In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Ace Hardware franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for an Ace Hardware franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Ace Hardware franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Ace Hardware outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Ace Hardware’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2016 average, median, highest, and lowest gross sales for the 1,139 Ace Hardware branded stores participating in the Retail Financial Report, classified into the following retail formats: Hardware Stores (Convenience, Core, and Super), Home Centers, and Contractor-Oriented Supply
Section I – Background Information
14 Things You Need to Know About the Ace Hardware Franchise
Appoints New Senior Vice President/Chief Marketing Officer
1. In early July 2018, Ace Hardware announced the appointment of Kim Lefko to the position of senior vice president and chief marketing officer (CMO). Lefko will report directly to John Venhuizen, president and chief executive officer.
2. Venhuizen said, “We are excited to welcome Kim to Ace as our new Senior Vice President and Chief Marketing Officer. In concert with her new team, Kim’s 20 years of results developing and advancing beloved consumer brands will further our local owners’ passion to fulfill Ace’s brand promise as the helpful place. I believe Kim will be a great addition to our leadership team.”
3. As Ace Hardware’s new CMO, Lefko will lead the brand’s global marketing and advertising efforts and digital initiatives. Along with her team, she will be responsible for developing innovative strategies that further Ace Hardware’s brand promise and position Ace as the most convenient and helpful hardware stores on the planet.
4. Before joining Ace Hardware, Lefko most recently served as chief marketing officer at Weber Stephen Products, maker of the Weber grill. In that role, she led the development of a centralized global website that streamlined e-commerce, fulfillment, and services. Prior to that, Lefko served as senior vice president of sales and marketing at Radio Flyer where she oversaw the development of the company’s first internal sales and marketing organization.
5. Lefko also brings a wealth of experience from her time at Newell Rubbermaid. She held various marketing leadership roles as she transitioned Graco Children’s Products to one of the largest, most profitable business units within the company. Lefko started her career in sales and marketing at Black & Decker with various positions across product management, event marketing, and national account management.
Honors Veterans with 1 Million American Flags
6. In early May 2018, Ace Hardware announced that it was collaborating with the Veterans of Foreign Wars of the U.S. (VFW) to honor veterans by pledging to give out 1 million American-made flags nationwide, in time for Memorial Day. On Saturday, May 26, consumers were encouraged to visit participating Ace Hardware stores to receive a free 8″ x 12″ American flag (only at participating stores while supplies lasted), while a second flag was donated to a local VFW Post to be used for marking and honoring veteran graves on Memorial Day.
7. John Surane, executive vice president for Ace Hardware, said, “We are thrilled to continue our long-standing history of honoring veterans by supporting VFW Posts and local communities this Memorial Day. The sacrifices that these men and women have made for their country is something that should be recognized every day, and we at Ace want to make this Memorial Day even more meaningful. We applaud the VFW for the incredible support they’ve provided veterans nationwide for nearly 119 years and are grateful to be able to work together with our loyal customers and show our support this Memorial Day.”
8. The 1 million American flag giveaway aligns with Ace Hardware’s long history of supporting veterans nationwide. In fact, the company’s name is a commemoration of the “Flying Aces,” the courageous fighter pilots from the First World War. Ace Hardware’s patriotism continues through the support of its veteran retailers, and the sincere appreciation for all the veterans and active-duty military who work in Ace Hardware stores, distribution centers, and its corporate offices.
9. Keith Harman, national commander at VFW, added, “Working alongside Ace to support our veterans is a natural fit – their stores are located in communities across the country, just like our local Posts. We are grateful to receive this donation from Ace Hardware and their consumers, and we look forward to honoring our veterans in a big way this Memorial Day.”
10. Ace Hardware was founded in 1924 when entrepreneurs Richard Hesse, E. Gunnard Lindquist, Frank Burke, and Oscar Fisher united their Chicago, Illinois hardware stores into “Ace Stores.” Their combined buying power enabled the store owners to negotiate lower prices on merchandise purchased from wholesalers. The partners incorporated Ace Stores in 1928 and opened the new company’s first warehouse the following year. In 1931, they changed the company’s name to Ace Hardware Corporation.
