2015 Sign Franchise Review

How would you like to run a business that was consistently pulling in 6.65 percent to 16.9 percent growth year over year? If you were running a sign franchise in 2014 those growth numbers could have been yours.

Franchise leaders are quite bullish when it comes to the sign and visual communications market this year, noting record growth in some instances from 2014. This growth has given many momentum into the early months of 2015, indicating that this year may very well prove to be another record year of growth.

“2014 was a record year for FASTSIGNS in every metric; we surpassed 2013, which had been another record year for the company. We set records in average unit volume, number of locations, system sales, number of outside sales people, net promoter score, franchisee satisfaction, and franchise sales,” said Catherine Monson, CEO, FASTSIGNS. She also reported that as of March of this year, same center sales was up just under nine percent YTD.

Sign Biz’ President and CEO, Teresa M Young, also saw sales increases across the board in 2014, especially as the year rolled into its third and fourth quarters. She reported that the biggest increases were in the western region US. “This substantial—20 to 35 percent—increase continued right into first and second quarter of this year,” said Young.

Likewise, Boris Katsnelson, president of SpeedPro Imaging—reporting for the first time this year—saw extraordinary growth for this franchise in 2014. He reported SpeedPro Imaging had 16.9 percent growth in system-wide sales and 11.9 percent growth for mature studios.

For the Sign & Graphics Division of Alliance Franchise Brands, 2015 is shaping up to be a very successful year. “We have experienced growth in all sectors of our business, while successfully maintaining three strong brands: Image360, Signs Now and Signs By Tomorrow,” said Ray Palmer, president of the Sign & Graphics Division for Alliance Franchise Brands.

The Numbers

The numbers from the franchises are still very positive this year even though we have some flux in the franchises reporting. This year for the first time, SpeedPro Imaging agreed to participate in this industry review. In order to provide a more accurate year-to-year comparison, it was necessary to back out the numbers from SpeedPro in this review in several key metrics. This year’s review includes data from five franchise groups: FASTSIGNS, SpeedPro Imaging, SignBiz Inc. (including SignBiz and LobbyPOP), Alliance Franchise Brands, Sign & Graphics Division (including Signs Now, Signs By Tomorrow, and Image360), and Signarama (including Signarama and Speedy Signs). Unfortunately, Signarama was preparing for its annual World Expo and was unable to provide updated numbers for this year’s study. We have instead used numbers from 2013 to be able to provide a more comprehensive overview of the sign franchise market.

For 2014, the sign franchises had total sales (system-wide) of $1,039,863,386. Once we back out SpeedPro’s figures, we see a positive 6.65 percent growth in year-over-year total sales from 2013 to 2014. Total system-wide sales for North America were $ $894,617,426, and once adjusted saw a 10.52 percent increase over 2013 numbers. Unfortunately, sales-per-shop in 2014 was down 12.05 percent over 2013 numbers, with franchisees on average pulling in $ $494,809.60 in sales in 2014.

The total number of shops in the market were down a hair—.067 percent when we back out SpeedPro’s numbers—from 2013. Looking at the total market, we had 1,900 total locations (including SpeedPro), 1,748 locations are franchise-owned, co-owned and 1,599 are located in North America.

Standing Out from the Crowd

Like any business in the sign and visual communications industry, shops need to find meaningful ways to differentiate their business from competitors. Franchises continue to provide direction to their franchise partners by offering education, technology insights, and new products and services.

At the end of 2014, FASTSIGNS started a special pilot program with three of its franchises—FASTSIGNS of San Diego - Mira Mesa, CA; FASTSIGNS of Milwaukee - Glendale, WI; and FASTSIGNS of Chicago - Lakeview, IL.—to offer 3D printing services. "We are continuously watching for and learning about new technologies that have the potential to make visual communications more interesting and impactful to and for our customers," said Monson. "By providing professional 3D printing, we are able to offer one more solution that can be used to create comprehensive visual communication solutions to help businesses develop innovative new products or solve manufacturing challenges."

Through this pilot program, FASTSIGNS will have the chance to evaluate the 3D printing market opportunity before offering it across the entire network.

