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Jan 1, 2009 12:00 AM
Franchising isn't the business it once was. With consolidation, the digital revolution and the growing importance of managing technological change, the support system that a franchise operation can receive is invaluable. “The picture has changed since the 1970s,” says Carl Gerhardt, CEO of the Allegra Network (Northville, MI). “As things have tightened up, a good strategic plan is essential, along with outstanding marketing and guidance with technology issues.”
Formerly American Speedy Printing centers, the Allegra Network has transitioned to the forefront. The network now includes the primary brands of Insty-Prints (acquired in 2002), Allegra Print & Imaging and Signs Now (acquired in 2005) — all directed toward serving the small business owner. “We're not interested in the retail opportunity any longer,” says Gerhardt. “We think that market is now served by FedEx/Kinko's and the big box stores such as Office Max and Office Depot. Our target market is small business owners, providing them with marketing assistance and value-added services.”
Gerhardt explains that ad agencies have abandoned small businesses, leaving an opportunity for Allegra Network to offer services smaller companies can't do in-house. “We help target their customers, source mailing lists, develop databases, print, personalize direct mail, even sell ad specialty items,” he says. “There is an opportunity for our franchise owners to make money doing all those things.”
In spite of its 400 printing franchises, plus another 200 Signs Now locations, the network still finds ample room for growth. Five years ago, Allegra had a program that encouraged independent printers to buy into its franchise system. But it was difficult to move the program forward. “In some cases, the independents didn't need that much help or just wanted to remain separate,” Gerhardt explains.
Allegra found that some of the independents wanted to get out of the business altogether. Coupled with the fact that potential franchisees coming out of the corporate environment typically wanted to buy an existing business, Allegra developed another program to match independents with franchise prospects. “In 2004, we did our first three conversions of independent operations to franchises. And the participants were pleased. We provided an exit strategy for the independent printer and the support that the new franchise owner needed,” says Gerhardt.
With those cautious beginnings, Allegra has ramped up its Matchmaker program and now has eight people in the development department, including three whose job it is to match interested independent printers with new franchisees and then assist in putting together the final deal.
Since then, Allegra has finalized about 40 Matchmaker acquisitions and has another 20-25 in various stages of progress. Gerhardt anticipates that the network will open between 15 and 20 in 2008, which is double that of last year.
The Matchmaker program extends to Signs Now. “About half of our new Signs Now franchises come out of this program,” says Gerhardt. “This is still a high-growth area, especially with digital technology, so we do still support start-ups.
For those thinking of moving into a print franchise, Allegra requires prospects to sign a franchise and license agreement before they buy the business. Typically, a buyer of a $1 million independent printing company needs somewhere between $100,000 and $300,000 in cash; the rest of the investment can be financed in a number of different ways. However, Allegra requires the seller to carry back some of the financing. Gerhardt believes this keeps the relationship between buyer and seller solid during the transition phase. “We like to have a seller with something invested in the success of the new franchise.”
Allegra also offers a sliding scale on its royalties. On average, a $1 million business pays about 4% royalty per year plus 1% into a marketing fund. Owners, however, get half of their investment into marketing back in the form of marketing support.
A typical franchise agreement term is 20 years. And with its solid support system, Allegra is seeing a 90 percent renewal rate. The reason for this goes back to its support system for the franchisees. In addition to technological assistance and marketing expertise, Allegra helps its owners better understand how to make money. “We have a Profit Mastery program,” says Gerhardt. “This includes assessments, pricing studies, performance groups and our annual operating ratio study. In addition, there are 45 more support programs and tools designed to help our owners build their businesses.”
A regional operations director is available to help owners implement business systems and execute assessments. In addition, ongoing training and fall regional meetings are held within markets. Allegra helps develop peer groups to exchange ideas and experiences with other franchise members.
Rounding out the support program is a weekly newsletter from the home office that features program updates, news and franchise success stories, plus a franchise member website that includes many more resources.
Why do printers choose Allegra? “We don't usually compete for prospects with other franchisors,” says Gerhardt. “That's because the Matchmaker program is one of a kind. People who want to get into business for themselves first look for trust and confidence, and then great support.”
“We do have to sell them on the printing industry,” Gerhardt admits. “The industry is going through a huge consolidation — some say an evolution, but we say a revolution. The opportunity is greater than it was 20 years ago. If you are smart enough to get into the right markets, the opportunities are huge.”
Gerhardt maintains that the industry has outgrown many printers. “If you bring in someone who understands good business practices and direct marketing, and move them into providing value-added services, they can't help but be successful. Allegra franchise owners don't provide just print. They design, collate, bind, personalize, develop personalized URLs and assist with database development. When one of our centers gets its first opportunity for variable data or PURLs, they can call headquarters. And we can provide the package to help move them into these services.”
Most Allegra Network centers have sales ranging from $500,000 to $6 million. “There is no limit to how big your center can become,” maintains Gerhardt. “Our largest centers can grow to $7 million or $8 million or beyond. With the Internet, our franchises aren't confined to selling in a small geographic area. In fact, one of our center's largest client is in another state. We challenge members to double their sales and profits every three to five years, regardless of their size.”
So what about the 10 percent who don't renew their franchise? “They don't want to pay royalties anymore,” says Gerhardt. “Those are the people who haven't learned to use the resources we have available to them.
“If a franchise is positioned correctly,” Gerhardt adds, “the owners have a real appreciation for the help Allegra provides. Ideally, our centers have the ability to become marketing suppliers to the small business community. We have the knowledge and the programs to support the profit opportunities now available in the print industry.”
Jill Roth is executive editor for AMERICAN PRINTER. Contact her at firstname.lastname@example.org.
In 2008, Mike Pomerantz purchased an independent print shop in Oxnard, CA, through the Sir Speedy SmartMatch program and then converted it to a Sir Speedy. Doug and Bridget Nelke (Glendale, AZ) converted their commercial print shop to a Sir Speedy earlier this year. Pradip Dave, owner of a previously independent printing business in Upper Montclair, NJ, recently joined the network and began operating under the Sir Speedy brand. In addition, Dave purchased an existing Sir Speedy location in East Hanover, NJ. See www.sirspeedy.com.
“Strength in numbers,” (July 2008) details Tom Crouser's franchise model, CPrint (Certified Printers Intl.). See http://americanprinter.com.