How to start a print shop franchise
This sector is constantly growing and changing. What does it involve?
There are two key factors. Keeping one step ahead of technology is vital and the industry is constantly reinventing itself to meet advancing technology. The other factor is listening to what the customer wants. Quick print companies have started to move away from the high street towards the business to business side – a burgeoning sector.
Reinvention has not meant abandoning the traditional side of printing, though. When electronic media first emerged, some businesses found that the idea of a paperless virtual office was impractical, so print centres continue to be in demand for brochures, catalogues and advertising. The difference now is that this is done alongside printing and website design that can be distributed round the world. Businesses are increasingly interested in combining old and new.
Prontaprint is the oldest and largest franchisor of the three we are featuring here. It's almost 30 years old, and franchisees benefit from a large support network. The company has recently undergone an image revamp to mark the increasing move towards business to business. Kall Kwik is also aggressively attacking this new market and its centres are highly visible within business communities.
By contrast, since its UK launch in 1988, AlphaGraphics has focused purely on the business market. Its franchises are so carefully placed and therefore its public profile is lower because of its specialisation.
What is it?
Print centres used to be called copy shops. The name changed as the level and range of service advanced. Print centres now offer traditional and digital printing, colour copying, presentations, binding and collating, and assistance in designing from scratch, as well as reworking designs.
Walk-in business is virtually dead so the franchisee will need to create contracts with local businesses. It will be up to you to make contact with those businesses to sell the centre's services.
As Kall Kwik and Prontaprint have almost reached franchisee capacity for the UK, you probably won't be able to take on a brand new franchise. Most of the vacancies will be resales, where franchisees have decided to move on.
So your first job will be learning how to manage an existing team. They will be the ones running the centre while you are out meeting prospective customers, so delegation is an important part of your job – and trust is key from the start.
AlphaGraphics' franchises tend to be new startups. The franchisor is looking to expand tentatively and in specific environments. David Holliday, franchise development manager at AlphaGraphics, explains:
“We always match the profile of the company to the area. It's based on the number – around 2,500 – of businesses in the area rather than the head of population or the postcode. We have to make sure they are close to the commercial centre.”
For all three franchisors, location is very important, so you are unlikely to have much say in the matter. This is a moot point if you are purchasing an existing centre but there is still little room for manoeuvre when it comes to a new site. Prontaprint, for example, now has good national coverage and it is only interested in out of town areas that are ripe for development, or where the company is not already represented.
National advertising is handled centrally as part of the franchise fee. This generally accounts for 4% of the total. However, one franchisee in East Anglia felt his 4% wasn't well spent. “Advertising in Liverpool Street Station isn't much good to me in East Anglia is it?” Local advertising is up to you. This might be in the press or with direct mailing.
Customer feedback is vital. Bruce Shepherd jointly owns the Salford Quays Kall Kwik with his wife Elaine. He stresses the importance of annual customer surveys. When such a large part of the business is not conducted face to face it could be the only way to find out what your customers really think.
“Originally in this industry lots of business was won by waiting for people to walk in the door. Since we started this centre 18 months ago, I think we've only had one customer just come in.”
Shepherd asks for opinions on telephone response, attitude of staff, quality of the product and whether pricing is competitive. “A fair response to these types of questions helps us strive for perfection,” he says.
Who is it suited to?
Unlike service sector franchising, the quick print industry involves a lot of money from start to finish. It costs a lot to set up, but the potential returns are equally high. So if your motivation is profit, this could be the ideal business.
“Money is probably the most important motivating factor – what other reason is there for going into business?” says Keith Harman, franchise sales manager at Prontaprint.
But money can also be a barrier. With an outlay as high as £150,000, the door is often closed to younger franchisees. The standard profile is people aged between 30 and 50.
Franchisors largely agree on what they are looking for in a franchisee. Having sales and managerial skills counts highly in your favour, as does business experience. In the business to business market you need these skills to relate to customers and staff.
A lack of print experience is not considered a handicap. AlphaGraphics' David Holliday says he looks for a managerial, rather than a print, background. If you can manage and motivate staff then your chances are good.
Only Prontaprint said that candidates should ideally be “technically aware”. It seemed to one franchisee that people with no knowledge of the print industry are almost encouraged. Reading through the franchise literature, you could be forgiven for sharing this view.
Kevin Watkins owns an AlphaGraphics franchise in Bristol. Although his background is in IT, he hasn't found the print industry difficult to get to grips with. “AlphaGraphics have a requirement that you hire an experienced printer and designer. You can then rely on their expertise.”
Whatever your area of expertise, it is likely you will be able to put it to some use. AlphaGraphics is a global company and is keen on developing its internet services. Watkins has used his IT knowledge to get really involved in web design and digital print technology. He was impressed by the freedom of a business plan that allowed him to do this.
