2019 Annual Print Shop Franchise Review

Overall, 2019 was a relatively good year for print shop franchise organizations. Of the five remaining print shop franchise organizations, systemwide revenues were down only slightly, with the exception of Fortusis, which is in the process of building a new business model. The number of shops remained relatively flat, again with the exception of Fortusis (see their profile below). As these organizations work to adjust to the changing industry and business environment, they are all aggressively working with their franchises to add infrastructure for more efficiency, encourage the addition of new products, provide training and help franchisees looking for an exit strategy look for new potential owners. Combined, these five organizations generated $1.34 billion in revenues.

In speaking with the leaders of these organizations, all shared a bright outlook for the future. They believe in their respective business models and continue to develop and evolve them to stay aligned with market demands while taking into consideration the very different requirements of each center within their respective networks.

Here, then, are the updated profiles for each organization. We thank them for taking the time to respond to our survey and to spend time with us talking about their achievements, concerns and strategies for the future.

Alliance Franchise Brands Marketing & Print Division

The Print & Marketing Division of Alliance Franchise Brands incorporates a number of brands, including Allegra, American Speedy Printing, Insty Prints and KKP Canada. The company considers Allegra to be its flagship brand in the U.S.

The franchise network of print and marketing centers declined from 289 in 2018 to 279 in 2019. Gross systemwide sales in 2019 were $255,164,013, down slightly from $259,363,186 in 2018. The decline in the number of centers is attributed to exit of lower-performing centers and/or retirement of franchisees that results in their center being merged with a nearby facility. Average sales per shop came in at $909,539 for 2019, with the highest revenue shop delivering revenues of just under $10 million.

The network has been aggressive at recruiting new talent as franchisees. Two programs are available to independent printers and entrepreneurs looking for a proven franchise model.

“The Allegra MatchMaker Program allows entrepreneurs to purchase an established business with an existing customer base, cashflow and staff,” Allegra President Kevin Cushing said. “Owners of independent print shops looking to retire or sell their businesses can work with one of our merger and acquisition managers to find qualified buyers or match with existing franchise members looking to expand in other markets. A re-branding to Allegra Marketing Print Mail allows the new owner to capitalize on the power of the network and hit the ground running.” 

The Allegra Advantage Program is designed for independently branded print services providers who want to grow the value of their company by gaining access to a host of franchise network resources plus develop a strategy for when they are ready to sell. 

“They are often facing issues with sales, sales management and technology,” Cushing said, “and having all of that vetted for them by our home office team is a big benefit. It allows them to focus on growing instead of on infrastructure. When it’s time, exiting the business is easier to achieve because we can work with them to better position their company for sale. We’re out talking to entrepreneurs all the time.”

In addition, as many executives leave the industry’s OEM/supplier businesses, either through retirement or through the consolidation many of these companies are going through, the organization offers qualified executives a grant that helps ease them into a new business. And a referral program compensates anyone referring an entrepreneur who signs a franchise agreement. Cushing invites interested parties to contact him at [email protected].

As we reported last year, Alliance Franchise Brands also has a dual-branded program in place where Allegra and Image360 brands are merged into one business, with Image360 being the network’s sign & display graphics premier brand.

“When we originally rolled this out, we saw it as two separate business models under one roof," Cushing said. "We spent the better part of last year working to maximize efficiency and enhance support resources for a more flexible and powerful business.”

The original goal was to have 80 of these dual branded shops in the next five years. There are currently 33 dual branded centers, with about five more in the pipeline.

“Independents are also interested in getting into the display graphics business,” he said, “adding an Image360 to their independent shop, and that is another option. Plus, Allegra centers that are doing an increasing volume of signage but outsourcing to an Image360 or other display graphics shop, may also want to look into dual branding their centers as their volumes grow.”

Speaking of outsourcing, it accounts for 23% of systemwide revenues.

“Outsourcing has always been part of our strategy,” Cushing said, “allowing our centers to shed overhead, making it a variable rather than fixed cost. An Allegra center might create simple signage but outsource things like building signage to an Image360 or independents. It involves a pretty routine build-versus-buy decision-making process. Apparel is 100% outsourced, and many of our centers have eliminated offset printing, replacing it with a combination of digital printing and outsourcing.”

