2016 Annual Franchise Review: How Are the Franchises Faring?

It’s the time of year again where we take a hard look at the franchise market, which is a good barometer for how the print industry as a whole is faring. This year, we’re seeing mixed results. Consolidation is driving the number of shops down, but the average sales at the remaining locations are on the rise. Signage—and especially wide-format—are increasingly becoming integral parts of the franchise services, a trend that will only continue to rise. Overall, it has been an interesting year for the franchise market.  

Total global printing and related sales for franchised operations in 2015 was $1.48 billion—which is fairly flat when compared with 2014 figures. The actual number of franchised printers around the world dropped by 32 shops last year, to a total of 2,166 in 2015 from 2,198 in 2014, as reported by the Big Five: Alliance Franchise Brands (print and marketing division), AlphaGraphics, Franchise Services Inc., ICED Management, and Minuteman Press International. However, average sales per shop in 2015 increased more than 10 percent, to $740,000 from $665,665 the year earlier. Indeed, “our center count was down but individual center sales were up,” commented Jay Groot, president of ICED, which includes Kwik Kopy Printing, Kwik Kopy Business Centers, Ink Well, Franklin’s Printing, and American Wholesale Thermography (AWT) brands.

In keeping with the industry-wide trends, franchise demand for offset printing services dropped about three percent overall in 2015, while color digital work accounted for nearly 25 percent of all sales. According to Bob Titus, president of Minuteman Press International, during 2015 his franchise owners were moving into digital print and and looking for ways to diversify their products and services. At 939, Minuteman boasts the most shops of all the print franchises.

The demand for brokered services remained high, too. Interestingly, demand for binding services was cut in half (see chart), from more than 13 percent in 2014. This year, for the services breakdown portion of our research, Printing News added label printing to the franchise survey. But that service offering added up only to a half a percentage point (or $296,000) worldwide. Wide-format printing stayed at just under 10 percent of sales, but Franchise Services, Inc. (FSI) saw its system-wide demand jump to 15 percent among its 380 printing shops, which include Sir Speedy, PIP, Signal Graphics, and MultiCopy brands. “We’ve had significant growth in signage,” reported FSI president and COO Richard Lowe.

“We believe that bringing in new owners for our existing centers is a good strategy,” said ICED's Groot. “It helps to infuse our brands with a fresh outlook. Additionally we will continue to focus on sales and marketing as a priority.

“Our facilitated Focus Groups have been very popular over the years, and some of the groups insisted on continuing their meetings well beyond the initially-planned series,” he continued. “At some point, though, we—and they—felt that we needed a new outlook, and we found that with the inauguration of our first Best Practices Road Trip. A highly motivated group of owners met for two intense days of instruction and sharing at a host center. The event was so successful that another trip is scheduled for 2016.

“Our 2015 Conference and Trade Show was successful through the efforts of our vendor partners,” Groot added. “They continue to provide innovative ideas for marketing their products and services, no longer content to ‘just sell.’ Because of the strength of our vendor providers, outsourced work continues to trend upward, adding to the bottom line without straining the in-house resources."

Like at FSI, wide-format is a strong and rapidly growing profit center for our ICED franchises. It was so important to ICED franchises that an entire day was devoted to detailed marketing instruction of the vast wide-format product line during their 2015 Conference. "We continue to expand other opportunities, particularly promotional products, as part of our mix of in-house production and outsourcing,” noted Groot.

ICED provides easy-access to a library of marketing materials to fit different media, which allows its owners to quickly produce regular and timely communications with their customers and prospects, Groot concluded. “Revitalizing individual websites, including updating e-commerce capabilities, is another ongoing project that we feel is a vital tool for our owners to use in effectively communicating with their market,” he said.

New Lead at Alliance

Kevin Cushing, the “new” president of Alliance Franchise Brands’ Marketing & Print Division, joined Alliance last April. Cushing had been CEO of AlphaGraphics Inc. in Salt Lake City from 2004 to 2012. Perviously he had also been an owner of two franchise locations in Minnesota that received numerous awards for achievement.

The Marketing Resource Center (MRC) continues to support Alliance franchise members, Cushing explained. “The MRC provides creative strategies, copywriting, design, web programming, etc. for our franchise members,” he said, which include Allegra, Insty-Prints, American Speedy Printing, Speedy Printing, and Zippy Print.

“In 2015, we also made great strides in two long-term strategic initiatives. As the only franchise network in the industry with an owned production hub and three centers, we are able to vet programs for the benefit of the network,” Cushing added. “Last year saw a 23 percent increase in services rendered by the Allegra hub for the benefit of our franchise members.

