Print Franchise Review 2022

Print Franchise Review 2022

By Cary Sherburne

Print franchise networks struggled, like many businesses, in 2020. But most of them have bounced back almost to 2019 levels and are seeing good growth going into 2022.

2020 was particularly tough for underperforming centers, many of which were closed or sold during the height of the pandemic. This makes the overall networks stronger and healthier.

For example, AlphaGraphics closed 2021 down 14 centers as compared to 2020. But systemwide revenues were up significantly, as were average store sales – at $261 million and just over $1 million respectively. Decline in centers and revenue for Franchise Services was largely due to divestiture of its MultiCopy brand; taking that out of the equation, it grew at 11%. 

For the most part, networks offered pretty much the same products and services in 2021 as they did in 2020, with a few exceptions. For example, both AlphaGraphics and Minuteman launched robust e-commerce solutions to make it easier for customers to do business with them 24/7 and to, hopefully, create more profitable revenue streams. The AlphaGraphics platform, which was launched in July, had already processed almost 10% of the network’s transactions from July through year end.

Digital printing, color and black & white, continue to be cornerstone applications for these networks, although not a growth engine. Very few centers have offset presses anymore, and centers are outsourcing offset printing to trade providers. Almost everyone told us their growth engine was signs & display graphics, with some networks seeing as much as 20% to 25% of revenues from that source, and expecting that growth to continue.

Beyond offset, other outsourced services, which typically run about 20% of revenues, include promotional products, apparel and services associated with sign installation such as electrical work. Most networks are encouraging their centers to produce as much as possible in-house but cautioning franchisees to take a close look at job profitability, and to consider outsourcing less profitable jobs so as not to tie up resources that could be applied to more profitable work. Almost unanimously, they told us they do not like to say "no" to customers.

In terms of attracting entrepreneurs or independent printers to their networks, the companies reported varying degrees of success, from almost no results in 2021 to arguably the most successful network, Minuteman, which attributes that success largely to the efforts of its 25 regional offices and the fact that staff work to meet face-to-face with prospective franchisees, including calling on commercial printers who might want to sell or convert.

Most cited hiring and supply chain as key challenges. No surprise there.

It always surprises us that so many independents resist the franchise concept, especially in light of the struggles many had during the pandemic. The usual objection is that they don’t want to pay royalty fees. But as a couple of the franchisors pointed out to us, those royalty fees are equivalent to another employee, but one that perhaps is doing sales one day, customer support another, production, etc.

This takes into account the services the franchisor provides, including help with hiring, supply chain, marketing and marketing services for customers, training, technology and business advice. Plus, most of the networks are increasingly adept at sharing work across the network as a benefit to the entire network.

These are just the highlights, and as usual, we have included profiles of each of the networks in this report.

Alliance Franchise Brands Marketing and Print

The Alliance Franchise Brands Marketing & Print network delivered systemwide sales in 2021 of $214,395,601, up from $196 million in 2020, but not quite at the 2019 level of $249 million. The network is on track to reach, and likely exceed, 2019 numbers in 2022, according to President of Franchise Operations Ray Palmer, who notes that in January, the only monthly results that were available as of this writing, the network showed promising growth. The highest revenue center for the network delivered in excess of $10 million in revenue, and a number of centers generated revenue in excess of $1 million.

Due to the lingering effects of the pandemic and some owners of multiple centers downsizing, the number of locations in Alliance Franchise Brands’ Marketing & Print Group has declined from 279 in 2019 to 247 in 2021. 

For some centers, the challenge has been their vertical market focus; obviously, those who had focused on verticals like events, entertainment and hospitality were continuing to struggle in 2021, but those verticals are now starting to come back.

“If you are in the medical vertical,” Palmer added, “they can’t get enough of what we make. So it just depends on which vertical market segments a particular franchise member focused on when they built their business.”

Alliance Franchise Brands also has an active recruitment program, with their Resale, MatchMaker and Advantage programs.

The Resale program matches potential franchisees with existing franchisees who are retiring or leaving the network for other reasons, while the MatchMaker program helps entrepreneurs enter the industry by buying an existing independent business and converting it to an Allegra center. The Advantage program encourages independent commercial printers to join the network.

