Sign Franchise Review 2021

One of the biggest themes of this year’s "Print Franchise Review" and this "Sign Franchise Review" is that the division between the two types of franchises is starting to blur. The commercial print franchises have been expanding into wide format and display graphics, and even, in some cases, traditional manufactured signage, such as channel letters, monuments and other non-printed signs. This is not a new trend, and in fact parallels what we have been seeing in the general printing industry for the better part of the past decade. On the other side of the admittedly narrowing divide, the sign franchises have also been adding commercial print services, either by installing equipment in-house, via brokering, or by acquiring commercial printers and rolling them into the franchise brand. This also is not a new phenomenon, and some franchises have long offered commercial print products and services, although some—SpeedPro namely—are starting to move more strongly in the M&A direction. Others, like Alliance Franchise Brands, have a co-brand program that jointly brands a single center with both the print and sign franchise.  

We are still debating whether to combine the two franchise reports, but there is NAICS (North American Industrial Classification System) to think about. For example, when we track the printing industry in our various data series we are talking about businesses classified in NAICS 323 (Printing and Related Support Activities), which the U.S. Census Bureau defines as: 

• Industries in the Printing and Related Support Activities subsector print products, such as newspapers, books, labels, business cards, stationery, business forms and other materials, and perform support activities, such as data imaging, platemaking services and bookbinding. The support activities included here are an integral part of the printing industry, and a product (a printing plate, a bound book or a computer disk or file) that is an integral part of the printing industry is almost always provided by these operations.

On the sign side, the Census Bureau has two different classifications for signs and display graphics: 

• NAICS 339950 Sign Manufacturing: This industry comprises establishments primarily engaged in manufacturing signs and related displays of all materials (except printing paper and paperboard signs, notices, displays).
• NAICS 541850 Display/Outdoor Advertising: This industry comprises establishments primarily engaged in creating and designing public display advertising campaign materials, such as printed, painted or electronic displays; and/or placing such displays on indoor or outdoor billboards and panels, or on or within transit vehicles or facilities, shopping malls, retail (in-store) displays and other display structures or sites.

This may all seem a little Inside Baseball, and it is, but it does provide an argument for keeping the two franchise reviews separate. After all—and this doesn’t just apply to the franchises, but to print and sign businesses throughout the industry—there is a difference between a “sign shop” that has decades worth of experience in all facets of signmaking and a commercial printer that has bought a wide-format printer and produces some printed signage and other display graphics. We just need to be sure of what and who it is we’re taking about. 

At any rate, that was an issue we wrestled with as we were putting together this report. 

The State of the Sign Franchises

According to the latest County Business Patterns, in 2018 (the most recent year for which the Census Bureau has data), there were 5,853 Sign Manufacturing establishments, an increase of +2.2% from 2017, and 2,765 Display/Outdoor Advertising Establishments, an increase of +4.7% from 2017. So, generally speaking, the sign business is on rise—or at least was as of two years ago. Anecdotally, we know these trends continued through 2019. Until…

…the elephant in the room. As you might expect, dealing with the pandemic was what occupied all the franchises in 2020, and often—but not always—pushed other initiatives to the side. 

How do the sign franchises compare this year?

The sign and display franchises included in this year’s review are:

• Alliance Franchise Brands (Image 360, Signs By Tomorrow, and Signs Now)
• FASTSIGNS International
• Signarama (part of United Franchise Group)
• SpeedPro

All told, there were 1,900 centers among the four franchises in 2020, which represents a -2.2% decline in total centers from last year’s franchise review. All things considered, that’s not bad for 2020. And while three out of the four franchises had a net loss of centers over the course of the year, FASTSIGNS actually grew centers. In our conversations with the franchise heads, loss of centers wasn’t entirely due to the pandemic; some locations had been struggling for a while, there were owner retirements and non-COVID medical issues (even some deaths), and other factors unrelated to the business. For all franchises, the number of current centers is a net number; there were some closures and some new centers opening, so it wasn’t an entirely moribund year. Still, some of the franchises chose to focus on helping out the centers that already existed rather than opening new centers.

“We had a number of resales that we did last year, but we did not focus at all last year on opening up new studios,” said Larry Oberly, president and CEO of SpeedPro.

Some centers used the shutdowns of the spring and summer to catch up on backlogged projects.

“A lot of owners were able to go in and say, ‘Hey, since your school is shut down, can we do that rebranding project you wanted to do?’” said A.J. Titus, president of Signarama, “or, ‘People can’t come out, so this is the best time to rebrand your stadium.’” 

* Signarama's average sales per shop only includes centers with at least one full-time salesperson that reported all 12 months in 2020, and that have been open two years or more.

