What I Like (And Don’t Like) About the Ace Hardware Franchise Opportunity

What I Like About the Ace Hardware Franchise Opportunity

1.  Ace Hardware, America’s leading neighborhood hardware retailer for over 85 years, competes successfully with the big box retailers by offering their customers a convenient and personal shopping experience.  Ace stores are situated in the very heart of neighborhoods across the country, making it easy for customers to get in and out quickly (thanks to their convenient locations and fast checkout).  Ace customers get personal attention from friendly and knowledgeable store personnel and from passionate owners that usually live in or near the neighborhood.

Ace specializes in convenience hardware which involves preserving the home, not renovating it.   In difficult economic times, customers set aside their plans for large-scale home improvement projects, but the need for basic fixes and repairs is constant. As a result, Ace Hardware outperformed the big box retailers in same store sales from 2006 to 2009.

2.  Ace Hardware is a unique franchise opportunity because the company is a retailer-owned cooperative, meaning Ace franchisees are the owners of the corporation. Being part owners, franchisees pay no royalty fees and a portion of the profits get distributed back to them each year.  Being part of a cooperative also increases the collective buying power of all the franchisees.

In franchising, conflicts arise when the interests of the franchisor and franchisees are not aligned.  In the case of  Ace Hardware, this is a non-issue because the franchisees are the owners of the company.

3.  Qualified new franchisees of Ace Hardware can avail of business incentives up to $255,000 to assist them in opening a new Ace store.  Considering that the total initial investment to open a new Ace Hardware ranges from $650,000 to $1,000,000 (depending on the size of the store),  the amount of business incentives is definitely substantial.  The specific dollar amount of the incentive varies depending on the store format and the incentive is distributed over 2-3 years in the form of a credit.

4.  Ace Hardware is a widely known and respected brand — and very well regarded in the area of customer service.  In fact, in 2011, J.D. Power and Associates ranked Ace “Highest in Customer Satisfaction among Home Improvement Stores Five Years in a Row.”  And in March 2010, Businessweek Magazine ranked Ace in the top 10 of “Customer Service Champs” for the third consecutive year.

What I Don’t Like About the Ace Hardware Franchise Opportunity

1.  To operate a successful hardware store, one has to maintain a sizeable inventory of a huge range of products — usually several thousand SKUs.  Even if most of the sales come from just a few hundred of the most popular items, an owner cannot reduce the inventory so drastically that customers can no longer find everything that they expect to find in a hardware store.

The good thing is that very few of the items carried by a hardware store are seasonal or have a limited shelf life.  So any items unsold can just sit on the shelves and do not have to be discounted heavily in order to get rid of (with the possible exception of seasonal decorative items).