Whither lies the future of the franchise printer? Well, while most observers agree that the bountiful years of the 1980s will likely never return, there is ample opportunity to enjoy growth for those who buy into a particular franchisor's mantra.
Sure, there's been a lot of fireworks on the quick printer side in the past year. The FedEx acquisition of retail giant Kinko's turned some heads and the Allegra Network introduced a new president. But, for the most part, it's been status quo; modest growth enjoyed by franchisors whose network of centers have branched out into ancillary services, as well as tucking in independent printers on the M&A landscape. It sounds a little like your typical general commercial printer.
Defining the franchise printer is a little tough. Most people associate franchise printers as those who pay a fee to the parent company to become branded and enjoy all the perks of advertising and scale, which is largely true. But Kinko's, for example, owns all its "franchises" while providing competition in many common markets with franchise printers.
Also, most people see franchises as quick printers with retail outlets. In many cases, that is true. But some printers strongly resemble general commercial printers, with sheetfed and even web presses (as in the case of Minuteman Press).
Definitions aside, one thing is certain: everyone is watching the bottom line and the strategies to enhance it.
The next few years will be a critical time for the Sir Speedy franchise, based in Mission Viejo, CA. The organization has roughly 1,000 centers globally, including its PIP Printing and Multi-Copy brands. On the Sir Speedy end, at least 100 centers will be up for renewal over the next few years, bringing into spotlight the company's value proposition, according to Ron Zayas, vice president of marketing for Sir Speedy.
"In general, franchisors are struggling as this is about the time, the next five years, where there are a lot of franchises up for renewal," he says. "Franchisors are struggling with bringing value to their franchisees, to be able to say, 'What can a franchisor do for you that you can't do on your own?' "
Three Steps Taken
It wasn't enough for Sir Speedy to underscore its advertising initiatives, according to Zayas, so about five years ago the company took a three-pronged, technology driven approach to its value proposition. Those areas are:
Online ordering. "It can be very expensive to set up a Website that truly helps customers communicate, leverage and be able to place orders, especially across multiple sites," Zayas notes.
Improving internal technologies for receiving files and getting them through a workflow in an efficient manner. "We are a very manual industry and that costs money. The more we automate, the less we have to touch the files—especially repeat jobs—and the more cost-effective it becomes," he says.
Finance management. Sir Speedy is identifying areas where franchisees can save a percentage point here and there, all of which returns to the bottom line.
The trio of value tools has enabled Sir Speedy franchisees to enhance both their profitability and efficiency. "When our franchisees come up for renewal, they say, 'You give me more value than I pay you.' At the end of the day, that's what a franchise is supposed to do," Zayas stresses.
Growth for Sir Speedy will occur through two acquisition outlets: obtaining both smaller franchises and independent printers. As other franchises lose ground during renewals, Zayas believes it will cause them to take stock of their business strategy and find that tool sets of established franchises such as Sir Speedy are more attractive, particularly when a franchise dips below 200 centers.
As for independents, Zayas believes the Sir Speedy program is a viable one, particularly for businesses in the $750,000 to $1 million sales range that are looking to reach the next level of growth.
"We've created a custom tailored program that doesn't obliterate their brand, but includes it and their experiences with ours, and then we tie in these tools," Zayas says. "We're targeting individual markets where we don't have representation, and we're growing them that way."
Carl Gerhardt took the leadership torch from Bill McIntyre at Allegra Network, based in Northville, MI, and the transition should prove to be seamless. The pair had went into business as partners in a master franchise to bolster then-American Speedy's presence in the Rocky Mountain states.
After spending time in a consulting role with the company, McIntyre—settling into the chairman's role—convinced Gerhardt to take the president's helm. "We did a management buyout with the help of some investors a few years ago, so we have a chance to be an equity partner in the Allegra Network and also the chance to lead us to the next level of growth," Gerhardt says. "It's a challenge in the current market conditions, but we're excited about the possibility."
Gerhardt notes that sales and growth for many of the Allegra centers have stagnated as the economy slowed and the industry continued to mature. The centers that have thrived are the ones with a more progressive and marketing-focused approach to business.
Acquisitions at the franchisee level have been a source of growth for the parent. Allegra assists its members in identifying and acquiring independents; in the last nine years alone, Allegra has worked 140 deals at the center level.
In fact, at the Colorado Springs, CO, center in which Gerhardt had a partnership interest, the franchisee pulled off six transactions in a two-year span that enabled it to double its sales. Many of the deals involved tuck-ins, which didn't increase the number of facilities, but added sales.
Franchisor and franchisee acquisitions have been the bread and butter for growth at Allegra Network, which counts Domino's Pizza founder Thomas S. Monoghan as one of its owners. The company has acquired or established seven brands under the Allegra Network umbrella: Allegra Print & Imaging, American Speedy Printing, Instant Copy, Insty-Prints, Quik Print and Zippy Print.
