Printing Franchises In the Digital Economy

Twenty years ago, pundits were predicting that the advent of the computer age would be the death knell for the paper industry. Virtual documents would replace the paper variety, and demand for paper would dry up is how the thinking went.

Of course, quite the opposite happened. Growing computer usage actually fueled increased demand for paper, as businesses and individuals wanted hard copies of important documents. The pulp and paper industry continues to grow and now accounts for more than $750 billion in annual sales in the U.S. alone.

Similar dire predictions have been made about the prospects of the printing industry in the digital age. With consumers and businesses now having widespread capability to zap documents back and forth in digital format, the printing industry’s days must be numbered, right?digital

That prediction is proving to be just as flawed as the forecast decline of the paper industry. To be sure, the face of the printing industry is changing as are most industries in the digital economy. In the process, it is creating new opportunities for forward looking entrepreneurs. Many of those opportunities lie in the quick printing segment of the industry, which also happens to be the segment where franchising plays its largest role.

Quick printing itself is a relatively young industry, one made possible by advances in computer technology. Computers enable relatively low skilled workers to perform tasks that once could only be done by skilled print craftsmen. The quick printing industry began to emerge about 35 years ago.

Traditionally, quick printing franchises focused on commercial printing and copying jobs that required a fast turnaround. Those jobs tended to be relatively small in comparison to the work done by conventional printing firms. Quick printing has grown from about a $10 million a year business in the early 1970s to an estimated $2 billion a year business today.

The quick printing industry is changing, as are most industries in the digital economy.

Several trends drive the quick printing business in the 21st century. An important one has been a shift in focus from the consumer to the business to business segment that has taken place over the past five or six years. Research shows that the average corporation spends between 6 percent and 15 percent of revenue or documents, and quick printing franchises are in a great position to capture a significant share of that business.

Advances in digital technologies are also shaping the future of the quick printing industry. While most shops still offer the pre press, graphics, binding and copying services that have been their historical stock in trade, the majority have also expanded their capabilities to include working with digital files. Quick printers can exchange digital files with their customers via diskettes, the Internet, even wireless channels.

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HOME BUSINESSES

A third trend that is helping the quick printing industry is the tremendous growth in small companies and home based businesses in recent years. Those ventures have developed into a valuable source of new clients for many quick printers, driving up demand for both conventional printing and copying services and computer based digital services.

The total number of franchised quick printing shops in the United States has been on the decline recently, but the flip side of that trend is an industry consisting of larger, stronger businesses than in the past. Industry observers estimate that there are currently about 3,800 to 4,000 quick printing franchise outlets in operation in the U.S.

Analysts consider quick printing to be a relatively mature industry, meaning that most markets are adequately served by the number of shops already in existence. As a result, most franchise systems are closing older units as they open larger, more technologically advanced outlets. There is also a strong resale market for existing franchises, with about 150 units changing hands in an average year.

Quick printing franchise systems cover a wide range of sizes and startup costs. The largest systems are Minuteman Press, with more than 900 units; Sir Speedy, about 700; and Kwik Kopy Printing, 680.

Mid size chains include PIP Printing (about 460 outlets); Allegra Network, which consists of Allegra Print & Imaging, American Speedy Printing, Quik Print, Speedy Printing and Zippy Print (340); AIphaGraphics Printshops of the Future (320); and Insty Prints (220).

Growth in small and home based businesses is one trend helping quick printers.

The smaller chains in the industry tend to be regional in nature. Among them are Franklin’s Printing & Copying, about 50 franchises; Signal Graphics Printing, 50; The Ink Well, 40; Copy Club, 18; and American Wholesale Thermographers, 17.

digital-map-fullEXPANSION OVERSEAS

Reflecting a broader trend in franchising, many quick printing franchise systems are also pursuing growth in other countries. Sir Speedy and AIphaGraphics, for example, both do business in more than 20 countries, while Kwik Kopy is in about 12 nations. Minuteman Press, Allegra, PIP and Signal Graphics are also involved in international franchising.

In general, the cost of buying into a quick printing franchise system has gone up over the past four or five years. However, franchisees get a lot more for their money these days. Today’s basic equipment package often goes far beyond copying machines and printing presses, extending to state-of-the-art computer systems and digital graphics equipment.

Insty Prints has the lowest initial franchise fee, $12,000, with most systems charging between $20,000 and $30,000. Total startup costs and capital requirements range from about $100,000 to more than $550,000, depending on the company, the location and the type of equipment purchased or leased.

One barometer of a quick printing chain’s true health and profitability is average sales per shop for units open at least one year. In 2000, the last per shop were up 4.2 percent to $503, 219, according to the annual franchise survey conducted by Quick Printing, the industry’s leading trade magazine.

Quick printing franchise systems cover a wide range of sizes and startup costs.

The biggest gains in average sales per shop in 2000 were posted by Ink Well, up 14 percent, and Kwik Kopy, up 8.1 percent. Better than average gains were also achieved by PIP (up 7.3 percent), Copy Club (up 6.7 percent) and Allegra (up 4.8 percent).

The highest volume quick printing franchises are those in the AIphaGraphics system, averaging $995,356 in 2000. Average sales per store at AIphaGraphics likely passed the $1 million mark in 2001. Other high volume chains include Copy Club, average sales per store of $753,883 in 2000, and Sir Speedy, $726,000.

