2016 Sign Franchise Review: All Signs Point to Growth
Despite turbulent times, sign franchises continue to expand and evolve, becoming exactly what their customers need
The visual communications industry is in a constant state of flux. “We exist in a market with expanding competition, more price erosion on commodity items, and customers who are expecting customization,” said Catherine Monson, CEO, FASTSIGNS.
And yet, despite these challenges, franchises are on the rise.
According to the International Franchise Association’s (IFA) Franchise Business Economic Outlook for 2016 (by IHS Economics in January 2016), the number of franchise establishments increased 1.7 percent in 2015, franchise employment was up three percent, and franchise output grew 5.6 percent. The report also indicates that the number of franchise establishments to increase by 1.7 percent in 2016, matching the pace of growth in 2015 while employment growth in the franchise sector will continue to outpace the growth of employment in all businesses economy-wide.
Why is owning a franchise so alluring? For many, owning a franchise allows you to go into business for yourself, but not by yourself.” A franchise provides franchisees with a certain level of independence where they can operate their business. According to IFA, “a franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily takes years to establish. Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement.”
Additionally, franchises offer pre-opening support—including site selection, design, construction, financing, training, and a grand-opening program—as well as ongoing support—training, national and regional advertising operating procedures, operational assistance, ongoing supervision and management support, increased spending power, and access to bulk purchasing.
The Numbers
Compared to the national average for all franchises of 5.6 percent, franchises in the visual communications segment saw higher growth numbers in 2015.
The numbers from the franchises are very positive this year even though we once again had some flux in the franchises reporting. This year for the first time, SignWorld 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 SignWorld in this review in several key metrics. This year’s review includes data from six franchise groups: FASTSIGNS (including FASTSIGNS and SINGWAVE), SpeedPro Imaging, SignBiz Network (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).
For 2015, the sign franchises had total sales (system-wide) of $1,278,949,901. Once we back out SignWorld’s figures, we see a positive 7.12 percent growth in year-over-year total sales from 2014 to 2015. Total system-wide sales for North America were $1,124,241,035, and once adjusted saw an 8.56 percent increase over 2014 numbers. Sales-per-shop in 2014 was up 8.01 percent over 2014 numbers, with franchisees on average pulling in $579,522.83 in sales in 2015.
The total number of shops in the market were up 4.6 percent from 2014. We had 2,295 total locations. Of the total number of locations, 2,291 locations are franchise-owned, four co-owned, and 1,922 are located in North America.
Anecdotally, as well, franchise leaders reported strong growth in 2015.
“Our business has seen steady growth and success in the last few years, and our new brand, Image360, is gaining momentum in the marketplace,” said Ramon (Ray) L. Palmer, president, Sign & Graphics Division, Alliance Franchise Brands. “While building on the success of the traditional signage and graphic market segments, Image360 offers an all-encompassing product and service base with a consultative, problem-solving style to customer service and creative management. This shift in our focus has helped us embrace the change we are seeing throughout the industry.”
According to Boris Katsnelson, president and CEO, SpeedPro Imaging, 2015 saw same-store sales growth of 13.4 percent. “We are pleased that our continued focus on the customer has shown increased revenue and market share,” said Katsnelson.
Looking Ahead
Of course the question everyone wants to know the answer to is: will this growth continue? According to the same 2016 IFA report quoted earlier, business spending will accelerate in 2016, giving a boost to business services franchises, which are projected to rank first in growth of the number of establishments and tied for second in employment growth with a 3.3 percent gain.
2016 is also of special significance to Alliance Fracnhise Brands, as both Signs Now and Signs By Tomorrow celebrate its 30th anniversary this year. “This, along with a strong growth from Image360 centers, will provide a good opportunity for growth throughout all three of our brands,” said Palmer.
FASTSIGNS, likewise is off to a strong start in 2016 and Monson is confident about continued growth in 2016. “At FASTSIGNS International, we continue to evolve and grow the business to stay on the leading edge of the visual communications industry. Our franchisees are expanding their facilities, adding new equipment and capacity to keep up with customer demands from proactive outside sales, which is a key part of the FASTSIGNS business model,” said Monson. “FASTSIGNS franchisees are proactively working with customers to provide solutions to their visual communications challenges. Our number of locations will continue to grow with standard new ‘green field’ centers as well as Co-Brand and Conversion opportunities. Our Co-Brand opportunity is ideal for those in related businesses such as printing companies, photo processing and ad specialties who are eager to diversify and develop sales in our higher margin (compared to the margins in their traditional business) products. The Conversion opportunity allows an independent signage business to convert to a FASTSIGNS center and become part of a world-class franchise and one of the most successful franchise systems in the business services category.”
Additionally, as the economy continues to improve, A.J. Titus, operations manager, Signarama/ United Franchise Group has seen opportunities to expand. “Customers are starting to market their business more and improve their work space. Because of this, wall decor has become our fast growing product sold,” said Titus. United Franchise Group added wall décor software to provide their franchisees with a solution to help grow this business opportunity. They’ve add other products as well to our initial package, including a laser engraver, giving franchisees the ability to engrave signs in house,” said Titus.
“In 2015, FASTSIGNS International experienced an increase in sales in all product categories, including digital signage, architectural signage, interior décor and installation,” said Monson. “In 2015, FASTSIGNS International experienced an increase in sales in all product categories, including digital signage, architectural signage, interior décor and installation.”
Franchise leaders pointed to several other market segments which have the potential to grow again in 2016 and until the beginning of 2017. Fabric graphics, window graphics, corporate branding, backlit signs, floor graphics, building wraps, murals signs, specialty graphics, and vehicle graphics are at the top of the list. On the other side of the coin, three “B’s”—billboards, banners, and blueprints—are on the decline.
Global Opportunity?
Without a doubt, franchising as a whole plays a vital part in the US economy. According to the 2016 IFA report, “the gross domestic product (GDP) of the franchise sector will increase by 5.6 percent to $552 billion in 2016. This will exceed the growth of US GDP in nominal dollars, which is projected at 4.4 percent. The franchise sector will contribute approximately three percent of US GDP in nominal dollars.”
Does this translate to the global market as well? Franchise leaders agree wholeheartedly.
“Franchises play a vital role as independent business owners that are operating in a proven model with great support,” said Katsnelson. “They can focus on delivering an excellent product to their customers while relying on the franchise system to provide best-in-class systems and support. This enables franchise networks like ours to grow disproportionally to the rest of the market.”
“Franchisors provide franchisees with an established business model, training, and ongoing support across all areas of business, including access to the latest technology,” said Monson. “Most importantly, FASTSIGNS franchisees benefit from the power of a global brand. When you become a part of the FASTSIGNS franchise system, you enjoy the power of a worldwide network, with name recognition that attracts attention. We are also able to service national and international customers. Specifically, franchises have a proven business model and greater buying power to drive costs down.”
“Being part of Alliance Franchise Brands ensures our franchisees are uniquely equipped and partnered in a way to always be cost-competitive and quickly responsive,” sid Palmer. “As part of Alliance Franchise Brands, members are linked with a network with more than 600 franchise members in the US, Canada, and England. Our international network and local connections offer the best of both worlds—ensuring our solutions are virtually limitless.”