Should, The Document Imaging Channel Become a Franchise System?

by ray stasieczko August 01, 2021

The print equipment OEMs must enter a race for relevance to exit from the race to the bottom.   

As the document imaging channel's dealers watch the OEMs doing nothing regarding consolidation in real-time, is it time to ask, are the OEMs extremely delusional, or is something else at play?

I can imagine a completely new approach in distribution to end-users. I am imagining a franchise system.

Let me lay some groundwork before I outline my vision of a franchise model replacing the now-outdated dealer model.  

For nearly two years, I have been bullish on Xerox. However, it should also be clear to all my followers that I do not see Xerox as an OEM compared to the leading OEMs of the print equipment industry.

I see Xerox as a marketing company that sells equipment, supplies and services that equipment to end-users, for the most part, manufactured by others. However, Xerox does an incredible job with its innovation in creating uniqueness to the products they source.

I believe that Xerox is in a great position to continue as the dominant source in delivering print products, supplies, and services to end-users. I also think that Xerox will continue through innovation to add value to print equipment, software, and financial solutions. Again, look at what they are doing with CareAR as a great example.

Over the last few years and back through the previous few decades, we have witnessed many changes to how the print equipment OEMs delivered their products to end-users. However, one conclusion we must all admit is that the OEMs have not been as successful as intended in providing print equipment and its services directly to end-users.

Recently we all witnessed Konica sell off 19 direct operations, and many feel this is only the beginning. In 2017 we all saw Ricoh evacuate from many of their direct operations, and today many rumors describe Canon exiting their direct footprint. OK, I admit I started the Canon rumors. However, it is a logical conclusion.

In reality, the OEMs would have wished they never had to go direct. The direct model was a reaction to competition, and that competition came from dealers who moved from mainly single lines to delivering multiple lines. Also, the OEMs needed to protect themselves as their larger dealers were selling off to competitive OEMs.

Today, as the industry continues to decline, it appears most OEMs are ignoring, at least from the perspective of their procrastinating, a much-needed consolidation. Instead, it seems like the OEMs are stuck in some false hope that they will prevail over the others. 

The OEMs must admit that if they capitalized on each other's strengths and formed aliases better positioned for the marketplace, they could defeat those who remain loyal to 1990.  

We all remember the Xerox HP story of 2019/20, and to this day, I remain on record as saying HP completely miscalculated a great opportunity to completely change the marketplace.

Unfortunately, it seemed like HP's newly appointed leadership could not see past their arrogance. Xerox would have given HP direct access to end-users needing service-based business products, software, and processes. Something that HP has never succeed at delivering through the dealer model. 

So, now let me explain my thoughts on the franchise model. A business model to replace the outdated oversaturated OEM direct/dealer model, a model feeding the race to the bottom.

Let me say, All the OEMs have won the race to the bottom. Sadly, it seems as the OEMs are still competing as nothing changed.  

The print equipment OEMs must enter a race for relevance and admit that the race to the bottom is destroying all past aspirations.   

As the OEMs consolidate and exit their direct business models, they will also need a distribution channel to the end-users. This distribution need will present Xerox with great opportunities. It will also offer a few of the mega dealers a unique opportunity. However, dealers other than Xerox will have to be producing revenues above one and closer to two billion.

Xerox or a massive mega dealer not crippled by manufacturing plants or pigeonholed to only one product will become considerable assets to the remaining OEMs after the massive coming consolidation.

Xerox or a massive mega dealer operating franchises that control the distribution, supplies, and services offered would be extremely valuable to any OEM. However, the business model of delivering print equipment to businesses will continue being pressured by lowering print volumes and less dependency on printing equipment.

As we look at the current leading OEMs with direct operations, we would all conclude that the non-print services these OEMs provide end-users are not providing the necessary profits and are merely attempts to offset the declining revenue and earnings of the core product of print. It was the hopes of the OEMs they would sell more print equipment by offering additional products. 

Unfortunately, the OEMs with direct operations do not have the discipline to build these non-print-related services without a print focus. In other words, they can't see past the box they make. "The box" is a term many OEM's direct leaders will despise; however, the actions of their go-to-market strategies have proven the accuracy of the statement.

This is where Xerox, or again, a massive mega dealer, has the upper hand. They can choose the products they wish to sell. The OEMs will more than willingly put the name of any multibillion-dollar distributor delivering to end-user on the boxes they make.

So, what does my vision of the franchisee model look like?  

Xerox has the most recognized name in print/MFP equipment and its services. So, in my vision, Xerox must first eliminate all co-named branding of the Xerox-owned companies. The global units all become Xerox business solutions.  

Next, Xerox dealers are presented opportunities to become a XEROX franchise; however, they must change their legacy name to Xerox business solutions as part of this commitment. 

Again, think in terms of Mcdonalds'. All the franchise owners call their restaurants McDonald's, not Bob or Sally Burgers.

I have always believed that the document imaging channel's dealers put way too much emphasis on the individual name rather than benefiting from national recognition.

One of the reasons I have been so bullish on DEX Imaging and Marco is that they genuinely understand how to control the branding of their roll-up acquisitions.

The other roll-ups allowing the rolled upped entity to keep their name is, in my opinion, a distraction and limits the potential of being nationally recognized.

In my franchise system, the benefits of all entities selling the exact solutions under the same name bring massive scalability. This approach also eliminates the non-uniform processes, which hamper scalability in any national or global deliverable.

So, now as you visualize these massive platforms, think about the attraction to the OEMs. What OEM would not want to participate with such a scalable partner? A partner who would distribute their products, maybe even exclusively. In other words, who would not want to provide the burgers to McDonald's.  

Think about the negotiating power these massive franchise systems would have. Think about the attraction of third-party supply organizations or software organizations. So, many opportunities would surface as these franchises gain momentum. The potential regarding IT service platforms would create significant disruption in that space as well.

The OEMs outside of these franchise models would be significantly challenged as they would be left with small dealers. These remaining dealers would be far outnumbered and would be highly (disenfranchised) pricing is one example, making competition unimaginable.

Some reading this will list all the reasons why massive organizations could never provide the service the local dealer can, or they will fool themselves that end-users care more about buying from an independent dealer with their name on the building over any national brand franchise.

Of course, these arguments are usually based on emotional egos, not any reality. Nevertheless, the changes needed to align supply with demand in the print equipment and services industry will challenge so much of the industry's status quo.

The investments today's dealers are being forced to make to deliver technologies outside of print, such as managed IT services are cripple their cash flows. In a franchise model, these investments lessen as the franchisor is financially better positioned. 

As new things take over the things of the past, many will find themselves fighting for survival in the past world; it will be those who fight for constant relevance who will defeat the status quo.

I will be discussing this franchise concept in more detail in my video series, The End Of The Day With Ray!

As always, I welcome all to subscribe to my YouTube Channel. https://www.youtube.com/channel/UCULKZDBCR1ozWXmu4Tob66A

Remember this, my friends.

"Status Quo is the killer of all that will be invented."  

Ray Stasieczko  CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray!

If not already Let's connect here on Linkedin  

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