** SpeedPro numbers include SpeedPro Canada, which has lower sales and investment numbers than the U.S. operation.
*** All columns are totals except for average sales per shop, average number of employees per shop, average investment to open a new shop, and highest revenue shop are averages.

Tracking the changes from last year:

• Alliance Franchise Brands had no net change in centers, compared to 2019, as new centers offset lost centers. System-wide sales were down -8.9% from 2019, and average sales per shop were down -10.0%. The highest revenue shop in the network was actually up from 2019—a common occurrence in this year’s survey. 
• FASTSIGNS saw a +3.3% increase in centers. System-wide sales were also up +0.9%, and the average sales per shop were up +4.2%. The highest revenue center for 2020 was 75% higher 2019’s highest revenue center.
• Signarama also saw a growth in centers last year—they were up +3.0%. System-wide sales declined -10.2%, however, and average sales per shop dropped -6.4%. And, again, the highest revenue shop for 2020 was 20% higher than 2019’s. 
• SpeedPro U.S. saw a -6% drop in studios and system-wide sales were down -17%. (These numbers exclude SpeedPro Canada studios.)

The Pandemic: Grace Under Pressure

The sign franchises were well-positioned during the pandemic because if there was one graphic communication application that became essential, it was signage. Many centers closed down immediately and reopened when they were allowed to, although some chose to stay closed even if they could stay open. 

How well individual centers did was generally a function of two factors: geography and primary verticals served. In states that aggressively forced businesses to shut down—like California, New York, Washington and some others—centers fared worse than in states that allowed businesses to remain open.

“We definitely were harmed the most in California, Nevada, Illinois, New York and Washington state as well,” Oberly said. “We had the biggest declines in some of those, some very severely like California, where we have our largest market penetration.”

As for verticals, it’s no surprise that centers that primarily served events, travel and hospitality customers did the worst, while those that served medical and health customers fared the best. 

It was a year that demonstrated very well the advantages to being part of a strong, effective network and having a strong corporate “mothership” offering guidance, education, downloadable materials and templates, and sometimes just a “pep talk.”

“Every Thursday, we would hold a weekly ‘Connect with Catherine’ video conference call on everything they needed to know about successfully navigating the COVID pandemic,” said Catherine Monson, president and CEO of FASTSIGNS International, “whether it was how do you comply with the FFCRA [Families First Coronavirus Response Act]? How do you benefit from the CARES Act? How do you apply for a PPP loan? Very early on, how do you get deemed an essential business? How do you market virtually? How do you make virtual sales calls? What products and services are selling? What industries are buying?”

The weekly video calls also let the individual centers help inspire each other.

“We set up a ‘successstory’ email address and every week in the 'Connect with Catherine' I would share franchisee-specific success stories that would motivate other franchisees to try the same thing; I would remind them to send in their success stories. This created a ‘flywheel’ of success.”

Lying beneath the surface of the aggregate numbers in the table above is a range of individual center performances.

“Our best stores actually performed extremely well,” said Signarama’s Titus, “and the middle-tier stores probably lagged a little bit.”

He chalks up the success of the leading shops to focusing on sales and getting out and talking to people—largely through Zoom. And one major key for many sign franchise centers was being able to start producing PPE, safety signage, and all the new applications that came out of the pandemic.

The sign franchises also quickly supplied resources for local businesses. For example, Alliance Franchise Brands developed “Back to Business” packages for various vertical industries.

“Early in the pandemic, we knew it would be critical to support our franchise members in new and innovative ways,” said Ray Palmer, President of Franchise Operations for Alliance Franchise Brands. “So, we quickly aligned our teams, researched the CDC and NIH guidelines on safe environments during a pandemic, and built vertical marketing packages by industry. These turnkey marketing and sales materials allowed our members to quickly reach out to clients with ideas on how we could help them reopen safely.” 

The Competition: A Crowded Market 

Being part of a franchise network was an important lifeline during the pandemic, but other trends had started impacting these businesses years earlier, but were made more acute during the pandemic. Last year, we heard many stories of commercial printers who were able to “pivot” to signage and display graphics, and that helped them get through the year. But it was a pivot that many printers started doing years ago. So the sign franchises have been seeing increased encroachment from general commercial printers and the commercial print franchises, and the consensus among the sign franchises is that “we know signs better than anyone” and they are undaunted by these seeming “upstart crows” coming from other parts of the printing industry. 

On the other hand, it makes sense to offer customers one-stop shopping, so the sign franchises have largely been able to offer small-format commercial print work either on a brokered or partner basis.

