In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the AlphaGraphics franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an AlphaGraphics franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an AlphaGraphics franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned AlphaGraphics outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of AlphaGraphics’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019 and 2020 average and median gross sales for the 128 single-unit AlphaGraphics business centers that have been in operation in the United States for 2 years or more as of December 31, 2020

• 2019 and 2020 average and median gross sales for the 40 multi-unit AlphaGraphics business centers for which all of its outlets have been in operation in the United States for 2 years or more as of December 31, 2020

• 2019 and 2020 median gross sales, gross margin, operating expenses (payroll, accounting and legal fees, advertising and marketing, auto operating expenses, building rent, royalties, lease and rental expenses, office supplies, property and liability insurance, travel and entertainment, utilities, and all other overhead expenses), EBITDA, and other miscellaneous stats (depreciation, interest, cost percentages for different profit centers) for the 102 single-unit AlphaGraphics business centers that have been in operation in the United States for 2 years or more as of December 31, 2020 and that provided expense data

Section I – Background Information

21 Things You Need to Know About the AlphaGraphics Franchise

New agBox Concept Offers Custom Business Experience

1.  In mid-October 2020, AlphaGraphics announced that it is now offering agBox (Build Outstanding eXperiences), an innovative way for businesses to build and share unique branded experiences for virtually any occasion, from conferences and training to holidays, celebrations and company milestones. The agBox concept allows companies to curate and deliver fully immersive experiences for employees, partners and customers with custom gift and event boxes.

2.  With the array of opportunities to present agBox experiences and AlphaGraphics’ full suite of print, design, promotion and marketing solutions, the agBox concept is suitable for any event and offers nearly limitless options for customization and personalization.

3.  Stephanie Johnson, vice president of marketing for AlphaGraphics, said, “Social distancing and remote work have meant that many companies have been looking for new ways to connect with both employees and customers. AgBox not only offers a new tool to overcome those challenges, it’s going to transform how we think about business experiences overall. The enhanced experience of agBox is critical in our current challenging circumstances, and it’s proving to be equally effective in more traditional business environments. We’re confident agBox will inspire innovation and engagement through immersive experiences for years.”

4.  Opportunities to enhance brand identity with one-of-a-kind agBox experiences include business and professional events like conferences, training and trade shows; initiatives such as product launches and new partnerships; birthdays, holidays and company milestones; and welcome kits for new employees or clients.

5.  The agBox concept leverages AlphaGraphics’ position as a leading provider of full-service printing, design, marketing and promotional services. As a convenient one-stop source for business experiences, the company is equipped to guide customers throughout the agBox process, from concept, product selection, packaging options and delivery.

6.  Ryan Farris, president and COO of AlphaGraphics, added, “We’re uniquely situated to provide this option for our customers. With AlphaGraphics’ comprehensive range of products and services, our business centers offer quality, convenience and customer experience for businesses, which has helped create an important new revenue source during a challenging economic period.”

Reveals Brand Refresh and New Website

7.  In early April 2021, AlphaGraphics announced that it had recently launched a full brand refresh. The company, which just celebrated its 50th anniversary in 2020, has made several changes to reflect the brand’s overall growth as a company.

8.  Ryan Farris, president and COO of AlphaGraphics, said, “Fifty years ago, we started out as a brand for print services. Since then, we have grown into one of the largest printing and marketing franchises in the world. AlphaGraphics is a print and marketing partner you can trust. We consult and collaborate with our customers to provide them with custom solutions for their business. Our brand refresh is a reintroduction to our customers to showcase how we can help their business every step of the way.”

9.  Along with the brand refresh, AlphaGraphics rolled out a new website geared toward telling the company’s story while also helping it become a marketing execution partner. The website showcases the company’s full services offerings: print services, signs, marketing and technology.

10.  Farris added, “The website is a direct representation of our move toward the future and how AlphaGraphics continues to modernize and expand after so many years of service. The website is a celebration of who we are as a franchise. It showcases how much we have grown over our 50 years of existence.”

Corners Digital Landscape with Marketing 360

11.  At the beginning of September 2021, AlphaGraphics expanded its digital marketing and ecommerce services by offering an all-inclusive solution known as Marketing 360. The new Marketing 360 platform adds a host of digital solutions to AlphaGraphics’ existing capabilities, including advanced web design, online payment processing, email and text-based marketing programs, a customer relationship management (CRM) platform, SEO tools, and much more. Customers can opt in to services a la carte or take advantage of convenient package deals.

12.  According to Ryan Farris, president and COO of AlphaGraphics, “AlphaGraphics’ addition of Marketing 360 demonstrates our brand’s commitment to evolving, innovating, and adapting to clients’ ever-changing needs in the face of a constantly shifting business landscape. It’s overwhelmingly obvious that our small and medium-sized business clients need a partner who can deliver on all their marketing needs, including the digital tools and solutions that modern businesses depend upon.”

