AlphaGraphics Takes the Lead in Succession Planning; First-of-Its-Kind Program Includes Up to $39,920 in Credits Toward Store Purchase.

TUCSON, Ariz.--(BUSINESS WIRE)--July 13, 1998--

Offers New Method of Creating a Franchisee Pool in Today's Candidate-Short Market

AlphaGraphics Inc. has adopted an innovative succession planning program designed to help identify and groom qualified buyers for AlphaGraphics franchisees interested in selling their printshops.

The cornerstone of the program is a novel employee incentive system, believed to be the first of its kind in the franchise community, that allows AlphaGraphics operations managers, sales managers and production schedulers to earn up to $39,920 in credits over a three-year vesting period that can be applied toward the purchase of an AlphaGraphics franchise.

"Typically in the franchise industry, franchisees who are ready to transfer ownership of their businesses are left to find buyers on their own, with no practical means of locating candidates who are qualified to keep the business growing and thus ensure exiting franchisees a good return on their investment," said Tom Camplese, the company's vice president franchise development.

"We decided to give our franchisees a smooth and profitable exit strategy by implementing a system that will attract and retain good managers and at the same time help them step into the ranks of ownership."

In addition to full vestiture, the company's succession planning program offers equity partnership arrangements that allow newer managers to acquire minority partnerships in a store as a step toward ownership; assistance in business valuation and financing; and an aggressive recruiting program that seeks franchisee candidates with print-related and digital publishing experience through both traditional and Internet channels.

New Model for the Franchise Industry

Industry observers say the unusual vesting portion of AlphaGraphics' program offers a potential new solution for other franchisors facing the challenge of recruiting franchisees in today's robust job market.

"With today's low unemployment and the gradual phasing out of downsizing, even people who lose their jobs are so rapidly absorbed into other employment situations that they don't have time to think about franchising," said Don DeBolt, president of the International Franchise Association.

"For other franchisors who are having trouble recruiting franchisees in today's economy, a program like AlphaGraphics' is a way to address the shrinking pool of qualified franchisees."

A Recruiting and Retaining Tool

The seeds for AlphaGraphics' succession planning program were planted several years ago with the adoption of an early version of today's Prospective Partners Program (PPP) vesting system.

The program offered financial incentives for store ownership similar to those in place today, but it was not used as a formal tool to recruit and retain entrepreneurial talent. The company decided it was missing an opportunity, and it recently modified the program to maximize the potential for attracting franchisee candidates.

One new provision requires eligible employees to be sponsored by their employers rather than automatically accumulating credits, ensuring that they can be groomed, tracked and advertised to the rest of the organization. The opportunity to be put on this fast track to ownership is an important incentive for employees to stay with AlphaGraphics as well as a tool to attract top managers from outside the AlphaGraphics network.

"Where else can you get the opportunity to earn a cash-equivalent credit of nearly $40,000 after just three years of employment?" said Camplese, noting the competitive edge the program offers over other potential employers.

Another new rule requires that a store that hires a vested employee pay $10,000 or an equivalent number of earned company credit points to the sponsoring store. This provision helps offset the loss to the sponsoring store and funds the cost of recruiting and training a replacement.

Early Successes

A number of AlphaGraphics employees already have taken advantage of the credits they earned in AlphaGraphics' original vesting program to make the transition to ownership.

Gary Yeates, for example, began his AlphaGraphics career as a bindery and delivery person, graduated to production management and sales, and then used his credits to help purchase a store that was turning over in Thousand Oaks, Calif. The sum not only eased the cost of store ownership but also served as a cash-equivalent asset that helped him get financing approvals for an SBA loan.

Frank LaPere used the credits he earned as a 12-year AlphaGraphics corporate employee to help purchase a store in Austin, Texas, from an owner who decided to make a career change. His AlphaGraphics experience included 2-1/2 years as manager of two company-owned print shops in Tucson, giving him crucial hands-on experience that enabled him to turn a profit in the first year.

"In a high-tech printing business like AlphaGraphics, it's difficult for a new owner with little or no experience in the industry to take over an existing operation," said Camplese.

"By grooming a pool of qualified successors for franchisees who are ready to transfer ownership of their stores, this program increases the probability of success, which in turn enables exiting franchisees to receive a better return and the additional tax benefits of taking the buyout over time. It is a long-term strategy that reaps substantial rewards for mature franchisees, new owners and the entire AlphaGraphics system."

    CONTACT: AlphaGraphics Inc., Tucson
              Debbie Mileti, 520/293-9200, ext. 3008
               www.alphagraphics.com