Friday, March 13, 2009

Is AlphaGraphics going to be the Starbucks of the printernet

Updated March 15, 1:25 EST
The original title was Is AlphaGraphics going to be the Starbucks of a Print Output Network.

To see what I mean by PRinternet here or here or here
The difference is that Starbucks controls the customer experience from HQ. That's not working out so well right now. But, AlphaGraphics worries less about a one-size-fits-all "brand" and more about balance sheets, R&D, sales per square foot and generating more cash and EBITDA.

In this morning's, Cary Sherbourne has a great interview with Art Coley, Senior Director of Franchise Development for AlphaGraphics. It's behind the subscriber pay wall, but well worth the read. Meanwhile, here are two free snippets for our viewers:
. . . more than half of all the restaurant locations in the U.S. are franchised and they account for 75% to 80% of the revenue for the industry. In the printing industry, less than 10% are franchised, and the unit economics for independents are about the same as for franchises. As I said, the industry average is $650,000 in annual revenues for print franchises; at AlphaGraphics, the store average is $1.1 million.
. . .
As you may know, Pindar owns AlphaGraphics. Tom Pindar, (said): “What I want you to know is that the current economic environment has perfectly teed up the opportunity to expand for you. You should be adding sales people and you should be looking to do acquisitions of independents who have not kept up.”
About a month a ago I did a post about AlphaGraphics. In it, I quoted a story in from Beyond-Print -
"(February 12, 2009 – G. Alexander) London’s Daily Mail is now being printed in the US using inkjet technology. Alphagraphics is handling the production work, using a Screen Truepress Jet520 and Hunkeler finishing equipment.

The system is installed in northern New Jersey and serves the New York metropolitan area. It can produce hundreds of copies of a 24-page paper each hour. Initially, there will be excess capacity but, according to an article at, additional titles will be printed on the machine by the end of March."

"Hundreds of copies of a 24-page paper per hour." 250 print output nodes on the ground.Each one run by a trained and successful business person. It is worthy of note, that the newspaper purchased the equipment and installed it to be managed at AlphaGraphics.

Imagine the power of a distribute and print network:
As of today, AlphaGraphics has 250 standards based, professionally managed print nodes. Let's say, half of them have a Screen Truepress Jet520, or the Kodak Screen when it gets introduced.

They print 400 12 page tabloids an hour. With one shift, each node produces 7 x 400 = 2800 newspapers. If the work is there, they go to 2 shifts, 5,600 12 page papers a day. Total network production at 125 nodes is 700,000 12 page papers.

As demand increases, more nodes adopt the ink jet newspaper output device. As AlphaGraphics grows, the nodes increase to 300. As non AlphaGraphics nodes come on line with the box, in a couple of years there are 500 print nodes on the ground. In a couple of years, the boxes get 2x as fast and the successful nodes purchase two.

So . . . a couple of years out.
500 (nodes) x (10,ooo (400 @2shifts 1 machine) + 20,000 (100@2 shifts 2 machines))
500x (400K +200K) = 500 x 600K = 300,000,000 12 page newspapers a day. With no mailing costs and with money going to every network node. Minimal central billing. Electronic payment.

Local delivery that builds the brand of each node so they can increase their balance sheets, invest in R&D, maximize their sales per square foot and generate more cash and EBITDA.

Who is going to use the power of this awesome print network?
National brands that need to print for hyperlocal communities. The K-12 education system that will replace textbooks with a subscription based, print + web model education support. Public health systems that have to communicate with everyone. Politicians trying to get elected. Government at the Federal, State and Local levels that have to communicate with everyone.

How to get from here to there
1. Vendors have to compete on product and service, not spin. Forget about Wall Street for now.
2. Harness the power of your in-place networks by incenting the ground forces appropriately.
3. Nurture each print node to grow them into being well managed and self supporting. Stop looking at PSP's as the source of cash. The growing business model is a facilitated user network, with the vendors as the facilitators. The dying business model is value chain enterprise, with deals being made at the top of the pyramid.

It worked for the internet. I can't see why it wouldn't work for us.

My bet is that highly leveraged publicly owned newspapers are going to drive this. When everything else isn't working, the only choice is to try something new. They need a growth story for the stock valuation. Microzone publishing for news and sustainability. Micro local as the growth path to make real money for the next decade.
A private note to JW- That's the part of Kodak I love.

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