13.  The Marketing 360 platform puts business tools and marketing talent at customers’ fingertips from one convenient location. An affordable subscription to the platform connects clients to a full array of marketing tools, plus the option to have a team of marketing experts that can oversee content marketing, design, video production, social media management, and digital marketing strategy as needed.

14.  In addition, by continuing to offer the innovative print and signs services that the brand has built its reputation upon over the past half-century, AlphaGraphics proves itself a true full-service marketing partner that can help businesses connect with customers via all digital and traditional media channels.

15.  Farris added, “AlphaGraphics has been a trusted and dependable partner for over 50 years. While we have always helped our customers with digital marketing aspects of their businesses, the Marketing 360 platform now provides all of the tools that our customers need to grow in the digital space, just as we have helped them grow in the traditional space. We are proud to continue delivering on our promise of excellence and creativity in the traditional media space while also investing in this significant expansion of new media services and digital marketing tools.”

16.  By cutting out third-party expenses and offering tailored marketing packages to help businesses of any size grow and thrive, AlphaGraphics is positioned to deliver a fully-integrated marketing system unmatched by competitors in scope and convenience.

Company History

17.  AlphaGraphics was founded in 1970 by Rodger Ford in Tucson, Arizona. Ford, who later became a serial entrepreneur, wanted to create a business center that offered customers the latest visual communications technology. The idea was pretty novel at the time and the first AlphaGraphics was a success.

18.  Ford expanded with additional locations and franchising began in 1979. Over the next decade, AlphaGraphics continued to grow and achieved several notable milestones, including becoming the first desktop publishing retailer in 1985. A few years later, AlphaGraphics became the first U.S.-based printing franchise to expand internationally.

19.  AlphaGraphics continued to expand and in 2001, the company was acquired by the Pindar Group, which owned and operated the company for the next decade before declaring bankruptcy in 2014. Following the bankruptcy, AlphaGraphics was sold to Western Capital Resources, Inc. Just a few years later, AlphaGraphics changed hands again, when the company was purchased by MBE Worldwide.

20.  Today, there are AlphaGraphics locations throughout the United States, Brazil, China, Hong Kong, Saudi Arabia, and the United Kingdom.

Entrepreneur’s Franchise 500

21.  AlphaGraphics ranked No. 232 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of AlphaGraphics franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on AlphaGraphics’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  256
• Outlets at the End of the Year:  250
• Net Change:  -6

2019

• Outlets at the Start of the Year:  250
• Outlets at the End of the Year:  250
• Net Change:  0

2020

• Outlets at the Start of the Year:  250
• Outlets at the End of the Year:  248
• Net Change:  -2

Company-Owned

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2019

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2020

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

Part 1 – Single-Unit Business Centers Operating in 2019 and 2020

• A “Single-Unit Business Center” is a U.S. Business Center owned by a franchisee that owns and operates 1 Business Center.

• The Single-Unit Business Centers table below lists the annual Gross Sales information reported for calendar years 2019 and 2020 by AlphaGraphics’ Single-Unit Business Centers that have been in operation in the United States for 2 years or more as of December 31, 2020 – that is, Single-Unit Business Centers that first opened before January 1, 2019 and were still open as of December 31, 2020.

• As of December 31, 2020, 128 Single-Unit Business Centers met the Single-Unit Reporting Criteria.

• Single-Unit Business Centers that temporarily closed or reduced operations in 2020 as a result of COVID-19 or governmental closure orders or mandates related to COVID-19 but that otherwise met the Single-Unit Reporting Criteria are included in Part 1.

Calendar Year 2019

• Average Annual Gross Sales:  $1,249,057
• Median Annual Gross Sales:  $956,621
• Median Annual Gross Sales of Top 25%:  $2,098,074
• Median Annual Gross Sales of Bottom 25%:  $453,416

Calendar Year 2020

• Average Annual Gross Sales:  $960,176
• Median Annual Gross Sales:  $694,380
• Median Annual Gross Sales of Top 25%:  $1,791,129
• Median Annual Gross Sales of Bottom 25%:  $282,881

Part 2 – Multi-Unit Business Centers Operating in 2019 and 2020

• A “Multi-Unit Business Center” is 2 or more U.S. Business Centers owned or controlled by a single franchisee and counted as 1 Business Center for the purposes of Part 2.

• The Multi-Unit Business Centers table below lists the annual Gross Sales information reported for calendar years 2019 and 2020 by AlphaGraphics’ Multi-Unit Business Centers for which all of its outlets have been in operation in the United States for 2 years or more as of December 31, 2020 – that is, Multi-Unit Business Centers for which all outlets first opened before January 1, 2019 and were still open as of December 31, 2020

• As of December 31, 2020, 40 Multi-Unit Business Centers met the Multi-Unit Reporting Criteria.

• Multi-Unit Business Centers that temporarily closed or reduced operations in 2020 as a result of COVID-19 or governmental closure orders or mandates related to COVID-19 but that otherwise met the Multi-Unit Reporting Criteria are included in Part 2.