A franchisor will spend time building up a relationship with all the major banks. They meet at least once or twice a year to ensure they are up to date. This will work to your advantage as a prospective franchisee. A bank won't tell you which franchisor to choose but it can help you in your research. It will also look favourably on you when lending you the money.
With an established franchisor banks are prepared to lend up to 70% of the total startup, even though you would normally expect to borrow 50%, says Catherine Hayes, national franchise manager at HSBC.
Because so much money is involved, it is important that you have a good relationship with your bank manager. For all of the franchisors, initial costs – including franchise fee and working capital – were more than £100,000, and, as a franchisee, you would typically have to account for around 30% of this.
The Prontaprint fee and package will cost about £20,000, however there are fees and set up costs on top of this. Minimum total investment is estimated at £120,000, and the minimum personal investment is about £35,000.
The exact costs of setting up a Kall Kwik Centre will vary depending on location and whether you set up in a new location or purchase an existing business. However the minimum personal investment is £45,000. The remaining costs are approximately £119,000 which pays for the shopfitting, training and working capital.
Don't expect to save money by buying an existing centre though. Resale centre costs can be higher than the cost of setting up a centre from scratch. Kall Kwik says a resale will cost roughly £164,000, whereas the cost of setting up a new centre is about £30,000 less.
How much can I earn?
Kall Kwik estimates that their average centre brings in about £420,000 in turnover each year. However they also claim to have some centres in excess of £1m per year and many above £500,000. Pre-tax net profits are said to be around 25%.
As Derrick Simpson, franchise sales manager at Kall Kwik sums up: “The print centres are very lucrative so the biggest attraction is money. There can be serious lifestyle benefits.”
Prontaprint also have centres that bring in in excess of £1m suggesting that there is considerable money to be made in the print business.
However, potential franchisees should be beware of expecting to make too much money too soon.
Most of the high turnover figures come from businesses that have been established for several years. And, while there is considerable demand for these services there are also a lot of costs involved.
Your first year might just break even or could incur a small loss, however, thereafter as long as you work hard and follow the franchisors advice it is likely that you will move on to a course of rising profit.
Many profitable franchisees then tend to buy other franchises near to their area and therefore double their profits.
You could become a millionaire in a relatively short amount of time. But give up any dreams that it will happen overnight.
Tips for success
- Printing is moving towards the business to business sector and away from the high street, so bear in mind that this is an industry in flux. For high-profile business deals you will need to have some experience of dealing with other companies. Newer franchises, such as AlphaGraphics, maintain they are already leading the way. But it is with the two older franchisees that a potential problem looms.Brian Duckett, managing director of Horwath Franchising, maintains that more traditional franchises are less keen on corporate buyers because they pay less for buying resales in bulk. In his experience franchisors are also reluctant to move towards corporate buyers, believing such a move will change their image.This is bad news if you plan to sell for a profit in 10 years' time. Also, contrary to Duckett's comments, Prontaprint now has a strategy to attract people interested in buying multiple franchises. So if you aren't a corporate buyer you could end up paying more in the first place. Until franchisors have clarified the trend, be wary.
- Remember that high set-up costs can be a financial risk. Hayes at HSBC says, “Franchisees need to be wary of the level of overheads involved in setting up a franchise. Getting payments in on a 30- or 60-day basis, leasing equipment, sorting out premises, you need to make sure you have sufficient finances at the outset.”
- With such a buoyant market at the moment it's easy to assume that you will automatically do well. But this won't be the case. Both franchisees and franchisors have stressed the importance of following closely the business model created by the franchisor.
- You should focus on giving good customer service. Customers are very good at visualising what they want but not so good at communicating it. To avoid frayed tempers later, make sure you get as much information from them as possible then repeat back exactly how this will look.
- To a certain extent the franchisor will be able to help you stay ahead of the competition while you concentrate on the business. For example, in the early days don't take it on yourself to go out and negotiate deals on the latest equipment. This is one of the franchisor's more useful functions, so make sure you take of advantage of it.
- Concentrate on managing your staff and making sure they are happy. Once this side is sorted out you can turn your attention to other things.
- If you are buying an existing franchise you will also be taking over its current equipment. Obviously whatever equipment you inherit will affect the type of business you are initially able to get. Multiple print runs will be difficult if you've only got one printer.
- If possible, take someone with you who works for the printing industry to assess the equipment before you buy. This will help you realise the actual value of the centre you are taking over. If you are new to the business, it will also stop you taking on jobs you are not equipped to deal with.
- The franchisor will support and help you, but, at the end of the day, the more research you can do around the subject with other sources – banks, other franchisees, people in the industry – the better your chances of success.