Should Your Sign Shop Convert?

As the sign industry takes on more responsibility, shifts focus and migrates into new technologies, many independent sign shops find that their “clout” and “back office”

support seem inadequate to meet today’s marketing and operational demands.  We witnessed the first “vinyl” sign shops take hold in 1985. From there, the growth of “computerized” sign businesses exploded, until today, there are approximately 20,000 sign shops across the US, about 4000 in Canada, and thousands in other countries.  A fair number of these are organized into chains, linked by either contractual arrangements, common ownership, or a license.

Is the Grass Greener?

The first question that must be addressed by any independent sign business when considering membership or shared ownership of the business is, Do the benefits outweigh the costs? To answer this properly, some research study, math, first person interviews and statistics are critical. Don’t worry, we have a great free tool at the end of this article for you!

As a sign company grows, the owner will utilize the resources designed for small business in general – from Chamber of Commerce memberships, to SCORE counselors, and networking groups. These provide some good leads, some solid advice, and enhance the business connection to the community. At a certain point, however, most sign businesses will find they need answers to more intricate questions related to the operation of their business. So let’s break this down, give you some of those resources right now. After this, you will likely not want a franchise for your support!

• The US Small Business Administration has reported loan failure rates for franchises. You can visit this link for Opendata Socrata to view latest statistics published for every brand, and even sort by name or failure rates: SBA Loan Failure Rates by Franchise Brand
• The Woodrow Wilson Institute for Scholarly Research in Washington, DC, research has shown that independent businesses survive at a greater rate than franchise businesses. Something to think about, yes?
• But what about all of those claims that franchises do better, in terms of success rates? As it turns out, this was a piece of ancient text that was repopulated, reused, and recirculated by franchise organizations and their brokers for so many years, people started to believe it. But then the recent President of the International Franchise Association said, Stop, not true. The full text of that official IFA statement is here, for your continued research. IFA Statement
• Let’s do the math. If you pay out 6% of your gross revenue each month as a typical royalty payment, and 2% for a mandatory ad fee, you are giving up roughly 40% of your net income! Here’s how the math works (scroll to bottom of this page): The Royalty Impact
• But isn’t the “brand name” worth something? As it shakes out, the sign industry is not one of those that sees incremental sales increases attributable to a “brand” name. The sales increases in the business-to-business arena are not measurable, and in fact, in some cases, a bad franchise experience hurts all franchisees as the customer will steer clear of the brand. A recent study by Booz, Allen, Hamilton reinforces this point. They found that only 15% of brand loyalty is generated by up front promotions, while 85% comes from the point of sales contact and beyond. In the B2B market, this means that what your sales teams are saying, the tools they are using to deliver their message and the customer’s total experience with your shop become more important than all the money spent on creating the brand image. Read More.