Calendar Year 2019

• Average Annual Gross Sales:  $2,790,011
• Median Annual Gross Sales:  $2,239,778
• Median Annual Gross Sales of Top 25%:  $4,955,689
• Median Annual Gross Sales of Bottom 25%:  $1,245,663

Calendar Year 2020

• Average Annual Gross Sales:  $2,103,301
• Median Annual Gross Sales:  $1,493,625
• Median Annual Gross Sales of Top 25%:  $3,945,755
• Median Annual Gross Sales of Bottom 25%:  $903,956

Part 3 – Certain Information for Single-Unit Business Centers for Calendar Years 2019 and 2020

• The tables below describe certain cost and expense information as a percentage of Gross Sales for franchisees operating a U.S. Business Center at a single location during 2019 and 2020.

• There are a total of 102 Single-Unit Business Centers included in Part 3 below for Calendar Years 2019 and 2020, which represents all Single-Unit Business Centers that met the Single-Unit Reporting Criteria (as defined above) as of December 31, 2020, excluding 26 Single-Unit Business Centers that did not provide any/complete expense or sales mix data.

• All figures in Part 3 are medians.

Calendar Year 2019

Annual Gross Sales:  $983,602

The following are expressed as a percentage of Gross Sales.

Gross Margin:  69.39%

Operating Expenses

• Payroll:  29.12%
• Accounting and Legal Fees:  0.66%
• Advertising and Marketing:  2.64%
• Auto Operating Expenses: 0.77%
• Building Rent:  6.81%
• Royalties:  5.32%
• Lease and Rental Expense:  3.28%
• Office Supplies:  0.81%
• Property and Liability Insurance:  0.49%
• Travel and Entertainment:  0.50%
• Utilities:  1.90%
• All Other Overhead Expenses:  2.76%

EBITDA:  12.93%

Depreciation:  1.55%

Interest:  0.74%

Calendar Year 2020

Annual Gross Sales:  $735,338

The following are expressed as a percentage of Gross Sales.

Gross Margin:  69.64%

Operating Expenses

• Payroll:  32.79%
• Accounting and Legal Fees:  0.83%
• Advertising and Marketing:  3.09%
• Auto Operating Expenses: 0.95%
• Building Rent:  9.13%
• Royalties:  5.71%
• Lease and Rental Expense:  4.54%
• Office Supplies:  1.04%
• Property and Liability Insurance:  0.72%
• Travel and Entertainment:  0.25%
• Utilities:  2.34%
• All Other Overhead Expenses:  1.08%

EBITDA:  6.17%

Depreciation:  2.38%

Interest:  0.96%

• Gross Margin is defined as Gross Sales less cost of goods sold. Cost of goods sold includes material costs, equipment costs, and vendor services (outsourced tasks) but does not include Labor or Rent.

• Payroll is defined as the total of direct labor (labor directly employed in the production of product, including benefits) and indirect labor (labor not employed in the production of product, such as administrative or sales personnel), including payroll taxes and group medical, for the U.S. Business Center. In many cases, it may also include owner’s salary.

• Advertising and Marketing is defined as the total advertising, promotion, AIM fees, and all other advertising and marketing expenses.

• Building Rent is defined as the rent paid to the landlord of the premises where the U.S. Business Center is located and any property taxes paid on the building.

• Royalties is defined as the gross royalties paid to AlphaGraphics, Inc. and does not take into account Universal Service Credits that some franchisees currently receive (taken into account in other overhead expenses) which can be used as a credit against Royalties owed.

• Property & Liability Insurance is defined as the total property and liability insurance.

• Utilities is defined as the total telephone, internet, gas, and electric expense.

• All Other Overhead is defined as the miscellaneous costs and income that includes Managed Service Fees, Universal Services Credits, freight income and freight expenses, other income and other expenses, and other administrative expenses (includes bad debt, banking fees, charitable contributions, credit card fees, dues and subscriptions, shipping, property taxes, licenses and fees, etc.).

• EBITDA is defined as the earnings before interest, taxes, depreciation, and amortization. In many cases, it does not include owner’s salary.

Part 4 – Costs as a Percentage of Gross Sales

• This section includes the average percentage of Gross Sales attributed to certain specific services provided at Single-Unit Business Centers.

2019 All Business Centers (102 Business Centers)

• Printing – Gross Sales %:  5.19%
• EP – B&W – Gross Sales %:  8.59%
• EP – Color – Gross Sales %:  27.96%
• Large Format/Signs – Gross Sales %:  14.03%
• Design – Gross Sales %:  7.14%
• Bindery – Gross Sales %:  8.74%
• Sublet – Gross Sales %:  23.02%

2020 All Business Centers (102 Business Centers)

• Printing – Gross Sales %:  5.25%
• EP – B&W – Gross Sales %:  8.32%
• EP – Color – Gross Sales %:  25.75%
• Large Format/Signs – Gross Sales %:  15.75%
• Design – Gross Sales %:  6.92%
• Bindery – Gross Sales %:  7.98%
• Sublet – Gross Sales %:  24.27%

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