“We’ve had national print partners and relationships in place since the first year I got here,” Monson said. “We’ve got a number of co-brand franchisees who also do printing for other fellow franchisees, and we have some franchisees that have added small-format equipment. So whether it’s done in-house or outsourced doesn't matter to us. We’ve had some franchisees buy local independent sheetfed print companies and bring them into their FASTSIGNS just buying the book of business.

“Signage is our business,” Monson said. “It has been our core business for 35 years. We just continue to sell more and bigger comprehensive solutions and comprehensive projects.” 

Signarama’s Titus concurs. “This is our 35th year in the business, and if someone’s going to try to jump in now, we have all the history, we have the brand, we have the R&D, and we have all the history in what we’ve built.” 

On the other hand, it makes sense to offer customers one-stop shopping, so the sign franchises have largely been able to offer small-format commercial print work either on a brokered, partner or in-house production basis.

“We’ve had national print partners and relationships in place since the first year I got here,” Monson said. “We’ve got a number of co-brand franchisees who also do printing for other fellow franchisees, and we have some franchisees that have added small-format equipment. So whether it’s done in-house or outsourced doesn't matter to us; it is about servicing the customer. We’ve also had some franchisees buy local independent sheetfed print companies and bring them into their FASTSIGNS, just buying the book of business and equipment.” 

Likewise, SpeedPro has offered commercial print as well as signage and display graphics.

“We've been in the business, we’ve just been doing it through third parties,” Oberly said, “but I think there is opportunity for us to acquire the right company in the right marketplaces. We’d expect to roll those into our operation.”

Look for SpeedPro to be more active in the M&A space as we go forward.

Alliance Franchise Brands, having franchises on both sides of this divide, are well-positioned to understand what is driving commercial printers into wide format and signage.

“They’re becoming blended so much it’s hard to distinguish anymore,” Palmer said.  “Everywhere you look, you see that most of the printers, if not all, are heading into the signage world because they have to, whether they like to or not. They have to maintain relevancy—and keep up with the demands of their customers.”

As a result, they have 33 Allegra/Image360 dual-brand locations, which they are in the process of streamlining.

“We’re taking a look at that business model because when you put two brands together, the business model changes for both brands,” Palmer said. “We are evaluating how the operation looks, the ability for cross-training and efficiencies, as well as marketing strategies. But the bottom line is that there is power in having two brands that specialize in print/mail/promo and signage/graphics/displays to meet our clients’ needs.” 

Signarama, part of United Franchise Group (UFG) and its family of brands, really stepped up during the pandemic and aided their local communities.

“For Signarama specifically, many of our franchisees retooled their sign-making equipment to create face shields, sneeze guards and customer CDC signage and even intubation boxes to protect surgeons as new information became available from the CDC,” Titus said.

Signarama stores focused on the needs of essential businesses as well as gratitude signs for healthcare workers and those serving the community. The brand often partners with Fully Promoted, another UFG brand which specializes in promotional items and screen and specialty printing.

“Fully Promoted did an incredible job from the PPE side, and our franchisees were able to align efforts and assist customers in their communities while working together,” Titus added.

The Future: Adding Other Services

At the moment, the sign franchises are busy enough keeping up with demand for signage that they are not looking too hard for new applications—like 3D printing or textiles—to branch into.

“We’re seeing people dabble in the 3D space, but nothing substantial or even measurable,” Palmer said. “The technology is there, but the applications really aren’t. There’s no killer application for 3D yet.”

Palmer has been seeing their members on the sign side expanding their offerings into what he refers to as “non-traditional, but becoming traditional” graphic opportunities, such as “XGD” or “experiential graphic design.”

“Those are more advanced types of offerings that take more creativity, and they’re higher value,” Palmer said. “We’re seeing a migration of our more advanced centers into those types of projects.”

Again, this is to effectively compete with the encroachment from the commercial printers adding wide-format equipment.

Indeed, that is the strategy of the sign franchises, which is to focus less on the printing aspect of signage and concentrate on the more traditional aspects of signage like monuments, channel letters and complicated installations that are more akin to construction projects than applying a graphic to a surface. And while it may not seem immediately intuitive to think of some aspects of interior design to be “signage,” that’s another line that’s blurring.

“We still do all the core signage that is a staple in our model, but we also see an opportunity to differentiate by working in new spaces,” added Palmer. “With the same equipment that we use to make traditional signs, there’s a lot we can do that wouldn’t be thought of as traditional signage. People don’t consider art on the wall to be a sign, and yet we do that.”

Some of the franchises—not necessarily en masse, but individual centers—were proactive in doing “celebratory signage”—those “Class of 2020” lawn signs that cropped up around graduation time last year.