With the Advantage program, since they typically don’t need to purchase equipment, find a location or hire staff, the investment can be as low as $29,000. Purchasing an existing center through the Resale program can require an investment of up to $379,000. 

When we checked in last year, the network had 33 of its dual-branded Allegra and Image360 print/sign centers. As of the end of 2021, there were 37. Currently, only about 7% of revenue on the print side is generated through production of signs. Brands on the print side include Allegra Marketing Print & Mail, KKP (Canada), Insty-Prints and American Speedy Printing Centers. While the franchisor is not requiring franchisees to transition to the Allegra Marketing Print & Mail brand, many representing the other brands are choosing to do so.

The print network is also generating about 27% of its revenue from brokered services, which Palmer notes includes offset printing, mailing services and promotional products if they no longer offer those services on-site. 

Caption: Dual-branded Allegra and Image360 center. 

In terms of encouraging existing independent printers to join Alliance Franchise Brands, Palmer is still seeing resistance, often because they don’t want to pay the 6% royalty, even though they understand how royalty fees are used to support franchisees.

“Having been a franchise member, I have a very different perspective on what the value of a franchise is compared to resources an independent might have," he said. "I would not have wanted to be an independent during 2020. To support our network during the pandemic, we were able to focus all of our energies on getting our franchise members the information they needed for government support. We created design packages and helped with marketing to specific verticals. We did a lot of the heavy lifting so that they could just focus on retaining and growing whatever sales were available. And we heard lots of thanks from our franchise members for all that work. If you're an independent, you do all that yourself; and forget about the intangibles, if you will, of being a franchise member.

"Alliance Franchise Brands is a network of people who are willing to help you if you get in trouble, or if you need something. But when talking to independents, it often comes back to a royalty discussion and explaining what that delivers. I look at that royalty fee as equivalent to an employee. But it's a different employee every day. One day, it's an employee who works in production; one day, it's an employee who's helping you coach your salesperson. And the next day, it's an employee who is helping you with an operational workflow issue in your center. I never had trouble writing a royalty check when I was a franchise member, because it was just too valuable to me.”

Allegra Marketing & Print also continues to roll out its WorkStream infrastructure, and there is some adoption of this workflow in the sign-focused centers as well.

“Our challenges are not unique to print providers," Palmer said. "Few industries have been untouched by supply chain issues, pricing pressures and labor shortages. With fewer mills producing product, national inventory levels at historic lows, distributor allocations limiting paper availability, and transportation challenges severely limiting the ability to get the paper to the print centers, the print market supply chain is being stressed at every turn.

"Our franchise members have been proactive with their client outreach, offering ways to help minimize the impact of shortages or longer lead times. This type of creative problem-solving has been welcomed. Recruiting, hiring and retaining talent is a perennial goal for business owners. With a contracted labor pool, we’ve put together resources to assist our centers with employee recruitment. We also have a strong network of supplier partners they can lean on, and our internal creative group is positioned to augment any shortfalls in graphic design services and project management. 

“On the upside, the mentality of being sales-driven solutions providers is one our franchise members embraced pre-pandemic. Doubling down on that business philosophy, we see great opportunity in service diversifications, like direct mail and mailing services, that complement their existing print capabilities. We are well positioned to respond to the buying trend of clients seeking a single-source provider for project start to finish: design, print and mail. We also have more of our members poised to complete acquisitions in their markets as a way to accelerate growth.

"The pandemic has certainly hastened the retirement timeline for many business owners in our industry and many others. Independent print company owners ready to move on to the next chapter in their lives have a viable means with our network to exit their businesses, confident that they’ll be leaving it in good hands.”

Percent Each Job Contributes to Total Revenue—Alliance Franchise Brands (Marketing & Print Side)

AlphaGraphics 

AlphaGraphics closed 2021 with 265 centers, a net loss of 14 as compared to 2020. However, systemwide sales were up significantly, from $229 million in 2020 to $261 million in 2021, a 14% increase.

According to Ryan Farris, AlphaGraphics president and COO, the decline in centers was mostly due to owners of multiple centers consolidating during the pandemic. One large franchisee, for example, consolidated from six centers to one. Average store sales were up from $850 thousand in 2020 to just over $1 million in 2021, nearly an 18% improvement. The highest revenue shop weighed in at $14.9 million in annual revenue. 

