What I Like About Aaron’s Sales and Leasing Franchise Opportunity
1. Aaron’s is the recognized leader in the sales and lease ownership industry, with over $1 billion in system-wide revenues. Aaron’s business model is unique because it’s a hybrid between conventional leasing and conventional retailing. Aaron’s target customers are those who are in need of furniture, electronics, and appliances, who do not wish to, or cannot, purchase them with cash or credit.
The customer makes monthly lease payments for the term of the lease (12, 18, or 24 months) after which the customer owns the product. At any time, the customer can return the product, without any further obligation.
The customer may also purchase the product in the first 90 days at the retail price, applying all lease payments made to date. This positions Aaron’s into the much larger retail marketplace. In fact, there is little disparity between the final purchase price at Aaron’s and the final purchase price at a conventional retailer after interest and service charges.
At Aaron’s, there are no credit checks, no debt obligations, no-cost repair services, and no obligation on the part of the customer beyond the current lease payment due. If the customers’ needs or financial circumstances change, they can return the products with no further obligation, and no debt. In comparison, an installment sale typically offered by retailers obligates the customer to pay the full amount regardless of any intervening circumstances.
2. Out of 1500 plus Aaron’s stores, about 67% are corporate owned. Having such a large proportion of corporate stores is quite unusual in the world of franchising. To me, this is proof that the business model works because it would be impossible to keep that many stores open if the corporate stores were not profitable as a group.
3. Aaron’s is the dominant player in this industry in terms of national brand recognition and market penetration. Aaron’s large number of stores nationwide results in substantial purchasing power when dealing with its suppliers such as RCA, General Electric, Dell, Philips Magnavox, Maytag, Sony, and others. In addition, Aaron’s dominant position in the market enables its franchisees to secure favorable lease financing terms for their inventory, which is crucial in this line of business.
What I Don’t Like About Aaron’s Sales and Leasing Franchise Opportunity
1. Aaron’s requires a large retail footprint to display the full inventory of furniture, electronics, and appliances. A typical store ranges in size from 7,000 to 9,000 square feet and is usually located in strip centers and stand alone buildings near major shopping areas. The combination of a large space in a high profile, high traffic location makes monthly rent a significant overhead expense. Since there is no guarantee that any particular retail space will work out, committing to a long term lease for such a large space is a huge (but calculated) risk.