PLACINGAND ADMISSION TO AIM

Under the Bolt-on Franchise agreement an initial licence fee, typically in the range of £6,000 to
£18,000, is charged at the outset. In subsequent years an additional, smaller annual licence fee is
also charged. The franchise is initially granted for a period of three years and successful Bolt-on
Franchisees will be offered the opportunity to extend the agreement for a further period.
Operationally the Bolt-on Franchise works in much the same manner as a Store Franchise with the
majority of the Company’s ongoing income arising from the transfer pricing element. Based upon
this transfer price a target is set for each Bolt-on Franchisee’s second year of operation, which is
typically in the region of between £30,000 and £90,000.
The Agency
Prior to the inception of the Group’s first Store, its business was principally centred on the leisure
sector. This operation has been referred to previously as the Group’s ‘Traditional Markets’ it has now
been re-branded in a fashion similar to a Bolt-on Franchise and trades as ‘Printing.com@The
Agency’. This division is also used to pioneer more sophisticated customer relationship management
techniques which could subsequently be embraced more generally by Printing.com Stores and
franchisees.
The benefits of adopting a franchise strategy
Prior to 2002, all outlets were directly operated by the Group whilst the details of the business
model were being developed and refined. However, since then a franchising strategy has been
adopted to facilitate a rapid rollout of the outlet network whilst reducing the investment required
and the exposure to financial risks involved in such a rollout.
Set out below is a diagram that illustrates the cumulative contribution that should be enjoyed by
the Group from a successful Printing.com owned Store versus a comparable franchised outlet and
illustrates the benefits of expanding through franchising:
Note: the diagram is not to scale and is not intended to show any quantitative measure.
The Directors consider that the principal benefits are that:
● the finance for further outlets is provided by the franchisee without depleting the Group’s
cash reserves or exposing the Company’s shareholders to potential dilution from further issues
of Ordinary Shares;
● each new franchised outlet should make an immediate positive impact on the Group’s
earnings as the initial support and licence fees should cover the corresponding training and
support obligations and contribute to investment in central infrastructure thereby insulating
the Group contribution phase of a new Group owned outlet; and
● the Group is shielded from the negative contribution from an under-performing outlet.
Whilst a mature Group owned Store might provide a greater contribution than its franchised
equivalent, the Directors believe that the avoidance of the substantial investment and financial risks
of a Group owned Store outweighs the potential for this upside. In addition, the Directors believe
that a franchisee may be better positioned to maximise the profitability of a Store, because:
● the provision of a business to business, printing and graphic-design service is a sophisticated
and consultative led transaction requiring continuity of outlet management and this objective
is most likely to be achieved through owner-managed (i.e. franchised) outlets;
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