Farris reports that from August through December 2021, the system saw an upward trajectory in revenue.

“We are almost back to the 2019 numbers, but I am confident we will exceed those this year," he said. "December of 2021 was our best December for seven or eight years.”

Part of the success in improving overall revenue results was continued closure of underperforming centers.

In 2020, AlphaGraphics had four company-owned stores, two of which have been sold, leaving two company-owned stores.

Like many in the commercial print space, AlphaGraphics has seen growth in its signs business, which grew to 22% of systemwide revenues in 2021, with a higher percentage produced in-house versus outsourced.

“That’s our biggest mover,” Farris said, “delivering roughly $50 million in revenue. The cut-sheet digital side is returning, but not on a growth path compared to 2019. The other segment that is growing and is really strong for us is our digital marketing services, which is currently about 6% of the portfolio.”

Farris said the ideal mix in the future would be 25% to 30% signs, digital print at 30% to 40%, and 10% to 20% from digital marketing services.

Farris also noted that AlphaGraphics has placed increased emphasis on e-commerce as an enabler that makes it easier for customers to do business with them, with a goal of 25% of revenues generated that way.

For AlphaGraphics, digital marketing services consists of a whole portfolio of offerings, including SEO, SEM, CRM, website development, social media management, content management and video management.

“We had about 80 of our centers trained in these services through the month of December," Farris said. "We will finish up the training this year and then launch more advanced sales and marketing capabilities.”

AlphaGraphics centers are outsourcing work to the tune of about 17% of revenues, primarily offset and promotional products, with that expected to remain about the same going forward. It also includes things like electrical work required for backlit signs and other installation projects. Farris said that only three locations have offset presses anymore, and those are 29”, not 40”, presses.

AlphaGraphics doesn’t seem to be experiencing supply chain issues to the extent of some of the other networks.

“It’s a little bit of a challenge in terms of educating the customer, but we don’t spend as much time showing options in paper colors, weights and finishes, limiting the choices to one or two options," Farris said. "That streamlines the supply chain in a way. We also have been able to buy up inventory from some of our partners, who can replace it faster than we can.”

However, Farris does cite labor as a challenge.

“Now it is time to staff back up since the volumes are back to pre-pandemic levels," he said. "But operators don’t need the same skill set they did in the past, and the automation we have implemented with our partners makes them more efficient. We are also looking for, and training to, a more diverse skill set. Instead of just a bindery person, we are looking for people who can operate everything in the building. That cross-trained person is more of the skillset we are going for.

"Job descriptions are not plug and play, and talent is not plug and play. Talent pools are much more competitive. We are developing career platforms, more robust beginner-level training, and doing more coaching and mentoring than in the past with our owners to get past the ghosting effect – you don’t have time to wait for three candidates and pick the best one. You pretty much have to make the decision instantaneously.”

To meet these labor challenges, AlphaGraphics is grooming its own talent, hiring from a variety of schools and teaching them the skills they need, often using virtual training modules. In addition, all the equipment you might find in an AlphaGraphics center is now installed at headquarters in Denver. So owners can send new employees there for training.

“If we can help our owners find the right people and train them, it will be more efficient and add scale,” Farris said.

Caption: The award-winning AlphaGraphics leadership team. 

The new e-commerce platform will be launched nationally in July and includes an integrated, easy-to-use and intuitive design tool, allowing customers to do business with AlphaGraphics 24/7.

“Customers can order online and have their order shipped or picked up locally," Farris said. "It’s not just your traditional commoditized items, but also value-added items like wide format, which no one is really doing super-well online. That will be a real growth enabler for us. We can get that after-hours customer, that smaller customer, and we can make their life easier for a quick order that is put into an automated system. In the back half of the year, we will go more aggressively after national accounts and other franchise organizations and big chains. We will provide them an ordering platform just for their products and services that taps them into our network, giving them flexibility as to where products are produced. And we can also do direct mail and email campaigns on a national level as a single source. All of that becomes a growth driver for our three main segments.”

Farris also said that even during the pandemic, the network had good success finding entrepreneurial owners willing to build a center from scratch, as well as converting independents. He is looking to double the size of that sales team in 2022 to interact with more potential buyers, either existing operators or future operators, helping them through the build-versus-buy decision process.

