Alphagraphics looks for modest expansion

David Ward, San Diego
Tuesday, February 7, 2012

After a tumultuous few weeks that saw it bought off its insolvent parent company by a private equity firm before its CEO was abruptly replaced, Alphagraphics is now looking to go back to the basics of supporting and slowly growing its network of print franchises on both sides of the Atlantic.

In an interview with PrintWeek, newly-installed Alphagraphics interim president Art Coley suggested at least the acquisition by Blackstreet Capitol has put the company in a very financially stable position.

"People are realising that when you go back to the announcement in July 2011 that Pindar was going into administration, we were being controlled by the UK courts and administered by a consulting firm, KPMG," he explained.

"All of that was cleaned up and taken care of on January 11 and our financial stability and future is more certain now than it possibly has been ever. Maybe the days when RR Donnelley owned Alphagraphics might be up there in comparison, but we’ve got a very strong group behind us."

Coley, previously vice president of global development at the group before replacing CEO Kevin Cushing, has spent the past few weeks speaking with many of the company’s 260 franchise owners, reassuring them that Blackstreet is in it to grow – and not gut – the company.

"They’re a small entrepreneurial boutique private equity firm that does maybe one or two acquisitions annually – and that’s out of hundreds of opportunities, most of which don’t get a second glance," Coley noted.

"Hard assets to be broken up dont exist and I think that’s starting to be realised by the network, who see they’re not liquidators, they’re people who buy and invest in companies and then looked to grow them."

Coley said the fact there are no immediate plans to change the business model is more good news for franchisees, adding that Blackstreet has already indicated it is looking to add people with franchising knowledge to the Alphagraphics board. 

"With franchising, if that’s your plan and strategy – and I haven’t seen anything to prove otherwise – you’d better be plugged into your franchisees to help them succeed and win and grow their own profits," he added.  

One thing that is being tweaked is the company’s growth plans. In 2010, Alphagraphics publicly stated a goal of doubling its number of franchises worldwide, but in the interview Coley outlined a more modest growth target.

"We’ve anticipated that over the next 18 months we’ll open, at most, 18 new locations in the US," he said. "I think in Brazil we’re looking at somewhere between three and five and in the UK, it’s maybe two or three. We’re really going to have to assess the UK market and decide how we go after that to get our best growth there."

Currently about 20% of Alphagraphics franchisees either operate more than one location or have a contractual agreement to open an additional location within the next six to 12 months.

Coley said the company still plans to hold annual meetings – with the next one set for Orlando in July - and will continue reward owners of the top performing franchises with Caribbean holidays and other incentives.

Coley had nothing but praise for Cushing, the man he replaced, calling him a mentor and the reason he moved his family from Texas to Alphagraphics’ headquarters in Salt Lake City.

As for Cushing’s abrupt departure after he attempted to lead a managed buyout of the firm while it was in administration, Coley noted, "All I can tell you is the board made a decision to have a change in leadership - I found out the day it happened.

They asked me to be interim president and they’re working for a permanent solution. There is no search going on for someone else; they don’t want someone else."

Coley added that many of Cushing’s programs to enhance franchisees will be continued.  "We want to be more hands on with implementing the training and the support," he said.

"We also want to focus on marketing and lead generation for the network, with more SEO and SEM work so that every one of our centres is showing up at number one in both organic and paid search."

While Alphagraphics has followed others in the printing space by expanding into marketing services, Coley said the company is not forgetting its core printing services and the legacy products that it has provided for 40 years.

"Yes we have some franchisees that are struggling," he conceded. "I complimented one franchisee last November that that sales were up 17% over 2010 and he said, ‘Yes, I am happy about that, but I’m still down 35% from where I was in 2007.’"

But Coley also said the dramatic changes taking place in commercial printing can work to Alphagraphics' advantage. "There’s a tremendous opportunity in our space, because there’s a bigger shift in market share going on in our business than has ever taken place," he said.

"So, yes, that means there will be some losers, but for those who aren’t afraid to make the challenge head on, there could be tremendous winnings."


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