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Commentary & Analysis

Franchise Sign Shops and Digital Print

Report from theSigns Now &

By WhatTheyThink Staff
Published: October 20, 2006

Report from theSigns Now & Allegra Network Annual Meeting Commentary by Steve Aranoff & Robert FitzPatrick, The EAGLE October 20, 2006 -- We were invited to take part in the one-day Expo held during the Annual Convention of Sign Now and The Allegra Network in Las Vegas the week of September 18th. Allegra Network was the 4th largest traditional print franchise company before purchasing Signs Now, the 3rd largest wide format print franchise supplier earlier this year. At a store level, Signs Now doens't the revenue necessary to handle the high end of the large format marketplace but has a major opportunity at the low end of the market. It is interesting to look at exactly what that means. The Allegra Network, which was founded in 1976, has more than 400 locations in the United States, Canada and Japan with system-wide sales of $265 million (2004). Signs Now, which was founded in 1983, has more than 240 locations operating in 41 states, Canada, the United Kingdom and Brazil with system-wide sales of more than $70 million (2004). Assuming only a 5 percent annual growth rate, these two organizations, now combined, might have sales at the end of 2006 of $370 million via more than 640 locations. That translates to average sales of $577,000 per location. However, looking at the Signs Now grouping from 2004, the average revenue of each Signs location was $292,000 per location, growing to perhaps $325,000 in 2006. This is hardly the revenue necessary to handle the high end of the large format marketplace about which we regularly write, but a major opportunity at the low end of the market, where a wide format digital UV combo printer and a vision equipped router can be bundled for under $150K and leased for under $3,000 per month. Many brands, one hub Overall, the Allegra Network is billed as the hub of information and support for more than 450 locations in the United States, Canada, and Japan. You may know their centers as Allegra Print & Imaging, American Speedy Printing, Instant Copy, Insty-Prints, Quik Print, Speedy Printing, or Zippy Print. Now, Signs Now stores and capabilities can be added to this grouping. All together, the franchisees are there to provide expert print and visual communication services much like any small printer has done for years. Based upon the differing web sites, it looks like it is too early to see whether the opportunities available in the Signs Now model will also be available to the Allegra franchisees or vice versa. This event was a quick way for us to find out that: * Each of the independently owned and operated locations specializes in full-service graphic design, printing and business communications for small, medium and large-sized businesses. They claim to be staffed with expert printing consultants who work with clients to analyze their printing and/or sign communication needs and help choose the best design, quantity and printing method for each project. * One feature of special interest was a claim that, because each individual center is part of a network of professional "sister' companies, they can provide whatever service a customer may require, next door or around many parts of the globe. Unfortunately, we didn't find any further information about this opportunity on either of the two very different websites, allegro.com or standoutinacrowdedworld.com. Variable Interest in New Products We were enticed to attend the one day expo with the belief that this group was well-poised to enter the digital market and we wanted to see what kind of interest there might be. As part of a franchise network, it was interesting to see the many vendors trying to sell directly to the network members, rather than selling through their distribution channels. Colorspan, Mimaki and HP, for example, had their own good-sized booths, while DuPont was there with its National VAR Toryon technologies. Although this franchise group sets up preferred vendors to present to its owners, they prefer to give a small buying advantage to the owners rather than to pocket a fee from the vendors to be allowed to join as preferred suppliers. We found this refreshing. This group didn't really look to be that hungry; more interested in remaining to be small easy to operate companies with a decent income. There was a certain amount of interest in these printer products, but most of the action seemed to be around the less sophisticated products and supplies for the offset world. Toryon/DuPont did have a handful of companies interested in their over $250,000 DuPont flat bed printer, but no sales were reported at the Expo. There was significantly more interest in their announced new printer among Signs Now attendees. It was not shown here, but was to be introduced by DuPont a week later at the SGIA Expo. This printer will retail for $100K, much lower than the initial higher priced offering. It will be very interesting to see that new machine's performance, as the speed and print quality are anticipated to be as good as the current model, but in a less robust design with a less precise board movement mechanism. Production quantities will not begin until early in 2007. This lack of interest in the newer and higher end digital printing products is undoubtedly caused by the fairly small volume done by most of the Signs Now franchisees. With an average sales volume of about $300,000 per site, what could be expected? That's not to indicate that small shops can't afford and buy more, and grow into larger shops. We've certainly seen this at work in the industry, where one large flatbed printer and cutter can nicely support a $1.5 M operation. It's just that this group didn't really look to be that hungry; more interested in remaining to be small easy to operate companies with a decent income. We also didn't see any indication that this franchise group was seriously trying to develop larger stores; the smaller operations seemed to be their niche market. We are now pretty sure that this specific sign franchise market is not currently a big opportunity for the larger UV and Solvent roll fed printer companies So it shouldn't have been surprising that we found that the higher end of the flatbed print world went over the heads and budgets of the attendees. Most of those stopping by were offset shops with no wide format capability. Many questioned why anybody would have brought a $250K DuPont printer to the show! If these franchise printers had wide format of any kind, it was more likely the under $10,000 roll fed printer, and not the combo or flat bed variety. While we saw a glimpse of interest, we are now pretty sure that this specific sign franchise market is not currently a big opportunity for the larger UV and Solvent roll fed printer companies that we normally see around the larger trade shows. On the other hand, there are other franchise groups. For example, we've seen much more large format interest in the group, Signs by Tomorrow. We hope to visit their annual meeting and to compare-contrast the two different "Sign" franchise opportunities.

 

 

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