“We’ve put in some phenomenal real estate tools just like real estate agents have in the commercial world," he said. "We help them find the right demographic, foot traffic, street traffic, and our internal team helps them identify the right markets. A lot of candidates who have left larger printing companies are coming to our Discovery Days to learn more about what being an AlphaGraphics franchisee can do for them.”

Percent Each Job Contributes to Total Revenue—AlphaGraphics

Fortusis 

As 2019 came to a close, Fortusis was on a path to start actively recruiting new franchisees, but the pandemic had other ideas. The network held steady at 37 centers, and systemwide revenue increased from $11,367,787 in 2020 to $11,792,996 with two shops generating over $1 million, up from one the previous year.

Fortusis CEO Curtis Cheney credited growth in signage, 17% of the network’s revenue, for its return. Currently, only one location has a flatbed printer, and the company has not yet entered the soft signage market, but is outsourcing both direct-to-rigid and soft signage projects.

“We expect to continue to outsource these products for the foreseeable future,” Cheney said, “since most of our locations are 2,000 to 3,000 square feet, and there are many other organizations out there than can produce these applications efficiently and cost-effectively.” 

While Cheney notes that in many cases, it makes more sense to outsource direct-to-rigid printing rather than mount and laminate roll stock, he also explains that many centers are using foam board, that already has adhesive on it, to create some rigid signage.

“This material comes in 25”x40” sheets in a box of 25,” he said, “and it makes mounting pretty easy. Some shops have cutting devices; others are hand cutting. Either way, there are a number of applications they can create for customers in this way, cutting down on cycle time and outside expenses.”

Caption: Fortusis is launching a new brand, KKP, for its larger commercial locations.

But the big news from Fortusis is around center branding.

Fortusis brands included Kwik Kopy Printing, Kwik Kopy Business Center, Ink Well and Franklin's Printing. Cheney said that most Ink Well sites were closed in December, with one rebranding itself as Kwik Kopy, and there are two Franklin’s remaining, one of which will remain Franklin’s and the other rebranding to Kwik Kopy. The company is rebranding Kwik Kopy with a refreshed logo and messaging, and launching a new brand, KKP, for its larger commercial locations.

“We found that customers were sometimes confused by the Kwik Kopy name and believed that we might not be able to handle a lot of the jobs they needed. So launching KKP centers is more about aligning our vision and that of our customers.”

Currently, two locations are branded KKP, Salt Lake City and Washington D.C.

Fortusis will launch the new branding to its franchisees at its annual meeting in May 2022 and is developing a new marketing program that will be rolled out at the same time. Cheney said that franchisees will be able to self-select branding, and some larger shops may choose to stay as Kwik Kopy due to brand recognition in their communities.

KKP branding, however, will have certain requirements, including specifications about materials for large format and finishing capabilities, and will likely add a requirement for a flatbed printer in the next couple of years. There will also be a requirement to have a certain level of redundancy built in and an equipment configuration that minimizes their need to outsource. Overall, the network outsources about 20% of its work, but Cheney says some locations outsource as much as 40%.

“I think with all the rebranding, it creates an excitement inside the franchise," Cheney said. "We have a lot of owners who have been with the same logo and branding for so long and have not seen a lot of movement. This is something that can breathe new life into the network. In addition, some owners are looking to acquire commercial operations that have been struggling during the pandemic and either fold those operations into their current locations or open a satellite center.”

Another area of opportunity for the network is bringing on more corporate-owned locations.

 “In 2020, we had one, in Salt Lake City," Cheney said. "In 2021, we had two, and we expect to add a couple more in 2022.”

The average investment for a franchisee to open a new center is $238,875, down slightly from the previous year.

In terms of challenges, Fortusis is not unique in struggling with paper supply and staffing shortages.

“One of the biggest challenges I see for our organization this year is adapting to the constantly changing economy," Cheney said. "We see some of our centers struggling with staffing shortages, supply chain issues, and paper and equipment shortages. Up until recently, these constantly changing factors have not been a problem. I feel that if handled correctly and quickly, our centers can capitalize on the opportunities that it produces. On the contrary, if we cannot be nimble and make rapid changes it could have some devastating consequences.”

