted, but nebulous term that encompasses all types of personalization, mobile services, website development, social media management, and a whole cornucopia of other services. As Paparozzi cautions, “It’s no longer ‘print or’; it’s ‘print and’.”
Comments from the Franchise Leaders
Allegra Network, Mike Marcantonio, president & CEO
Across our industry, 2011 results were in line with expectations. Modest signs of economic growth signaled some positive change; enough to be hopeful, but far from contented. At Allegra Network, it has validated our decision and commitment to assemble all of the necessary resources, tools, and alliances to fully support our franchise members’ transition to delivering cross-media marketing services.
For us, it starts with education. By year-end, 112 of our marketing/print centers had completed a certification program that incorporates strategic marketing planning, media overview, best practices, and creative execution. Once completed, franchise members can come to Allegra Network’s headquarters in Plymouth, MI, for a deeper dive into strategic planning and one-to-one coaching on the sales process and how it differs from selling print.
Knowledge builds confidence, evidenced by several dozen franchise members who have sold integrated marketing communications programs that incorporate advertising, public relations, direct mail, Web marketing, and social media strategies. We share the “wins” throughout the network via a project archive with more than 100 industry-specific marketing plans and campaigns that can quickly be re-purposed and re-sold.
This library of “go-to” document resources is necessary to improve efficiencies in the consultation and selling process. Next, is delivering on the brand promise. Members who earn our Marketing Central certification gain access to agency-level expertise through our headquarters-based Marketing Resource Center (MRC). This team of veteran strategic planners, copywriters, graphic designers, and Web developers offers support with the planning and execution of projects, campaigns, and more comprehensive plans—from creating print ads and developing social media campaigns to preparing an email blast and launching a website.
Having the most qualified staff at the center level is the next piece of the pie. Sometimes, that occurs through re-training existing team members in selling and delivering broader based marketing services. At other times, we assist franchise owners with their candidate searches, creating job postings and conducting personality/aptitude profiling and interviews.
Finally, our strategic alliances put wide-ranging marketing technology tools in ready grasp of our franchise members. They include email services company Constant Contact, data providers AccuData and InfoUSA, advocate marketing firm Amplifinity, and other equipment and software vendors. Saying you can do it is one thing; having all of the tools and resources at hand to get it done is another.
We eagerly look forward to the new opportunities 2012 will bring and are proud of how our franchise members have embraced and adopted the changes we have asked them to make. In the coming year, we see great growth potential in direct marketing, wide-format output, and mailing services—areas where all of our franchise members can grow and continue to prosper.
AlphaGraphics, Art Coley, president
First of all, I’d like to thank you for once again publishing the annual franchise review. More than ever, independent print shops are contacting us about joining our network. Your review provides valuable information in understanding what each franchise brand might be able to offer.
At AlphaGraphics, we believe that now, more than ever, is the best time to be a business owner in our industry if you have the right resources and support. Now is the best time to be a business owner in our industry if you’re current with technology, the right equipment, and the right systems and processes to make sure you’re relevant in the marketplace. That’s what we work on doing each day for our franchisee partners in the AlphaGraphics network. Our continued sales, profit, and location growth tell us we must be doing some things right…and we know we’re just getting warmed up.
Our focus is pretty simple. We work each day to help each of our business centers increase sales and profits. We work each day to help them build value in their business. And we’re looking for more franchisee partners who share that passion and drive. Whether someone is in the industry today as a business owner or looking to enter this industry, we welcome a conversation to see if there could be a fit for us to partner.
We are bullish about the future and continue each day to be the number one document and marketing solutions provider for businesses around the world.
CPrint International, Todd Nuckols, president
As far back as 2010 it became very apparent that print buyers weren’t returning to the same habits they had pre-recession. So, we took bold steps and peered into the future to help CPrint affiliates survive and thrive for many years to come. We continued on this trend in 2011 and as a result of the cards dealt before us, we continued training our affiliates on ManagedMarketing, which is a proprietary CPrint program that teaches printers how to help their customers increase sales.
CPrint affiliates are not becoming advertising agencies or marketing companies, but instead are now integrating print with new Internet-based communication tools for their current small business customer base. The combination makes the customer’s message stronger and the new Internet services are driving sales for the core business of printing. For the CPrint affiliates, this results in exciting new services that make sales calls easier and less focused on price. CPrinters are getting paid for the value they bring, and not just the transaction they deliver. And it’s working.
This past year we awarded two of our shops with the top award in our program called the Superior Performance in Print Shop Management Award. To receive this, a print shop owner must achieve the following in the same business year: a 2:1 or higher current ratio, 20 percent or more profitability, and 15 percent or greater sales growth over the last three years. We feel this puts a print shop in the top five percent of all shops in North America, and we are proud to say that two CPrinters achieved these marks while many print shops were struggling to keep the doors open.
Additionally, 64 percent of our National Board affiliates achieved an average of 16 percent sales growth as of the close of the fall meetings. And all shops were achieving their growth by adding intangible services to their sales mix, including desktop websites, mobile websites, email marketing, as well as wide-format and other products. Of course, they continued to print ink or toner on paper because that is still a large segment of their business but they now think like entrepreneurs and not just printers. That’s the key to survival in our opinion.
