Franchise Print: A Bright Spot in the Small Printer Landscape? (Part 1)

By Cary Sherburne, Senior Editor

October 2, 2006 -- (Originally published at WhatTheyThink.com for Premium Access Members in January 2006) January 16, 2006 -- Much has been written about the struggle our industry has undergone over the last several years in terms of declining revenues and profits and accelerating competition from alternative media. According to WhatTheyThink’s economic commentator, Dr. Joe Webb, inflation-adjusted printing shipment and profits are again approaching the lows recorded in 2001. While printing shipments have been trending downward, it appeared that profits were starting to rebound, perhaps due to fewer but healthier printing establishments. But they are going the wrong way again over the last two reported quarters.

At the same time, according to PIA reports, while the number of U.S. print establishments has declined by an average of 1,000 per year since 1995, the number of print establishments took a bigger jump downward between 2003 and 2004, declining by 1,538. One of the primary reasons for all of this hardship, according to most of the literature, is the increased competition from alternative means of business communications—that is, as use of the Internet and other types of electronic media increases, they are being funded by dollars that might otherwise have gone to print. At the same time, it has been difficult for printers—especially smaller printers—to keep up with the investments required to stay competitive in an increasingly multichannel world.

The picture is not all doom and gloom, of course. There are many bright spots among printers of all sizes that demonstrate that the industry is slowly transitioning to meet the needs of the different world we find ourselves in today. Though the gap between “leaders” and “laggards” continues to widen, the “leaders” are looking forward to a bright and profitable future.

One reasonably bright spot in this economic picture is the franchise print networks. Between 2003 and 2004, franchises reported mild losses in the number of establishments and some overall systemwide revenue growth (not inflation-adjusted) despite dire predictions by some industry pundits that the hundreds of 20- to-25 year contract expiration dates now hitting the segment following its boom in the ‘80s would lead to sharp declines. WhatTheyThink spoke with executives at leading franchise networks to see what has been happening in that segment of the printing industry, and to gain a perspective on its future.

The Data

In the 2005 Franchise Review published in June 2005, Quick Printing’s Karen Lowry Hall reported that the franchise segment of the quick printing market had remained fairly constant during the previous year. Overall, the segment showed revenue growth of 0.8% between 2003 and 2004. By franchise, Quick Printing reported the following statistics for that period:

*gained 213 locations with the acquisition of the Bradenton, FL-based Signs Now franchise; Signs Now stores not categorized as quick printing and not included in analysis

Change in overall numbers was a blend of resale of franchise contracts, closures, new stores and consolidations. Within these numbers, a total of 76 net new franchised print shops opened in 2004. The average sales per store demonstrated growth in most franchises, with only Triangle (-2.9%) and Sir Speedy (0%) failing to report growth in this metric.

The Research

In researching this report, WhatTheyThink spoke with executives at Allegra, AlphaGraphics, Franchise Services (Sir Speedy and PIP), ICED (Kwik Kopy Printing Centers, Kwik Kopy Business Centers, Copy Club, Franklin’s and Ink Well), Minuteman and Signal Graphics, which combined represent about 98% of quick print franchise establishments. We asked them to share their thoughts about 2005 performance, their outlook on 2006, and their perspective on the print franchise business in general. Their feedback was remarkably similar and indicates an emerging role these types of businesses appear to be playing in the future of small printing establishments. This Special Report contains the highlights of those conversations.

The Impact of Expiring Agreements

The consensus of most of the franchisor executives we spoke with was that the effect of the mass expiration of 20- to 25-year franchise agreements was not living up to the dire predictions, although they agreed that expirations are a challenge for any franchise business.

AlphaGraphics CEO Kevin Cushing said, “In many case, expirations parallel the owners’ own transition in work career. As owners are looking to retire and turn their businesses over, we view that as an opportunity to renew our license agreements because selling a business affiliated with a well recognized brand with good systems has more value that selling that business as an independent or simply selling customers and assets. New owners come into our system as new licensees, and we smooth out the bubble.”

Franchise Services’ senior vice president Richard Lowe added, “At renewal, the franchisee must make a decision about whether paying the royalties is worth it; and as franchisors, we need to deliver a level of value that makes that decision easier.”

Eric Stites is president of Franchise Business Review, a company that surveys franchisees relative to their experiences in order to make quantifiable and actionable information available to both franchisors and prospective franchisees. He observes, “When a franchise agreement starts to mature, the franchisee needs to ensure that it is still a good, solid opportunity as he or she considers renewal. And the franchisor must keep things fresh, keep the opportunity moving forward for the future.

“Companies in the printing space that seem to be doing the best are those that have embraced technology and leveraged the convergence factor to expand the range of services they are offering, like the FedEx Kinko’s printing/shipping concept. If the franchisee has been making money and the company they are with has been successful in supporting them, making that leap to renewing is an easy one.”


This report was researched and written by Cary Sherburne. She can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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