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This auditorily gifted bird has heard that Blackstreet Capital Management LLC has bought out the franchisor of quick printing shops, Alphagraphics, Inc. Employees of Alphagraphics had a conference call with the new owner last week. Blackstreet reassured concerned staff that the private equity firm thought things were great in the system. No changes anticipated for now. (Where have we heard this before?)
No press release or public announcement has been made to date.
A franchisor insider says that the Salt Lake City-based firm has struggled being in the black these past few years. It has also battled store shrinkage. In 2004 Alphagraphics declared it had 281 print shops under its brand. By 2011, it had 272 locations. Franchising for over three decades, it's not just the mature, developed markets of the United States and the United Kingdom where the chain has been shrinking. The print franchisor had master franchises in over 20 countries at the beginning of the Millenium, most in emerging economies. In 2011, it was down to seven.
Alphagraphics has travelled through the troubled waters of the quick print industry better than most. But that's not saying much. The whole sector has been shrinking for years, according to industry watchdog and editor of Quick Printing magazine, Bob Hall. "Shops have been going out of business steadily during the past 20 years. For example, in 1991 there were 5,454 franchise print shops, today there are 2,656," writes Hall in this month's issue of Quick Printing.
Copying one another, many brands paint a vision of hope that the future for them is in consolidating small to medium companies to form bigger brands, and that for franchisees, the future is in printing QR codes, becoming consultants in direct mail marketing, and expanding into parcel delivery services.
In comes Maryland-based Blackstreet Capital Management LLC, a private equity firm that sniffs out underperforming and troubled companies. In 2007, Blackstreet helped put up the money for a multi-million dollar buyout of a Papa John's franchise with 84 underperforming restaurants. The franchisee ended up not being able to earn enough money to make its payments. Rumor has it that Blackstreet helped fellow Salt Lake City-based Mrs. Fields/TCBY frozen yogurts In 2005 with a whole business securitization on future franchise royalties and fees. Securitization was the rage back then. Mrs. Fields stripped off its Pretzelmaker, Pretzel Time and Great American Cookie franchising firms, selling them to New York-based Nexcen Brands.
Mrs. Fields/TCBY found itself having to file bankruptcy in 2008 after it couldn't make expensive interest payments from its high debt load.
Does anyone know if there are franchisees or another group who has asked Blackstreet to help it buyout the franchisor? Or is Blackstreet Capital acting all on its own?