“Many of our franchisees reached out to the local school districts to sell the school district $10,000–$20,000 jobs to produce graduation signs for all the seniors, including photos and names and individual signs for every senior’s front yard,” Monson said. “Even junior high and elementary schools were getting them because schools were trying to make their students feel special.”

Others, like Alliance Franchise Brands, went the B2C route for these kinds of signs, but the sign franchises still tend to not focus on the B2C market.

“Our focus continues to be B2B because we think that’s where the model needs to be,” Palmer said. “It’s a recurring revenue model: once our members get a client, they keep them. They find new ways to work with them and build trust. You don’t get that same type of repeat business from a B2C base. So, while we captured these opportunities, especially during the pandemic, it’s not something we see our members deeply focusing on in the future.”

FASTSIGNS has been active in the M&A space for the past year or so, and is actively moving into new markets. In December 2019, they acquired a small sign franchisor called Sign Me Up and converted their locations to FASTSIGNS, which added another 12 locations to their footprint. In September 2020, FASTSIGNS also acquired a computer support franchise called NerdsToGo.

“We are adding a lot of enhancements to their offering and professionalizing them as a franchisor,” Monson said. “We’re teaching their franchisees how to be more profitable. We’re bringing them higher margin, recurring revenue products and services.”

After the NerdsToGo acquisition, FASTSIGNS created a holding company called Propelled Brands.

“And we’re looking for other B2B franchisors to buy,” Monson added.

Looking Forward

The sign franchises are bullish on 2021—heck, many were even bullish on 2020. And while many initiatives and strategies that predated the pandemic were put on hold, it’s not time to start them up again. Most of the sign franchises have a conversion program, whereby an independent sign shop is converted to a franchise, and they will be making a renewed effort in this direction, as well as other growth initiatives. 

Sign Franchise Fast Facts

Here are the results of our Sign Franchise Survey, conducted in February, 2021.

What do you see as the biggest challenge for your network in 2021?

• The pandemic is going to change the way we do business for the foreseeable future and perhaps permanently in some ways. 
• Helping our franchise members operate profitably while we work to get to the “new normal” is a key focus of Alliance Franchise Brands. 
• Liquidity, partnering with our supply chain, and increasing market share will continue to be some of the key focus points for Alliance Franchise Brands and our members.
• A challenge that we try to keep front of mind is “pandemic fatigue.” Not only of our franchise members, but of their client base as well. We need to continue to stay focused on providing the solutions needed now and into the future. 
• The way to effectively conduct business in the future will continue to change, and we are focused on helping lead and drive that change.

What do you see as the biggest opportunity for your network in 2021?

• We continue to see evidence that the underlying foundation of the economy remains strong. The experts we consult are advising us of a solid comeback to the economy. We have seen figures of almost double-digit quarterly GDP increase projections. 
• We plan to be ready to capitalize on these new opportunities as well as be prepared to work differently with our customers and suppliers. We are starting to see some strengthening of business opportunities and the economy but are aware that the pandemic unknowns can still have a big impact on our near-term future.

FASTSIGNS International

What do you see as the biggest challenge for your network in 2021?

• The pandemic. 

What do you see as the biggest opportunity for your network in 2021?

• We’re stronger and nimbler than ever and ready to lead this industry. 

Signarama

What do you see as the biggest challenge for your network in 2021?

• As a franchisor, our job is to help and grow our franchise network of business owners. During the pandemic, Signarama, along with the other United Franchise Group brands, created the Reopening America Together initiative to encourage and inspire our business owners to encourage and inspire their customers and communities. We pivoted our support, training and communication to be virtual and focused on what our franchisees needed during this time.

What do you see as the biggest opportunity for your network in 2021?

• The signage industry is constantly evolving—new trends and technology have gradually changed the way that we do business. Signarama’s goal is to move forward with change and growth in mind. 
• We have kept our business model and location requirements updated to start our franchisees off ahead of their regional competition. 
• Signarama has introduced upgraded equipment, and we are seeing demand for our services and the industry is booming. 
• Signarama is always looking for passionate business owners who want to grab the wheel of their career—there has never been a better time to start a digital signage business.

SpeedPro*

* SpeedPro numbers include SpeedPro Canada, which has lower sales and investment numbers than the U.S. operation.

What do you see as the biggest challenge for your network in 2021?

• The worst is behind us. We’re working towards a rebound by Q3. 

What do you see as the biggest opportunity for your network in 2021?

• Rebound, businesses re-opening, verticals such as events coming back by Q3.
• New products and product extensions, new marketing campaigns, and aggressive acquisitions program are in progress that will kick-start our sales. 
• Our owners are reinvigorated to make 2021 a great year.