“The WorkStream MIS initiative, an integrated order automation package that will be a game changer for our network, saw the WorkStream E-commerce component launched in 2015,” he noted. “WorkStream E-commerce enables state-of-the-art B2B and B2C storefront solutions for the clients of our franchise members."

Cushing continued, “Dual branding is well underway in our network, with many of our franchise members showing interest in expanding their offerings by adding an Image360 franchise from our Signs & Graphics Division. Those that have dual-branded centers are seeing impressive results. Our training programs for outside sales and sales management continue to be one of the highest rated programs that we offer.

“Another change in 2015 was the introduction of the Entrepreneurial Operating System (EOS) to the Alliance Franchise Brands home offices. EOS helps to simplify what can become overly complex operating systems while clarifying accountability and priorities. It is founded on many of the concepts discussed in great business books like The E Myth, Seven Habits of Highly Effective People and Good to Great and more. We are very excited about bringing this program forth to our network.

"We have bought into our CEO, Michael Marcantonio’s, vision of “sales driven solutions providers, powered by technology and enabled by outsourcing … and 70 percent of our ownership group is comprised of executives who owned and operated franchise locations, so we understand what it takes to be a successful franchise owner in our industry."

2nd Half of 2016

As FSI's Rich Lowe looks at the remainder of 2016, he noted that he doesn't see much change—at least not this year. "I do not see much change in the environment that we will work in. The printing industry will grow around 2.5 percent and the economy will be slightly better. It is an election year, which does drive some increased printing. I think as a network we have adapted very well from analog to digital, and now to marketing services. I am confident that we will continue to listen to our customers and adapt to their changing needs.

"I think the key to success is focus. It is challenging running a small business: You have to wear so many hats each day. Franchisees that are consistently successful ... focus on doing a few things really well."

Lowe highlighted six areas franchises need to focus on for the rest of 2016 to grow profitable sales:

1. Become an expert at selling, pricing and installing signs. "Signs are the fastest-growing product in our network," he noted.
2. Be consistent in your marketing efforts. According to Lowe, "Paid search is the number one lead generator in our network."
3. Improve your web presence.
4. Start improving your customer and prospect database.
5. Commit to outside sales as a strategic differentiator in your business. Having an effective outside sales effort is no longer an option if you want to be in this business.
6. Investigate whether packaging may be an opportunity for your business.

Lowe added that FSI presently is working on three opportunities for expansion to other countries. ICED, too, is looking to grow internationally into China, India, and the Middle East through master licensees, Groot reported.

Alliance is focusing on "wooing" independent print companies with two conversion programs. "Our team has created a great pathway for independents to create value in their business by joining our network through the Allegra Advantage and the Allegra Matchmaker programs,” Cushing explained. “Trying to manage e-commerce, MIS, equipment assessments, sales and marketing, to name just a few, on your own is an overwhelming task for many. Aligning with Allegra lightens that load and better positions their company to drive revenue, profits and value. Plus, when it comes time to exit your business, you are already part of a dynamic network with an active pool of interested buyers.

“We see great opportunity waiting to be tapped in data-driven, multichannel marketing communications, data acquisition and management, graphic design, digital marketing services and web-to-print solutions,” Cushing added. “On the technology front, our WorkStream MIS will be a game changer as an end-to-end order automation system. This will be introduced in 2016 as a very economical and robust fully-integrated offering.

“The Internet has been deemed the ‘hero’ or the ‘villain’ by many of those in our industry. We embrace every opportunity to use the Internet to add value and ‘stickiness’ to our clients while still maintaining a deep emphasis on the face-to-face solutions-driven consultation that is the foundation of our highest-value relationships,” he said.

drupa Show in Germany

Do print franchises care about drupa? There was a mixed reaction. ICED’s Groot said “drupa does not have much importance [to us], although we may see some new technologies.”

On the other hand, Cushing believes drupa is important to the Alliance network in a number of ways. “We have an aggressive and progressive view toward what our businesses can become. drupa provides the environment to ‘think big, learn from some of the greatest minds and companies in our industry, and adapt our plans based upon what we learn,” he explained. “drupa is also a great time to refresh our understanding and appreciation for how our industry plays a huge role supporting education, commerce, technology,  and non-profits across the globe.

“We always attend drupa,” said FSI’s Lowe.

Whether drupa has an immediate impact on the world of franchise operations or not, it is clear that changing technology and the need to offer a wider variety of services has rearranged the landscape for these shops. This will continue to be a constant challenge not only for the rest of 2016, but well into next year and beyond as well.

Print buyers are increasingly looking for shops that can “do it all” and the franchises are feeling that push and adapting accordingly. As wide-format and digital presses, Internet-connected services, and other technologies continue to seep into the franchise realm, it will be interesting to watch how it all plays out.