"We have a very comprehensive program to help our franchisees acquire independents; we know how to do that profitably for our centers," Gerhardt says of Allegra Network, which reaped just under $287 million in franchise system sales in 2002. "In terms of (acquiring) other franchisors, there aren't very many of us out there anymore. There's already been a substantial amount of acquisitions. We can't count on that or predict that's going to happen, but we're certainly hopeful for that possibility."
Minuteman Press, of Farmingdale, NY, is a bit of a different franchise animal in that it offers offset printing, mostly sheetfed with a sprinkle of web, along with high-speed digital color copying. The franchise added 13 facilities in 2003 to bring its total to 902, with sales figures in the $330 million range.
Bob Titus, president of Minuteman Press, points out that his global network is in the process of opening facilities in Australia, South Africa and the United Kingdom. In terms of U.S. growth, Titus is very bullish.
"It's a great atmosphere for adding quality people to your system," he says. "There are a lot of larger companies laying off good middle management and executive-type people. Those people are tired of working for a big corporation and want to be in business for themselves."
Titus is optimistic when it comes to the subject of franchisee startups. The land may not be as fertile as it was for growing startups in the 1970s and 1980s, but the fundamental traits behind a greenfields leader hasn't changed significantly.
"It depends on the individual running the store," Titus says. "If the people get out, make themselves known and build a reputation for themselves in the area, the business is going to work. But if they sit in the store and wait for things to happen, then success is not going to come to them."
AlphaGraphics, of Salt Lake City, garnered $282.3 million in 2003 calendar year sales, with $246.79 million coming in U.S. sales, which comprises 246 of its 284 global operations. A business-to-business print model for small- to medium-sized clientele, AlphaGraphics experienced flat growth for its fiscal year ending June 2003. But Keith Gerson, vice president of global development, reports a 5 percent increase for July 2003 to date, with signs of a recovering economy pointing to sustainable growth.
AlphaGraphics differs from most models here in that it does not compete in the retail environment. As for M&A growth, the company encourages franchisees to pursue local competitors as a growth strategy.
No Growing Pains
"For a numbers of years, we concentrated on our franchisees' unit economics, so we didn't want to grow too far too fast without ensuring that our franchisees were all profitable," Gerson says. "We've undertaken key initiatives for growth—when you look at franchise print reports, we're about a quarter million ahead of our next closest competitor on a per store average basis, and about twice the quick printer franchise revenue norms. And that's not by chance. That's what we did while other people were working on growth and then experienced unit attrition.
"We've been concentrating on our growth over the last three years and have experienced positive results while helping to ensure our franchisees' profitability."
In terms of value proposition, AlphaGraphics concentrates its efforts on franchisee support. It provides three levels: field, technical and phone support to strengthen its franchisees. AlphaGraphics is also buoyed by its status as a 100 percent ISO certified network at both the parent and franchisee levels.
Going forward, Sir Speedy's Zayas feels his company's greatest challenge lies in its ability to make centers more profitable. Acquisitions and non-renewals will likely balance each other out, with perhaps a slight growth in number of facilities, leaving the lion's share of sales augmentation to the individual centers.
On the product end, Zayas believes that Sir Speedy's MyDocs document management system complements the traditional core competencies of printing and finishing by the individual centers. The addition of scanning and archiving capabilities, variable printing, direct mail handling services and the ability to distribute a document and have it printed anywhere in the world enables Sir Speedy to control the entire document cycle.
Allegra Network's Gerhardt believes his company's primary challenge is in keeping pace with technology—testing and implementing tools that are on the leading edge as opposed to the bleeding edge. Similarly, quality leadership is essential in an atmosphere that will not tolerate complacency.
"When I got into the business 17 years ago, the quick printing segment was probably increasing 10 to 15 percent a year," Gerhardt says. "Although the natural growth has slowed to 3 to 5 percent per year, we have systems in place to take advantage of the newer growth opportunities such as mailing services, variable data and digital color. These value-added services are estimated to grow 10 to 30 percent."
"We've instigated some initiatives to maximize growth. For example, through our conversion program, new franchisees purchase independent, profitable printing centers and convert them to the Allegra Print & Imaging brand. We held our first strategic management course in conjunction with NAPL. We saw a need in our industry to create a program that focused on managing a business instead of running one."
Gerhardt notes that several members of Allegra's management team have experience operating in mature business segments, giving them an edge in being comfortable with and relishing growth challenges. In fact, he sees the company doubling its sales over the next five years.
Titus at Minuteman Press also feels it is critical to judge and maintain a pace with technology. "The biggest challenge we have is keeping an eye on the evolution of the digital equipment, because that's the expensive end and what the people invest their money in," he says.
In the realm of commodity printing, AlphaGraphics' Gerson believes the true differentiator is where and how you move your company out of the commodity realm. "Our biggest challenge is in the evolving nature of cross-media," he says. "It is the constant redefinition of what we would define as full service. It requires us to continuously be cutting edge and keep up with the swirling change that the Internet has brought forth, and assure that we're constantly on the leading edge and not the bleeding edge."
- Companies:
- Allegra Network
- AlphaGraphics
- Sir Speedy