Offset printing still represents 23% of network revenues, with digital printing representing 22%, including both color and black and white output. Finishing and mailing accounts for 11% of revenues.

Alliance Franchise Brands continues to build out its WorkStream technology package. Technology is a centerpiece of the company’s long-term vision for growth. The integrated system is designed to reduce the time associated with estimating, order entry and production activities through automation, shifting the focus to client services.

“We are now getting to the tipping point where there are enough different center sizes that have embraced some aspect of WorkStream, and it has borne fruit for their businesses," Cushing said. "As a result, others are sitting up and taking notice. A WorkStream implementation can shave 10 to 15 minutes off of each order in labor savings. The automation and simplification of the work process are also important as we recruit younger employees, while at the same time fewer schools are teaching a graphic arts curriculum. Plus, customers are being conditioned by the Amazon experience, and anything we can do to compress time and add efficiencies makes them more competitive. WorkStream is the number one efficiency thing we can offer."

Allegra does offer an aggressive training program for franchisees and their employees

“We have a Center Leadership Development Program in place,” Cushing said, “that is a three-year program to develop the next generation of leadership. This is especially attractive to those that don’t have a succession plan in place. Also, making sure the next generation leadership fully understands everything we can offer breathes new life into the business, as some existing owners deep into their careers with us are not necessarily looking for new things.”

In terms of challenges, increasing center productivity, managing workflow automation and developing capabilities of sales personnel rank as the top three. Addressing these opens up bandwidth to tack the biggest opportunity for center owners: Helping customers integrate print and non-print marketing campaigns as well as using marketing tools to promote their own businesses.

AlphaGraphics

At AlphaGraphics, systemwide revenues were down slightly in 2019, but still a healthy $305 million compared to $310 million in 2018. The year ended with 273 centers, the same number as 2018, but that doesn’t reflect what happened “under the hood.”

“We focused on cleaning up the network in 2019 and did more closures than normal," said President and COO Ryan Farris. "That caused a little bit of a slowdown in center count growth, but we believe it will pick up dramatically this year and next. We are bringing back net new construction of centers in addition to conversions, as one example, and have about 11 new centers that are under construction. We can’t count them till they are open, and the construction process can take six months or more. As they open our center, count will grow.”

New construction gives the organization the ability to rethink the layout and the start-up equipment for centers.

“It’s been good for the brand,” Farris said, “and we settled on what we think is the perfect starting square footage, equipment, sales and marketing packaging, go-to-market strategy – the fundamentals come back when you do this.”

In January, Farris said same store sales growth is higher in net new centers by about 4% as compared to existing centers.

“We believe this is due to the programs we have put in place and focused discipline to drive sales," said said. "Now we see existing owners wanting to do the things our new owners are doing, so that indicates we are on the right track."

In a net new center, equipment includes a reasonable color production machine, Xerox V180 or Ricoh 7210, that delivers good quality at 80 to 90 ppm with finishing attributes and the ability to feed paper from the top feeder or multiple trays. All new centers have a Duplo finishing device that offers specialty cutting, scoring and folding for standard business customer products and services. The centers also have an Epson SCS 80600 eco-solvent wide format machine with a work table that complements it.

In addition to equipment, the new centers feature an integrated installation of EFI’s PrintSmith Vision, XMPie for online ordering and variable data and the PrintSpeak CRM. They have the Essential FreeFlow Core package and are trained on 20 to 30 start-up go-to-market products – basic training on what stock to load in which tray, and applications that enable fast pricing and layout, easy color management, and that run through the shop quickly.

“This lets owners focus on sales and marketing, spending more time on the business than in the business,” Farris said.

This configuration also has advantages for headquarters, giving them real-time access to center performance data that helps in benchmarking and enables them to better support centers.

Sales training is also a key focus for owners and sales professionals.

“We have started to roll out AlphaGraphics agXell, a professional four-by-four sales training program," Farris said. "What are the four factors required to grow sales and the four roadmaps you are going to implement? Getting new customers, customer retention, cross-selling and dealing with price increases. Each of these has a process for awareness, trust, selling and closing phases providing structure, process, tools and oversight. Our CRM system tracks and guides them through the sales process with traffic type indicators red/yellow/green that help them see how well they are doing and what areas need more focus.”

