2014 Franchise Review: Mixing Things Up

Convergence is happening all around us, with food, music, ideas, and technology. As Mike Zimmer, president of large enterprise operations at Xerox, put it, “Remember the first time you saw a smartphone? It just made sense,” Zimmer wrote in Chief Optimist magazine, which itself is an example of convergence between Xerox and Forbes magazine. “One device for phone calls, texting, email, pictures, GPS directions, and music. So powerful, yet so simple. That’s what convergence is all about.”

Blending marketing into the print mix is not so different. Just ask Denise Spalding and Jennifer Eberle. co-owners of Allegra Marketing Services of Louisville-East Kentucky. With annual sales of $6.5 million last year, the dynamic duo is Alliance Franchise Brands’ “Sales Excellence” award winner for 2013.

Akin to a broad investment portfolio, diversification can build print-related profits, too. In addition to the old-standby services of color and monochrome offset and digital printing, there are other revenue streams popping up more and growing in print shops across the country: prepress/premedia, binding/finishing, and mailing services are among the largest ancillary offerings.

The franchise set-up is ideally suited for many business owners. For the 21st time, Minuteman Press International has been rated the No. 1 printing franchise by Entrepreneur magazine (January 2014). Sir Speedy president and COO Richard Lowe said, “Our franchisees have embraced the opportunities as full-service printing and marketing services providers and are adding offerings such as signage, online storefronts, and more.” The Franchise Services brand has more than 400 locations worldwide.

“Strategies that apply to franchises apply to the printing industry as a whole,” observed Tom Crouser, chairman of CPrint International and founder, principal, and president of consultancy Crouser & Associates, Charleston, WV. However, the diversity of adding services such as embroidery, sign-making, wide format printing, websites, and marketing services can make it difficult to develop an encompassing marketing brand, believes Crouser, who has seen his share of change as a 29-year print industry veteran. That is why CPrint issued its last franchise agreement some two years ago, after “backing in” to the franchise game eight years before.

“We saw less potential for affiliates to market as a group,” Crouser explained. “That’s because of the rapidly expanding non-uniform services adopted by independents, which wasn’t the case in 2004 when we launched the brand.” Crouser believes the new structure allows his former print franchise to adapt faster to the changing business needs of print shops and sign companies.

But independent print and sign shops still needed access to expert advice, quality training, and proven guidance. “We continue to serve independent business owners,” Crouser added, “offering our proven methods that [can] help them become more profitable, better organized, and better prepared to face the changes taking place in the industry The only change [is] that we no longer have the weight of a franchise agreement and its restrictions. We now have a regular agreement providing similar services with more flexibility and at a lower cost. We’ve never been in the ‘franchise’ business, [per se],” he noted. “We’ve always been in the business of helping printers to prosper.”

‘Blue Ocean’ strategy

Within Alliance Franchise Brands, “Our message to our members is to transition from catchers of commodity print projects that someone else created to pitchers of high-value solutions that they recommend,” explained Bob Milroy, president of Alliance’s Marketing & Print Division based in Plymouth, MI. Alliance represents more than 600 centers with system-wide sales approaching $380 million. Its major brands include Allegra, Insty-Prints, and American Speedy Printing Centers. “This past year was typified by decreasing print industry demand overall but sales of our 285 franchise members were up marginally over the prior year,” Milroy reported.

“We tell our franchise owners to deliver business outcomes, not just quality printing at a competitive price, which everybody can do,” said Milroy. “We encourage them to become ‘sales-driven’ solution providers, which we’ve identified as our Blue Ocean strategy.” The gist is to get out and offer solutions, he added, “because nearly all independent printers are not doing this. Many are still trying to win on speed, price, and service; as a result, they are not differentiated.”

To support its franchises in this quest, Alliance has built an internal tool called the Marketing Resource Center to coach them on selling marketing projects and helping to execute them. “This is a complete internal marketing services group with planners, copywriters, designers, web developers, and web marketing and social media experts,” Milroy noted. “We’ve also put together extensive training on marketing strategy and tactics, including a certification program for our members.

“The outlook for 2014 is essentially more of the same for commodity print demand, but much more optimistic for our centers who have strategically diversified into digital color, mailing services, large-format graphics, and marketing services,” Milroy concluded.

Alliance Franchise Brands

• Minimum start-up capital required in 2013: $250,000
• Total investment required: $166,352 - $501,532

Certified marketing

Reporting similar results was Jay Groot, president of the Cypress, TX-based International Center for Entrepreneurial Development (ICED) print brands: Kwik Kopy Printing, Kwik Kopy Business Centers (KKBC), The Ink Well, Franklin’s Printing, and American Wholesale Thermography (AWT). “Of our five print brands, the Kwik Kopy Business Center system has had steady, albeit not remarkable, growth, despite the depressed economy,” Groot said. “Several centers from our other franchises have rebranded to KKBC, or plan to in the coming year, further strengthening that brand.”

In 2013 ICED was down 50 stores (to 341 from 392), which either closed or left the system; 154 still are in North America, where annual sales were $67 million. System-wide sales were $86 million, down from $101 million in 2012. “Wide-format is a strong profit center for our franchises,” Groot added, “and we are expanding other opportunities, such as ad specialties, as part of our mix of in-house production and outsourcing.

“Our owners want to learn more about marketing, not just selling,” he continued. “Most have embraced our Marketing Certification program.” Working with Kate Dunn and Barb Pellow at InfoTrends, ICED offered a four-part series that began in late spring of 2013 and will wrap-up in September 2014. Along the way, Dunn reinforces the concepts through webinars for the members. “The response from our owners has been extremely enthusiastic,” Groot reported.

Nearly 50 of ICED’s domestic locations have operated under the same ownership for 20 years or longer. “Our focus in the immediate future is to help those centers transition to new ownership,” he said. “Toward that end, we have invested our efforts in a more robust resale program.”

ICED

• Minimum start-up capital required in 2013: $65,000
• Total investment required in 2013: $219,500 - $245,600

Outside perspectives

Read more about Zarik Megerdichian. one of my all-time favorite “characters” in modern printing. Of Christian-Armenian descent, Megerdichian is a former graphic designer who is now CEO of trade printer 4over, Inc., the firm he started “by accident” in 2003. He and wife Tina, 4over’s president, began with one plant in Glendale, CA, and a single Komori Lithrone sheetfed press. Today, there are lots more offset presses, eight more 4over manufacturing facilities around the country, and one in Canada. Their story is fascinating, and my big takeaway rings true in the franchised world of print as well: Sometimes, the most innovative print people are not printers by trade; many of our industry’s brightest mines originate from other fields – many related, some not.

JOB MIX

Category 2013 Percentage 2012 Percentage % change 2013 $ Value

Prepress 11% 7.4% +3.6% $39,657,955

1/C & Multi-Color Offset 40.49% 21.6% +18.9% $177,729,078

B/W Digital 9.1% 8.8% +0.3% $71,789,115

Color Digital 22.91% 27.9% -4.99% $155,363,535

Wide-Format 5.87% 5.3% +.57% $24,877,171

Finishing/Mailing 12.26% 14.2% -1.94% $89,998,615

Web Services 3.34% 1.1% +2.24% $23,807,945

Brokered/Other 20.83% 13.8% +7.03% $154,022,614