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Italy's MBE Worldwide Buys Alphagraphics

AlphagraphicsUtah-based Alphagraphics Inc., a franchising chain of quick print shops, announced October 4 that Italy-based MBE Worldwide has acquired 100 percent of the franchising firm for $61 million.

MBE Worldwide was founded in 1993 in Italy as an international sub-franchisor for San Diego-based franchisor Mail Boxes Etc. Inc. In 2001 Atlanta-based United Parcel Service (NYSE:UPS) bought out franchisor Mail Boxes Etc., subsequently beginning the uneasy re-branding of its franchise owners into The UPS Store. The franchisor kept the franchise contracts for nearly 4,700 franchises in the U.S., Puerto Rico and Canada, but it jettisoned the franchise licenses for the rest of the world. Italian sub-franchisor MBE Worldwide purchased those international franchising rights.

In May of this year MBE Worldwide bought Colorado-based PostNet International Franchise Corporation, giving MBE a foothold in the U.S. market. This occasioned PostNet’s CEO Steve Greenbaum retiring and MBE Worldwide's chairman and CEO taking his place.

Quick print Alphagraphics says that MBE Worldwide plans to let it work as an independent company. It will keep its Alphagraphics name and current management team.

That must come as a relief to Alphagraphics franchise owners. Shop owner-operators will not have to spend their money on new signage, logos and the re-imaging of their stores to another name. Their relations, trust and communication channels that franchisees have built with management over the years will stay intact.

“CAlphagraphics U.S. franchise outlets up slightlyombining forces with MBE Worldwide creates unique opportunities to synergize with colleagues similarly steeped in managing a franchise-based network of entrepreneurs,” said Gay Burke, Alphagraphics executive chairman.

Alphagraphics has seen its fair share of “synergizing,” a word defined as combining two or more things that together do more than the sum of their individual parts. In acquisitions of franchising firms, that often means doing more with less. Since its buyout by Pindar and then Blackstreet Capital, Alphagraphics has gone from nearly 90 employees who supported franchising services in 2000 down to almost half that in 2017.

There was a time that the quick print chain shrank in number of outlets too. In 2002 Alphagraphics had 242 franchises in the United States, according to disclosure documents that it submitted to a few state regulators and franchise buyers. But by 2007 it had only 227 U.S. quick print shops, all franchised. In the last few years it has managed to grow modestly. By the end of 2016 it had 256 franchised quick print stores (see chart). With considerably fewer employees, the franchisor has still been able to slowly grow the system in the U.S. by a little less than 1 percent a year.

Franchisees hunker down to see what becomes of their franchisor

History of Alphagraphics Aquisitions

  • 1989 — Commercial printer R.R. Donnelley & Sons buys 25% share of Alphagraphics Inc.
  • 2001 — U.K.-based commercial printer G.A. Pindar & Son Ltd. buys Alphagraphics Inc.
  • 2012 — Private equity firm Blackstreet Capital buys Alphagraphics Inc.
  • 2014 —West Capital Resources, an affiliate of Blackstreet Capital, takes over Alphagraphics Inc.
  • 2017— Franchisor MBE Worldwide buys Alphagraphics Inc.

Alphagraphics franchise owners have been quiet in public over the buyouts of their franchisor. That is understandable. The franchise owners are not in a position to change new owners of their franchisor. Franchisees in this medium-size chain do not have an independent association that answers to franchisees in pushing the franchisor. Even if they did have an association with its affiliation of experts, attorneys and strategists whose mission would be to look out solely for their interests, most franchisee associations would not know how to influence the buyout of their franchisor, should the group even be able to find out that the franchisor is looking for a buyer. What Alphagraphics franchise owners have is a traditional advisory committee to give store-level recommendations to a franchisor that on a good day is willing to listen. A buyout of the franchisor is strategically way above anything that would involve store-level advice from franchisees.

It makes sense that these print shop owner-operators would simply hunker down and keep silent about yet another acquisition of their franchisor. The question for shop owners going forward is, what does their future hold? Will Alphagraphics Inc. provide the same amount of support and service?