All new owners are required to go through the sales training program, which will also be rolled out to the rest of the network over the course of 2020.

Another metric the network is focused on is recurring sales.

“Last year, about 40% of first-time customers never placed a second order,” Farris said. “If you can get that second order, there is a strong likelihood they will place an average of six orders per year. You are building lifetime value instead of one-time value.”

A new requirement for owners is using a cloud-based business intelligence solution, Print Speak, that helps them better understand where they fall with respect to metrics but also gives headquarters a real-time view into performance. This includes a dashboard that shows the owner’s key sales metrics showing their center average, the average for the network and the average for the top 50.

“That lets them see real time if they are doing a good or bad job of closing those estimates, average order size, and total value of each customer as compared to the network and top performers,” Farris said. “We refer to it as incremental wins. If they can move those key metrics a few points, they will get the growth we are looking for.”

Looking ahead, Farris said that the goal is to keep closures to less than eight.

“Our goal is to add 45 to 50 new owners to the network with about 15 of them being transfers,” he said. “We hope to be able to open at least 17 new centers by the end of the year. The five-year goal is to get as close to 400 centers in the U.S. as we can.”

To support these aggressive goals, AlphaGraphics ownership, MBE Worldwide, recently raised $120 million in private equity funding from Oaktree Capital.

“We don’t see getting into multiple franchise brands like a lot of PE firms like to do,” Farris said. “Our strategy is still to be the worldwide player in print and marketing, and now shipping with the launch in Europe of MBE by AlphaGraphics. We are also looking at acquiring not only independents, but also firms that offer a complementary service that will help drive our print, marketing and shipping services, a product or service that the current AlphaGraphics brand could distribute. For example, we want to expand our digital marketing services. It’s not realistic to have specialized staff at each center, but our small business clients need those services; that could be a partnership or acquisition opportunity. We are also looking at labels and packaging – basically anything a small or mid-sized enterprise needs for their print, marketing and shipping services.”

Within the current framework, the fastest growing application is signs and display graphics. And variable data will be a big focus to drive color digital print volumes. Outsourcing comprises about 25% of revenues, the largest component of which is offset printing, since the network has very few offset presses left, accounting for $3 to $4 million last year.

“Some centers don’t have the capability to print on rigid substrates or to do complex installations,” Farris said. “So that also accounts for some of the outsourcing.”

Farris is bullish about AlphaGraphics’ future.

“We recently did a survey of owners,” he said, “and the highest ranked elements were confidence in the brand and the value of their investments. That speaks highly about the strategies we have in place and our roadmap for the future.”

Fortusis

Since Curtis Cheney acquired the ICED brands in late 2017, he and his team have been working to stabilize the franchise, which declined from 59 centers in 2018 to 38 in 2019, under the brands Kwik Kopy, Franklin’s and The Ink Well. Cheney understands the franchise business from a franchisee perspective, having been the general manager at the network’s largest center in Salt Lake City for nearly a decade.

“We divested ourselves of the American Wholesale Thermography brand,” he said, “and we let go a lot of underperforming centers so we could focus on building a good foundation for the brand. The good thing is the average sales per center were up from about $400,000 in 2018 to $450,000 in 2019.”

Systemwide sales for 2019 came in at $14,536,069, down from $24,500,000 the previous year.

When Cheney took over the network, he saw a lot of opportunities that were not being capitalized on in ways he thought appropriate.

“We needed to figure out what our model would be going forward,” he said, “and get all of the necessary infrastructure in place so we could start selling franchises. It took me a while to get up to speed on franchising from the franchisor perspective, and I have been working with the International Franchise Association to make sure we are ready to offer something that will be of value to our owners. I don’t want to sell franchises unless I have a good model, know it will work, and find the right people to sell those franchises.”

In the remaining franchises, there are four owners that have been in the system for more than 40 years.