This kind of differentiation gives shops real opportunities for growth. “In our estimation, the divide between the ‘print only’ type of sign shop, and the shop that carves out a portfolio with more offerings, yet specializes in a market segment, will grow,” said Young. “The biggest growth will be in specialization, while other shops choose to remain generalists. Both paths are viable, but specialization in a market segment, along with the manufacturing and expertise required to support that segment, will yield greater margins and a stronger position in the signage ecosystem. While print becomes more commoditized, the specialized products—ADA, illuminated, dimensional, experiential and dynamic signage, vehicle wraps—remain in demand, with demand growing.”

Integrating online technologies into static signage can significantly increase the value of signage and visual graphics, including QR codes, SMS text and augmented reality. “We can essentially make static signage a ‘virtual salesperson’ for our customers.”

Digital Signage

Digital signage is growing in adoption and provides significant opportunity. According to a study several years ago by ABI Research, the global market for digital signage equipment and services will grow from nearly $1.3 in 2010 to almost $4.5 billion in 2016.

“Now out of the infancy stage, digital electronic signage is poised for explosive growth,” said Palmer. “The market is accelerating even as the cost of deployment is declining, which means that even small companies are beginning to view this market segment as an excellent opportunity to develop new revenue streams. The situation is comparable to the late 1990s, when large format digital printing arrived on the scene and soon transformed the industry.”

“We continue to build tools and resources for our franchisees to help simplify providing digital signage and digital signage content to customers,” said Monson. “Customers understand the value and benefit of digital signage and the day-parting of content that it allows.”

“We continue to evolve and promote Dynamic Signage through our LobbyPOP division, now in its 11th year,” said Young. “We have seen a great up-swell in DS sales over the past 18 months. For some of our Members, dynamic sign system sales represent seven percent of their total revenue—and climbing! The cost of name-brand commercial displays has dropped to half of what it was two years ago. By adding our media player and free software, the complete system is well within reach of any small business.

Increased Competition

As the wide-format industry continues to mature and grow, shops are seeing more and more competition in this market as other businesses—commercial printers, screen printers, and others—look to augment and increase sales.

“We continue to see increased competition in our market from those in related businesses eager to diversify and develop sales in our higher margin—compared to the margins in their traditional business—products,” said Monson.

“Staying profitable and competitive with online and cross-market competitors is going to be an issue for sign and graphics businesses for years to come,” said Palmer. “Turning our sights to become sales-driven service providers offering unparalleled customer service should help independent and franchise business owners secure business in the future.”

Online competition is also heating, but according to SignBiz’s Young, trying to and sell a banner or poster online is misguided. “Not only does this bring the sign shop into an ocean of price shoppers, it is, in nearly every case, a futile effort. Current stats show that of 200 shoppers who start to build a sign online, only one completes the order,” said Young. “If you go down the path of e-commerce, with more than 400 online competitors already in the marketplace, the odds are stacked against you that you will carve out a new top position in that arena. Price shoppers can surf from online shop to online shop to find the lowest price. This is not the marketplace for a professional sign company. Growing the business means growing your expertise; marketing to your business community; providing a person-to-person consultation; guiding the client through sign codes, suitability for purpose, installation; and much more. Training and education within the sign industry should always support these initiatives. Consider e-commerce portals strictly as an add-on for convenience of the client. Don’t consider them the way to do business as a professional sign company. Make that distinction, and the sign industry will continue to grow in a healthy and sustainable way.”

Getting closer to the customer and helping them be more successful in their local market is key, said Katsnelson. “By having the best training and operational support we strive to help our franchise partners solve customer needs by providing private stores, distributed production and continuously leverage our unique capabilities.”

Ensuring healthy margins is always a necessary focus as is growing profitable sales volume, according to Monson. “Hiring, training, and motivating great employees who provide outstanding service and produce work with quality and commitment is an important priority. Selecting the right technology and adding the most appropriate new products and services is an area the savvy sign and graphics business owner spends time on. Making the optimum capital investments is critical.”