Alphagraphics no longer has a presence in Japan
Alphagraphics is no longer in Japan, but MBE Worldwide is there (photo 2001)

A private equity firm often looks for franchisors with company-owned stores, which it can sell for substantial money to franchisees, a procedure called refranchising. But Alphagraphics has no company-owned quick print shops for its new owners to easily monetize.

An advantage that franchisor MBE Worldwide brings to Alphagraphics after private equity firm Blackstreet Capital has owned it is that MBE should be able to know where to get the most bang for the buck. It knows franchising. MBE Worldwide now has 2,600 franchises across the globe that it needs to support. In doing so, it can borrow resources and skills from its other franchising resources, and borrow from Alphagraphics as well, to help its other chains. MBE should have a feel on where it can consolidate franchise support and where it can improve the performance of the franchisor. Since print and logistics franchising is its core business, it should have different insights than a private equity firm on where and how to save costs for its franchising firms.

That will be a challenge for MBE because Blackstreet Capital has been no slouch.

Alphagraphics allows MBE to further enter the U.S. market

Despite a sluggish growth in outlet numbers, the franchisor has been able to grow its bottom line. Last year Alphagraphics Inc. had $2.5 million in net income, according to its independent auditor’s report. That’s up considerably from 2012, the year Blackstreet Capital bought it, when the franchisor had a substantial loss.

Another area where Alphagraphics has struggled is international expansion. It currently is in four nations besides the U.S.—Brazil, Saudi Arabia, the United Kingdom and China, which includes Hong Kong. Internationally, its country count is down to well under half of where it was during the turn of the millennium.

Back in the U.S., could MBE combine both Alphagraphics and Postnet into a giant Mail Boxes Etc. chain, re-introducing it in the United States to gain a big bounce from consumers who remember the brand?

No. 

"UPS does possess trademarks for Mail Boxes Etc., MBE, and other related marks in the U.S.," said The UPS Store spokesperson Chelsea Lee to this journal. "UPS also owns certain marks in Canada."

That means that MBE cannot use the Mail Boxes Etc. name here.

Might it combine both Postnet and Alphagraphics brands into a single larger brand that does not use the Mail Boxes Etc. name? That larger footprint of stores under a single name might give it more share of the American consumer mind.

MBE Worldwide has also said it will not combine Alphagraphics and Postnet.

"We intend to keep the companies and brands separate," said MBE Worldwide's corporate development and strategy director Tim Denney in an interview with Blue MauMau. "Alphagraphics and Postnet are established brands," he stressed. He added, "As part of our agreement with Mail Boxes Etc. signed in 2009, we could not operate in the United States under the Mail Boxes Etc. brand name."

MBE Worldwide may be able to help the franchisor develop internationally. After all, it knows how to sell print and parcel service retail franchises to Europeans. The proof of that is that MBE has gone from 1,200 centers worldwide in 2009 to about 1,600 at present. MBE has a presence in Poland, Germany and Japan, while Alphagraphics does not. Being there, it has a better understanding of those markets.

MBE seems pleased with its latest American aquisition.

“Alphagraphics is an excellent strategic fit for MBE because of its entrepreneur-driven, people-centric, customer-first business model, which complements our MBE business and culture,” said MBE chairman and CEO Paolo Fiorelli, echoing almost identical words from him in PostNet’s press release when MBE acquired it. “Also, Alphagraphics has earned a reputation for technological and service excellence in the highly competitive print, marketing and communications industry in the U.S.,” continued Fiorelli. “We are excited to welcome Alphagraphics to the MBE family and will work together to provide high-value solutions to our business and consumer customers across the globe,” he stated.

With the acquisition of both Alphagraphics and PostNet in 2017, MBE Worldwide has now expanded its locations to nearly 2,600 in 39 countries. It projects that the two will have combined system-wide sales, from which MBE draws its royalties and fees, of approximately $940 million for 2017.


Disclosure: This reporter worked for Alphagraphics Inc. a decade and a half ago

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Call him at +1 (270) 321-1268, tweet @bluemaumau or email don@bluemaumau.org.