“The industry has changed dramatically over that time,” he said. “We need to get them up to speed on where technology has gone and how it can be useful to them. There were a number of years where technology was not adopted in the right manner in the network. For example, we still had a lot of places with offset presses that were not profitable. We looked at all the centers to determine what MIS they had, what their social media strategy was, what print technology was in place, and how video and cinematography could fit into the mix. We want our franchisees to be strong evangelists for the network, advocating that we have the knowledge about how to move commercial print forward. We have completed our FDD, and I think we now have an offering that is attractive.”

In terms of a systemwide MIS, Cheney said that was not a requirement in the past, but all new centers will be required to use the network’s MIS, Printer’s Plan. Currently, 10 centers have this MIS in place, up from two at the beginning of 2019.

Cheney said the network will start actively recruiting new franchisees in the third quarter of 2020.

“Most of our centers are sub-$1 million in revenue, and in our model, there is a low capital investment, so it makes it easy to enter the business.”

Using its Salt Lake City location as a test bed, Fortusis is exploring various technologies that can be added to the system to make it more competitive.

“We put in a dye sub printer and Direct-to-Garment (DTG) capability there,” Cheney said, “to see how they would do. And they are doing pretty well. DTG has taken off for them. It doesn’t deliver a huge margin, but we find we can bring a lot of people in the front door with that, and it complements other services. Another is toner-based foiling. Those machines cost less than $5,000, and you can do small runs of foil as added value.”

Average sales per shop for 2019 were $459,036. Cheney said, however, that taking the smaller shops out of the formula, the average shop revenue is $600,000 to $700,000.

“That’s the model we like,” he said. “They can do the one-offs, the Christmas presents, the small projects a lot of our competitors don’t want to focus on.

“The great thing about reinventing the business is that with my current franchisees bringing in money every month, we can reinvest right back to them to build a system that will work for everyone.”

In terms of recruiting new franchisees, Cheney is looking to millennials, an age group that has the ambition and excitement for something new.

“It really doesn’t take a lot of capital to get in,” he said. "We want someone that really wants to grow. We don’t anticipate them holding on to the location for an indefinite amount of time. I think this is a launching pad for them to grow and develop themselves and pass the investment they have created to someone else.”

The Fortusis model will be based on a 10-year transferrable agreement.

“I want them to get in, grow the business, have the excitement and not feel locked in.”

For current owners, Fortusis has created a number of new programs, including a new program started last November that owners need to accomplish over the next year.

“There is a new training program every month,” Cheney said. “When they complete the program, they will be invited to our incentive trip, a Royal Caribbean cruise to a private island in the Bahamas."

Franchise Services

Franchise Services continues to deliver good performance, with systemwide revenues up about 2% year over year, from $297 million in 2018, to $302 million in 2019. The number of centers has declined to 322 in 2019 from 330 the previous year. The network’s highest producing shop brought in $13.6 million in revenues, up from $11 million last year, a significant increase.

“We feel good overall about the year,” said President Richard Lowe. “We were a little shy of our objectives for the year, but our January was up 5% -- we hope that’s a trend. It’s not like the old days for any of the networks where we could expect 10%+ year-over-year growth. These days, it’s a bit like a 'Tale of Two Cities,' with the folks in the network focusing on what we need to do moving forward doing well.”

While some networks focused on weeding out lower performing centers in 2018 and 2019, that’s not the case at Franchise Services, according to Lowe.

“We want to help every one of them,” he said. “It’s a mature business and a lot of our owners who started in the business in their 40s and 50s are now in their 70s, at the end of their business lives. So 8% to 10% of our centers are up for resale as these folks move on to their next chapter. We have actually sold several recently at good multiples. They are salable if you are running a good business.”

One of the growth opportunities for the network is wide format.

“We went out on a limb about five years ago, with a goal of signs comprising 25% of the business, and we were at 19% in 2019, so good progress toward that goal," Lowe said. "Some of our centers are doing more than $1 million in signs. We are always on the look-out for products and services that are not going to be replaced by something digital. I think signs could be 50% of our business at some point in time.”

The other effort in the network is to develop more repeat customers, being proactive in developing programs rather than one-off projects.

