Franchise Services Inc. Survives By Serving Business

Wednesday, April 25, 2012

Franchise Services Inc. in Mission Viejo owns Sir Speedy, PIP, MultiCopy and Signal Graphics, all brands known for their printing services. But FSI is not a printing company.

FSI in 2008 started TeamLogic IT computer services. But it's not a computer repair service.

Article Tab: services-chairman-mission Franchise Services Inc. in Mission Viejo was created to provide services for its franchisees, not to run the businesses itself. Don F. Lowe, Chairman And Chief Executive Officer of the company is part owner and came from Kampgrounds of America.

JOSHUA SUDOCK, TEXT BY JAN NORMAN, THE ORANGE COUNTY REGISTER MORE PHOTOS � ADVERTISEMENT FSI is exactly what its name says, a management service for its franchisees. And that approach may be a key reason these five entities survived the worst recession in seven decades and slow economic recovery.

"If we had different divisions for each brand, we'd go broke," said FSI Chairman and part owner Don Lowe.

There are two schools of thought about franchising. Some franchisors see themselves as being in the restaurant business or accounting industry, and own some of their own units and sell the rest to others who pay a royalty to use the name and method for running the business. Others, like FSI, don't own any units and derive all their revenues from helping their franchisees succeed.

FSI, owned by five families with ties to New York investor Oscar Tang, has 55 employees and annual revenues of $25 million � smaller than some large franchisees in other systems. Those 55 employees provide infrastructure, marketing, technology, human resources and business management for about 500 locations in 19 countries.

The company actually has its roots in camping, not printing. Sir Speedy opened its first shop in 1968 in Costa Mesa. In 1977, Kampgrounds of America, franchised vacation spots that Tang owned, bought Sir Speedy out of bankruptcy.

"There can be a lot of conflict between franchisors and franchisees, and we originally had some of that just coming out of bankruptcy," Lowe recalled. "So we stressed keeping our commitments to the franchisees." At its peak, Sir Speedy had 994 locations and its chief rival PIP Printing had 1,400. But the industry took a beating as technology introduced inexpensive desktop printers. Sir Speedy bought PIP and MultiCopy, the leading printer-copier in Europe, in 1996.

Because of past rivalries, the owners thought it best to create a separate entity to run all the companies as one, Lowe said. That was the beginning of FSI. Lowe's son Richard is president of all printing brands. Signal Graphics was added in 2008.

Today, Sir Speedy has 350 franchises; PIP, 150; and MultiCopy, 80. "There's been a lot of consolidation in the industry," Richard Lowe said. "There are fewer franchises but they're more profitable." Technology is relentless, he added. To survive, the four brands are transforming rapidly into adjunct marketing services for their clients. Two-thirds of what these franchisees print goes through the U.S. Postal Service, so they have added fulfillment and mailing services. Clients who need brochures and flyers also need websites, Facebook pages and email marketing. So the FSI printing franchisees now provide those services too.

Kathy Morgan owns the Sir Speedy franchise on Tesla in Irvine. Her clients range from small firms to the Yard House restaurant chain, for which she prints menus and marketing collateral, to CalTrans, for which she will mail 2 million pieces this year.

"When Rich told me we were getting into marketing services, I said, 'Why marketing services?' and he said, 'Trust me,'" said Morgan, who has been with Sir Speedy since 1989 when her parents owned the franchise. "I hate to say it, but he was right." So far this year, her revenues are up 35 percent and on track to reach $3 million.

In 2007, FSI was looking for other business-to-business services that it might franchise, Don Lowe said. Technical support and computer repair were in great demand but it was a fragmented industry with no dominant company. One company was Computer Moms, which focused on individual consumers. FSI wanted to concentrate on businesses that couldn't afford in-house IT services.

FSI couldn't find a company to buy to get into the industry the way it bought Sir Speedy and PIP, so it decided to start TeamLogic IT from scratch.

"There are 300 million computers sold each year and they all break," Don Lowe said, explaining why FSI was interested.

Initially FSI thought TeamLogic might be a complementary franchise for its existing print franchisees to buy, but the company found that different people within companies order printing and hire IT services. Of the three print franchisees who bought TeamLogic franchises, none remain.

FSI named as TeamLogic president Chuck Lennon, a one-time Sir Speedy franchisee and FSI marketing executive who also worked at New Horizon Learning Centers.

"It would have been very challenging to start TeamLogic if it didn't have the support services of FSI," Lennon said. Because it is able to concentrate on attracting franchisees, TeamLogic added 60 locations during a difficult economy.

"TeamLogic's niche is to provide enterprise level support for small businesses," Lennon said. "Seventy percent of our work is for companies with fewer than 50 employees and 20 percent is with companies with more than 1,000 employees." TeamLogic has attracted a different type of franchisee, such as Keith and Taco Cowan, who own the Mission Viejo franchise. Both have technology backgrounds with Cowan having run several venture-backed technology companies. "I ran companies that needed TeamLogic's services," he said. "We've grown every year. It probably would have been faster without the recession. We're up 50 percent in the first quarter this year." FSI isn't about to stop looking for more opportunities to grow, Don Lowe said. "We're actively looking for a sign company we can buy and tuck under the FSI umbrella. We're looking at other franchise companies where we can bring value and growth to their network. We won't do food; we want business-to-business (companies) with 50-plus locations so that their concept is developed."

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