11. For the first few decades, Ace Hardware primarily served as a wholesaling organization, purchasing directly from manufacturers and storing merchandise in its own Chicago warehouse. The group’s low-cost purchasing and distribution methods quickly attracted new members and some franchisees. During its early years, use of the Ace name was recommended but optional; it would later become mandatory for new affiliates once franchising became official in the late 1970s.
12. In 1973, co-founder and long-time president Richard Hesse sold Ace Hardware to its retailers, which turned Ace Hardware into a dealer-owned hardware cooperative. Independent retailers became the exclusive shareholders of the company. Since then, Ace Hardware’s board of directors has always been made up of dealers.
13. Over the next few decades, Ace Hardware continued to grow and by 2015, the company surpassed $5 billion in wholesale sales. Today, Ace Hardware has locations in several countries around the world.
Entrepreneur’s Franchise 500
14. Ace Hardware ranked No. 13 on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Ace Hardware franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Ace Hardware’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 4,166
- Outlets at the End of the Year: 4,220
- Net Change: +54
- Outlets at the Start of the Year: 4,220
- Outlets at the End of the Year: 4,265
- Net Change: +45
- Outlets at the Start of the Year: 4,265
- Outlets at the End of the Year: 4,310
- Net Change: +45
- Outlets at the Start of the Year: 85
- Outlets at the End of the Year: 91
- Net Change: +6
- Outlets at the Start of the Year: 91
- Outlets at the End of the Year: 98
- Net Change: +7
- Outlets at the Start of the Year: 98
- Outlets at the End of the Year: 108
- Net Change: +10
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- The financial performance representation presented in this Item 19 should not be considered as the actual, potential, or probable results that you will realize from the operation of your store.
- Ace Hardware’s members are not required to furnish their stores’ financial results to the franchisor. However, members may participate in the Retail Financial Report (RFR) which is prepared by Profit Planning Group, Inc., (PPG) of Boulder, Colorado. The data submitted to PPG, by Ace Hardware’s members, is the basis of this financial performance representation.
- The financial performance representation does not include data from Ace Hardware stores operated by the franchisor’s subsidiary, Westlake.
- The 2016 RFR prepared by PPG used single store operations data voluntarily supplied by 1,183 of Ace Hardware’s members which includes 121 of Ace Hardware’s nonbranded stores. There were 1,062 Ace Hardware branded stores participating in the RFR Report (“Reporting Stores”). (Note: The actual number of stores included in the table below is actually 1,139.)
- The franchisor has not audited nor independently verified the information furnished by the Reporting Stores; however, it believes this financial performance representation has a reasonable basis.
- The Reporting Stores represent 25% of total domestic member stores operating as of December 31, 2016, which was 4,265.
- All but 6 of the Reporting Stores had been open at least one 1 full year. The average number of years each Reporting Store had been operated, as of the end of 2016, was approximately 19.69 years, ranging from 0 to 50 years.
- As of December 31, 2017, 1,150 of the Reporting Stores were still operating.
- The Reporting Stores were classified into the following retail formats: Hardware Stores (Convenience, Core, and Super), Home Centers, and Contractor-Oriented Supply.
- Hardware Stores cater to Do-It-Yourself consumers, focusing on repair, replacement, and small projects. Hardware Stores are further separated into three different categories by hardware square footage.
- Home Centers serve the small contractor as well as the Do-It-Yourself consumer, carrying basic hardware plus expanded millwork, windows and doors, lumber, and building materials, and kitchen and bath lines.
- Contractor-Oriented Supply caters primarily to building and remodeling contractors, featuring lumber and building materials as well as essential core hardware items.
Convenience Hardware Format (stores with a retail selling space up to 6,000 square feet)