The future looks bright for CPrint affiliates because they have tools at their disposal that much of their competition doesn’t even know exists. And, instead of staying in the shop, pulling the covers over their heads, and waiting for the storm to pass, CPrint affiliates are making money, having fun, and spending a lot more time with their families.
Franchise Services, Richard Lowe, president
The big picture is that all segments of the printing industry continue to operate under stress from the pressures of the economy, technology, and low cost competition, which has commoditized much of our traditional work. The dynamics of change won’t stop in 2012. Growth will come from changing the way we do business in order to capture market share. Today there is a certainty in our industry, it has dramatically changed in nearly every facet and there is no going back to the old ways. The new axiom is simply change or die.
The good news is that we started changing four years ago with the introduction of our Marketing Services Provider (MSP) strategy. We have made significant strategic and tactical changes to our business and it is playing out. New partnerships with technology companies have allowed our franchisees to offer new high value products and services to their customers and prospects. Some of our more traditional product offerings like signs, posters and banners, Web-to-print, mailing services, and promotional products are finding their way into integrated marketing campaigns that our franchisees sell to their customers. The introduction and adoption of marketing services by our franchisees has enabled them to fill the holes left by business lost to online vendors, customers changing the way they communicate, technology influences, and low cost providers.
Today’s franchise owners are constantly confronted with the changes and dynamics in the market. We are working together as a team in terms of research, partnerships, business development, marketing, and training to help our company grow. We are bringing them solutions that enable them to help their customers grow their business that, in turn, grows our franchisees’ businesses.
We have reason to be excited about the prospects of 2012 being a good year for both our franchisees and our company. Our franchisees have proven to be a most resilient bunch. They are marketing their businesses utilizing the same marketing activities that we want them to sell to their customers and prospects with good success. The great thing about looking at our franchisees as a group is that they are all in the game.
Our plan is simple. We have a commitment to growth. We plan to help our franchisees capture market share with innovative printing and marketing products and services.
ICED, Jay Groot, president, ICED print brands
As we wrap up 2011, our industry challenges continue. Franchises under the ICED umbrella are not alone; the industry as a whole is facing common challenges. But on the upside, more of our centers are seeing signs of a slow recovery, with orders up and more consistency from their clients.
ICED, the parent company for seven franchises, six in the print industry, has weathered many an economic storm since our beginning in 1967. What we’ve chosen to do is to focus on the positive. Our center owners have had to redefine themselves as something other than print providers, some reluctantly. For those with a desire to grow, we are guiding them toward being marketing solutions providers (MSP). They must learn how to market better, how to develop successful campaigns, how to track their ROI, how to be more efficient, and so on.
A good number of our owners read the handwriting on the wall in late 2008 and early 2009, and started making adjustments. They’ve faithfully attended our very in-depth focus group meetings, ignoring the inconvenience and the cost, because they want to succeed. We can work with people with that mindset. We can help them achieve that success.
Our Kwik Kopy Business Centers brand saw a steady increase in sales for 2011 by an average of 11 percent. The motivation is not just on increasing sales; increasing sales and sacrificing profitability creates a false sense of comfort that won’t last long, not for the franchisee or for the franchisor.
Online print ordering is a growing challenge. In recent years, 20 percent of print orders have migrated to the Web. Postcards, business cards, letterheads, brochures, and more can now be customized and ordered online. To capture that business, more of our center owners are using MyOrderDesk from PagePath and we have just updated our center websites, giving owners a fresh, new look with added features to help with that process.
This is a digital world, so having an online communications portal seems to be the very foundation for operating within that world. With that tool and dedicated online providers, our owners can be competitive without added overhead.
Online ordering and higher paper costs have cut deeply into profit margins, as have customer buying habits. As client companies streamline their operations, the message being pushed down the line is to cut costs, buy cheaper, place smaller orders, get bids on everything.
Thus it comes even more critical for our owners to embrace the marketing solutions provider role, not just for those clients that need the whole consultant package, but also for those customers that are more price-oriented, the commodity print market. Customers of all levels need a partner to help them keep a strong message in front of their clients.
We can make the transition to the MSP role: 1) by helping our owners identify new markets and opportunities; 2) with online training and education, and 3) by identifying and collaborating with vendors that can help with competitive product pricing and technology. We look for companies that are willing to explore new ideas and markets that help both of us, not just supply products. We are gratified to work with several such vendors; they provide content rather than just products, and they help our owners bring in more revenue.
Direct mail took on a bad connotation in recent years, with the assumption that digital communications would replace a piece of mail delivered by the post office. Not so! Direct mail has a definite place in a well-designed marketing campaign. That campaign may well include some digital communications and some print, but it will start with a face-to-face relationship between the marketing service provider and the client.
It has been our belief for 45 years that constant education is the route to success for our owners. That education comes in multiple venues and methods, and covers a myriad of subjects that a business owner needs to know, but it is essential to profitable growth. We constantly stress that to our center owners, and whether we are convening for our conference, holding regional workshops, producing or collaborating in webinars, posting podcasts and e-zines, or distributing our company magazine, education is the vehicle that will carry us through—and over—the economic hurdles that are certain to remain part of our immediate future.
Given the maturity of our franchise system, many of our centers might be considered “mature.” But our center owners, whether they’ve been in our system since 2009 or since 1977, also look to the future with hope, and look to us for guidance on that journey. We believe we are up to the task.