Average 2000 sales per store at other quick printing franchise systems included in the 2001 Quick Printing survey were:

  • Franklin’s, $569,000
    Insty Prints, $563,000
    Allegra, $549,000
    Ink Well, $513,096
    Kwik Kopy, $498,896
    Signal Graphics, $470,000
    Minuteman Press, $450,000
    PIP, $418,837

While digital technologies have created new sales opportunities and profit centers for today’s quick printing franchises, traditional services such as offset printing continue to play an important role. In printers, while toner based jobs which include digital printing account for 36 percent.

Costs are up, but quick printing franchisees get a lot more for their money these days.

Quick Printing polled the franchise chains on how their mix of work broke down in 2000 with the following results:

  • Black and white offset printing, 14.4 percent of total sales, unchanged from the previous year
    Multicolor offset printing, 20.6 percent of sales, up 1.3 percent over 1999
    Four color process printing, 4.9 percent of franchise printing sales, up 0.6 percent
    High speed copying, 17.6 percent of sales, down 6.2 percent
    Color copying, 10.9 percent of total volume, down 0.3 percent year to year
    Digital printing, 7.2 percent of sales, up 3.7 percent
    Pre press and direct to press (DTP) services, 7.6 percent of sales, unchanged
    Finishing, 6.5 percent of total sales, up 0.9 percent
    Brokered jobs and other services (such as facilities management, Web design and specialty products and services), 10.3 percent of sales, unchanged from the previous year.

The overall picture of quick printing franchises at the turn of the century is one of a stable industry posting steady sales gains and positioned to capitalize on new opportunities. However, new challenges are sure to emerge in the years ahead.

CHANGING COMPETITION

One area that many quick printing franchisees and franchisors are watching closely is the industry’s changing competitive dynamic. Large commercial printers and the growing ranks of office supply superstores have begun eyeing quick printing services as a way to offset declining sales in their businesses. Falling technology costs are lowering the entry barrier for competitors looking to pick off some of the quick printers’ most profitable services.

Technology, too, is proving to be a two edged sword for quick printers. While it greatly expands the scope of opportunities available to them, deploying new technology based services requires workers with a specific skill set that is in high demand in today’s marketplace. Finding, hiring and retaining those workers ranks as one of today’s most pressing challenges for quick printing franchisees.printing

While quick printers must invest in new equipment to stay competitive in a changing market, the declining cost of technology makes that easier to do. Sophisticated digital copiers have dropped in price from several hundred thousand dollars to less than $30,000 over the course of just a few years. Affordable equipment is also putting full color reproduction and computer to plate printing capabilities within the reach of many small shops that were priced out of those markets a decade ago.

Traditional services such as offset printing continue to play an important role.

The emergence of Internet based printing services during the dot.com “revolution” of the 1990s was a source of concern for the quick printing franchise community, but that is one challenged the industry has weathered well.

As was the case in many other industries, the new Internet based competitors in the quick printing industry not only failed to drive established companies out of business, most of them failed themselves. The ones that survived are scrambling to form alliances with traditional quick printing systems. They realized that an Internet presence alone is not enough to insure business success. “Bricks,” as it turns out, are at least as important as “clicks.”

The threat of increased competition also had a salutary effect on quick printing franchises in terms of heightening their awareness of the Internet and all it offers. Most chains have placed renewed emphasis on customer service, including establishing Web sites of their own. The sites offered increased convenience to customers, and franchisees can use them as marketing and networking tools.

Prospective franchisees interested in purchasing a quick printing franchise start out with one decided advantage. Because the number of franchise opportunities in this industry is relatively limited, you can take the time to examine them all before making your choice.

The due diligence process for conducting a quick printing franchise search is basically the same as for any other type of franchise business. One point to keep in mind, however, is that most quick printing franchises require a strong outside sales and marketing component to be successful. If prospecting for new customers is not one of your strong points, you likely will need to hire a qualified person to fill that position.

START WITH BASICS

You should begin by researching the overall industry, using trade magazines, government reports and the Internet. That will give you a feel for what’s involved in running a quick printing business and whether or not your capabilities are a good match for it.

Try to talk to franchisees who have left the system and find out why they did.

Once you’ve decided this is the franchise business for you, narrow your search down to a manageable number of candidates no more than four, but fewer is better. Contact the franchise sales offices at those companies and request their marketing packages and Uniform Franchise Offering Circulars (UFOC).

Some franchisors may not want to send you their UFOC in the initial package, preferring to wait until they have met you in person and gauged how serious you are about buying a franchise. That’s fine, but make sure you get the UFOC at your first face to face meeting with the franchisor’s representative, or immediately afterwards.

When you get to the point where you have settled on a single franchise system, contact as many franchisees in the system as you can. Whenever possible, try to meet the franchisees in person, preferably at their place of business. Ask direct, specific questions rather than open ended ones.

“What were your gross sales last year, and by what percentage were they up or down over the previous year?” is an example of a good question. “How profitable is your business?” is the type of question that opens the door to vague responses. By asking a number of pointed questions about smaller issues, you will be able to put together a bigger picture of how well the franchise is doing.

Try to talk to franchisees who have left the system. Find out why they left. The UFOC contains a section about any litigation the company has been involved in. If it has been involved in litigation with current or former franchisees, try to get in touch with them and find out what the dispute was about.

Pay particular attention to the initial and ongoing training the franchisor offers. The increasingly, technical nature of the quick printing business makes support a key issue, but be sure to look at the training offered in other areas, such as sales, marketing and management.

Printing is still one of the most important businesses in the U.S. economy. In terms of number of establishments, it ranks as the country’s largest manufacturing industry. Printing generates $142 billion in annual sales, with more than 52,000 firms employing 1 million-plus workers. Quick printing represents just one small segment of this huge industry, but with the right franchise, it can mean a successful future.

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