“Labels and signs are areas where we are working on this,” Lowe said. “Almost all of our centers have sold labels from the beginning, but mostly in reactive mode. With all of the things that need labels today, we are working to be more proactive with customers.”

Labels represented only 3% of revenues in 2019, with plenty of room to grow. Packaging is more complicated, having a different sales cycle and different contacts within the customer account.

“We believe there is opportunity there, though,” he said. “We have always been the small business support people. However, the equipment investment for packaging is high, so we will see how that develops.”

Another area of emphasis is finishing and mailing, which comprised 15% of revenues in 2019.

Franchise Services spends a lot of time listening to its franchisees as it develops plans for the future.

“We have 11 different board groups that consist of seven or eight franchisees who get together, create business plans and then meet once or twice a year to present progress against their plan to the rest of the group. It’s our best-rated support program by far, and it holds them accountable to their peers.”

Lowe participates in two of those groups.

“One of our groups is all women,” he said. “And they are all growing, pursuing all of these opportunities. Their sign businesses are outrageously good, and several are getting into short-run packaging.”

Like many of the other networks, Franchise Services encourages centers to outsource some of their work.

“Our philosophy has been that you should manufacture the things that have the highest value for your customer and then buy out the things you can get readily with high quality and a measure of control and speed,” Lowe said. “Then we don’t have the risk of having the equipment or people to run it in areas that are better served by a partner.”

Outsourcing accounted for 16% of systemwide revenue in 2019. Offset printing is one example of this. Lowe said that there are very few offset presses in the system, with franchisees turning to partners like 4Over for this work. Franchise Services centers also sell a tremendous amount of apparel, which is primarily outsourced to partners as well.

Workflow is an increasing focus as well.

“With 20, 30 or 40 orders coming from a customer per day, you need to get them out with fewer touches,” Lowe said. “We have a committee working on this, consisting of some franchisees, key headquarters staff members and some vendor partner experts in the workflow space. We tried to change this 10 years ago and it didn’t go that well. We had the idea of trying to solve everything with automation. But each center’s workflow needs are different, so it is hard to get one piece of software that fits everyone. This time we will take a different approach, breaking down elements of the manufacturing process from order entry to shipping and reorder, looking at each one and figuring out how to best optimize or automate each one. Then we will educate our franchisees, and we expect it will make a big difference for them.”

Lowe expects to start rolling out these best practices in the third quarter of 2020.

This year marks 30 years Lowe has been in the business, and he is still excited about it.

“We have more products and services than we have ever had before,” he said. “If you want to be successful, you can be. It is a very mature market in one sense, but a totally new business in another. We need to do a better job of communicating to people that are considering working in our space what a cool industry it is – it’s not an old, tired business at all. We deal in the idea business and we use a lot of technology. It might end up as a sign or a piece of printed paper, but it started as a problem someone had that we can solve for them. There are still challenges in getting to the center of the future and we have to navigate a lot of change, but we are prepared to do that.”

Minuteman Press International

Minuteman Press is the largest print shop franchise system in terms of international footprint, number of centers and systemwide revenue. With locations in the United States, Canada, South Africa, Australia and the United Kingdom, the network generated $462,981,369 in revenue in 2019, slightly down from the previous year’s results at $468,676,500. The number of shops increased to 967 in 2019, from 956 in 2018. The network’s two largest shops generate in excess of $7 million annually.

“A lot of our franchisees came into the network in 2008 and 2009 from the 50+ age group," Minuteman Press President Nick Titus said. "They were too young to retire then but are now looking to do so. Others who have been in the network for years are also retiring. With a strong economy, we have seen an increase in interest from people looking at getting into our business, but they want to continue making what they are making now; they have a lower tolerance for risk than in the past. Sometimes we have centers on the market that meet that need, and sometimes we don’t.”

To help existing franchisees continue to grow, and to attract new talent to the network, Minuteman has developed perhaps the most diverse in-house offerings of all of the networks, including promotional products (some produced with dye sublimation) and direct to garment (DTG), both print and embroidery.