Percent Each Job Contributes to Total Revenue—Fortusis

Franchise Services 

The Franchise Services network, which consists of Sir Speedy, PIP and Signal Graphics branded centers, saw its number of centers decline from 280 in 2020 to 208 in 2021. This was largely due to the fact that its 60 Multicopy centers were sold to MBE in March. Systemwide revenues fell from $252 million in 2020 to $206 million in 2021, again, largely due to the divestiture of Multicopy.

President and COO Richard Lowe noted that in addition to selling Multicopy, the network saw a decline of about 12 centers, mostly due to consolidation of locations by multi-center owners. Average sales per shop is $990 thousand with the highest revenue center weighing in at more than $13 million. Lowe notes that the average investment to open a new center in 2021 was $290 thousand, slightly higher than in 2020.

Taking Multicopy out of the equation, however, the network grew by 11% in systemwide revenue, still not back to 2019 levels but making significant progress. The focus for the network now is to continue to improve the customer experience, delivering as frictionless a process as possible.

“Customers don’t want to work to do business with you,” Lowe said. “And we don’t want them to have to! Our position is that we won’t ever say no.”

To help with this continued improvement, Franchise Services is developing workflow best practices guides that cover every step of the process, with seven of 12 already out in the field. In addition, about 55 centers are using Plan Prophet, a highly effective CRM, forecasting, automation and reporting tool developed by one of their franchisees which is fully integrated with MIS solutions like PrintSmith Vision and Printer’s Plan.

Like other franchise networks, Franchise Services believes that smaller to mid-sized independent printers can gain significantly from joining the network, but like others, they are still finding a great deal of resistance. In fact, a campaign during 2021 to attract independents delivered zero results. Instead, the network is seeking entrepreneurs who are interested in taking over existing centers as their owners look toward retirement.

 “Fifty-five percent of our franchisees have been in our network more than 25 years," Lowe said. "We had a great renewal rate last year, with 20 or 23 locations that were up for renewal sticking with us, including our top revenue generating center and the top four PIP locations. When we reviewed those that didn’t renew, it was primarily because they did not take advantage of all of the support services we offer.” 

Among other support services offered to franchisees, Franchise Services did 157 webinars in 2021.

“In a normal year, you would probably have very few people watching these webinars because they are so busy," Lowe said. "But during COVID, they needed help and they needed something to think about in terms of growing their businesses. And it was also a lot of moral support during a difficult time. It’s that type of support that is simply not available to independents, and that makes that royalty fee well worth it. It can be the difference between staying in business and washing out.”

When we spoke to Lowe for our 2020 franchise review, he indicated that the long-term goal for the network was to reach a 50/50 split between signs and commercial print. Increased emphasis will be placed on this transition in 2022 and beyond. In 2021, signs represented about 19% of systemwide revenues, even with 2020. Lowe said that there are about 15 centers that are already doing more than a million dollars per year in signage.

Like the other networks, the Franchise Services network is also taking advantage of outsourced services, to the tune of 16% of revenues, with some centers outsourcing as much as 40%.

“I tell our franchisees that we need to have brokered services as a strategy and not a tactic," Lowe said. "What I try to convince them to do is to only produce the things that have the highest value for their customers, and that’s mostly their ability to deliver with short turnaround times as well as complex projects like direct mail. If you buy out the commodity work, that frees up more resources to do the value-based work, and that makes brokered services a strategy rather than a reactive tactic.”

Caption: Mark Hildebrandt, David Robidoux, and Nicole Coughlin

In terms of challenges, Lowe cites hiring and keeping qualified staff, especially salespeople, as well as the supply shortage.

“In terms of supplies,” Lowe said, “we have made arrangements with several of our keystone vendors where they drop ship us supplies. So if a franchisee has an order into a vendor that is not going to be able to be delivered in time for a critical job, we will drop ship it out of our supply. We are very happy to be able to do that. Paper supply issues, in particular, are brutal. Almost every franchisee is on allocation. That’s probably my biggest concern, because if you can only buy paper at the same level as you did last year, how can you grow the business? Envelopes are really hard to come by as well.”

Percent Each Job Contributes to Total Revenue—Franchise Services

Minuteman Press International 

Nick Titus, president at Minuteman Press International, reports that the network had already rebounded to 2019 levels in 2020 and continued to grow in 2021, with systemwide revenues of $442,695,808, up nearly 18% from the previous year. The system also added 11 net new centers for a total of 959, with 788 of them located in North America. Average sales per shop also grew, from $564,000 in 2020 to $610,661 in 2021, with the highest revenue center weighing in at nearly $7.5 million and nearly 90 centers generating revenue in excess of $1 million.

Several projects benefiting Minuteman franchisees and their customers were also undertaken in 2021, including a brand-new website at www.minuteman.com, launched in July of 2021 in the U.S. and Canada, and which is integrated with the network’s Flex proprietary software infrastructure. It includes an online design and ordering platform for the stores and their customers.

“A customer can set up an account, and they can see their whole order history, place reorders, edit previous jobs – whatever it is they need to do," Titus said. "They can also design about a dozen different products with more to come. Once they order, it goes directly into the workflow. Payment flexibility is also built in. Depending on the customer, they can pay outright for the job, put down a deposit or be invoiced and then pay online. It’s great for customers and it’s great for our owners. It’s not yet 100% where we want it to be, but we have already put more than $11 million in online payments through the system.”

Launch of the website for South Africa, the UK and Australia is planned for the end of March.

Minuteman is also planning its World Expo for July 2022 in Dallas.

“It will be great to get 800+ like-minded people together talking positively about the business and getting more ideas for building their businesses further,” Titus said. “I think most of our owners are really looking forward to getting back together in person.”

There are several things about Minuteman’s operation that are unique to their system. For example, Minuteman was the first and only print franchise network to include heat transfer dye sublimation capability as standard in its centers, offering on-site production capability for smaller runs of things like coffee mugs, t-shirts, photos printed on metal or wood, etc. Several centers are also offering direct-to-garment printing using Epson printers. The network also uses Epson and HP wide format printers for signage and more.

Caption: Minuteman offers a variety of printed materials, offering on-site production capability for smaller runs of things like coffee mugs, t-shirts, photos printed on metal or wood, etc. 

“One of the things I enjoy watching,” Titus said, “is what’s happening in the stores as they each grow differently. Everyone starts off the same way, and then depending on what their customers are looking for in terms of diversification, that’s the way the owner goes while still doing everything else. For example, once they get a handle on signage, they may boost their production in mailing.

Another unique aspect of Minuteman is the way it handles royalties, which are at 6% of sales, lower than most of the others, but which also has a cap on those royalties. Owners only pay 6% on the first $36,500 of sales.

“That means that our largest shop at $7.4 million only pays about $25,000 in royalties per year," Titus said. "And that’s a big boost to the bottom line for all of our centers.”

He also noted that Minuteman is quite aggressive in the way it helps independent owners sell their businesses by attracting entrepreneurs and converting those centers into new Minuteman Press locations.

“One of our advantages is the fact that we have 26 regional offices, and that staff works directly with centers in their regions on a variety of projects. But they also call on independent printers in person and seek out entrepreneurs looking to buy into a franchise," he said. "This in-person activity is a huge advantage for us.

"The other major advantage is that we do not charge any fees to the selling owner. If a seller uses an agent or M&A firm, they will likely pay fees in the range of 8 to 12 percent of the sales price. So our fee-free structure really makes a difference. And for buyers who might be a little bit reluctant about jumping in with two feet, it's easier for them to buy an existing business, and have the employees already in place who know the customers and know what's going on in the business. It makes it easier for them to be comfortable with the decision. Plus the seller is not required to stay on for months during a transition.”

In terms of specific growth areas, Titus, like many of his print franchise counterparts, cites signage as a growth opportunity, with all of its centers having at least one wide format printer.

“We have owners that are doing full-blown commercial fabrication and routing and things along those lines, with bucket trucks and installations," Titus said. "It’s kind of a natural progression in the industry. There's a learning curve to do it, but we've made it easier for them to get involved. When a customer is doing an event, it’s so much easier for them to get everything they need from one source, from sell sheets to signs. And everything matches.” 

Like pretty much everyone else, Minuteman faces challenges with hiring employees and with supply chain issues. Titus sees the launch of the new website as a big opportunity for the network and their customers, making it even easier to do business with Minuteman.

Percent Each Job Contributes to Total Revenue—Minuteman