“Investment in embroidery machines can be large,” Titus said, “and employee training can be difficult. So some of our franchisees outsource it and some don’t. Our philosophy is to never say no to a job. Whether we do it in-house or outsource to a vendor, the customer doesn’t care. They just want their job done right. So we encourage our franchisees to take work in that can be outsourced. Then when the volume builds up enough in that area, it might make sense to bring in a piece of equipment or add an employee to bring the work in-house rather than farm it out.”

Some centers are using an Epson printer for DTG.

“It produces a very nice quality with images that last well,” Titus said.

Another area of focus is educating owners about mailing and USPS offerings.

“Getting the owners more involved in mailing and understanding it has resulted in good returns for those who have taken the jump,” Titus said. “If you can provide mailing, you are likely going to be printing the orders as well. The more educated our owners are on mailing and how to save customers money on postage, they will get more print orders as well. So promotional products, apparel and mailing have been our top three areas of focus.”

Minuteman does its own recruiting using lead generation techniques rather than using brokers.

“Our lead generation portals have been effective in helping our owners sell their businesses,” Titus said. “To support that, we have a full-time public relations person and a copywriter on staff pushing success stories out both to give our owners good visibility and to attract new talent to the network. We work to build Minuteman Press brand awareness and what we offer. The industry understands this, but the general public doesn’t. They think ink on paper, but we can put an image on just about anything. Getting that message out to the public has been beneficial.”

Minuteman Press also places a heavy focus on training in 28 different regions throughout the company. Each has a Vice President, and marketing or technical staff helping owners on the local level.

“We train those people to train the owners,” Titus said. “We have a support department in our home office working with owners and training on our proprietary software and some of the more technical things field staff perhaps can’t cover.

“Every one of our owners has different strengths and weaknesses, backgrounds and experience," Titus said. "It comes down to an individual level working with owners, training and assisting them. That’s part of the reason we see each store growing differently. It’s not a cookie cutter formula. We help each individual owner grow their business to their own comfort level.”

Minuteman’s proprietary infrastructure software, called FLEX, does everything from marketing and pricing to workflow.

“Everything runs through FLEX,” Titus said. “We’ve always built, managed and maintained our own software going back to the late 1980s. We have six full-time people that build, manage and support the system for our owners.”

Titus’ excitement about the business comes through in conversation with him.

“I don’t think we have ever been able to do as much volume in as little space and with the least amount of equipment and employees,” he said. “Technology has been such a benefit for the business. When I first came in 14 years ago, we were pushing out offset presses. Now it’s pretty much all digital. To see that change has been incredible. I don’t think our business has ever been better. It’s gotten so much easier, more cost-effective, and it’s fun to talk about it.”

Proforma

While it is not a print shop franchise like the other five we are covering here, Proforma is a print franchise. This network of print distributors generates about $600 million in annual sales with 38% to 40% gross profitability, with its largest distributor accounting for $40 million of that. The company doesn’t own any equipment but is a provider of printing and promotional product solutions, online technology, company stores and variable data solutions.

“We believe that technology is taking over the day, and either organizations are becoming great sellers or great manufacturers," Founder Greg Muzzillo said. "Today the end user wants to buy more things from fewer sellers and most printers don’t have the equipment to do everything the customer wants – commercial print, promotional products, uniforms, wearables (branded versus uniform apparel), signs, banners, displays. As businesses are driven to be more efficient, they are looking for more single-source suppliers. We help them do that. We consider ourselves to be one source with infinite resources.”

In acquiring new franchisees, Proforma doesn’t focus on greenfield franchises. Rather, its new franchisees typically owned their own printing company and are looking to make their business more successful or are printing sales reps seeking to turn their successful career into their own business.

“The biggest things we need to train on is our technology platform, our business growth resources and our back office support systems,” Muzzillo said. “They already understand print, and they know how to sell. We spent three years and $15 million developing a technology platform, and our franchise owners’ gross profits are up 17% and sales up 20% after one on the platform.”

Proforma does, however, have a new account development program – training on how to sell and cross-sell the full line of products the organization offers through its manufacturing partners. Franchisees can use any of the 500 preferred suppliers or their own suppliers if they wish.

“We do get great pricing and service from our preferred suppliers,” Muzzillo said, “but sometimes people have a reason for wanting to use their own suppliers, and that’s fine with us.”