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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Ace Hardware’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2017 (the most recent year for which data is available) average, median, highest, and lowest gross sales for the 953 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
20 Things You Need to Know About the Ace Hardware Franchise
Announces Acquisition of Handyman Matters Franchise
1. In early September 2019, Ace Hardware announced that it had completed the acquisition of Handyman Matters, a franchisor of home repair, maintenance, and improvement services based in Denver, Colorado. Handyman Matters will become Ace Handyman Services and operate as a new standalone subsidiary of Ace Hardware Corporation.
2. Handyman Matters is a franchise organization comprised of locally owned and operated and company-owned locations that offer professional and multi-skilled craftsmen and women trained to handle a homeowner’s to-do list in addition to larger projects. On-site services to consumers and small businesses include carpentry, plumbing, electrical, drywall, painting, flooring, and much more.
3. The franchisor currently has 57 franchisees who collectively employ approximately 250 handymen and women in 121 territories across 23 states.
4. John Venhuizen, president and CEO of Ace Hardware Corporation, said, “The introduction of Ace Handyman Services provides a platform from which Ace can further deliver on our helpful promise to consumers while expanding our presence in the growing do-it-for-me segment. This acquisition combines a proven home repair and maintenance franchise system with Ace’s trusted brand and renowned helpful service. Providing increased support to existing franchisees while aggressively recruiting more is part of a compelling evolution in our plan for strategic growth and our retailers’ continued success.”
5. Andy Bell, founder and CEO of Handyman Matters, will continue to lead the day-to-day business operations for Ace Handyman Services from its headquarters in Denver. Integration and rebranding initiatives are currently underway with a target completion in the first quarter of 2020.
6. Bell added, “We are thrilled to be a part of the Ace family. In addition to supporting locally owned and operated businesses, Ace and Handyman Matters also share a commitment to quality and outstanding service. As part of the new Ace Handyman Services, our franchisees have a tremendous opportunity to grow their businesses in collaboration with Ace and its trusted retailers.”
Announces New E-Commerce Delivery Service
7. In mid-April 2019, Ace Hardware announced the roll out of “Buy Online, Deliver from Store” at participating locations across the country. The new delivery option is a key feature of the enhanced e-commerce site, acehardware.com.
8. Bill Kiss, head of digital, retail strategy, and innovation for Ace Hardware Corporation, said, “There has been a tremendous consumer shift toward free and fast delivery in the marketplace. With 72 percent of U.S. households within 15 minutes of an Ace store, we are uniquely positioned to leverage that proximity to meet our customers’ home improvement needs. The introduction of delivery is another way Ace can bring our unique brand of helpfulness and convenience to customers.”
9. Ace locations participating in “Buy Online, Deliver from Store” offer same day, next day, and standard delivery options with purchases delivered by a local store. Ace Reward members can receive next day and standard delivery for free on in-stock orders totaling $50 or more. Each independently owned and operated store determines its own delivery radius and delivery pricing.
10. In addition to delivery, acehardware.com has several other features to optimize customers’ online shopping experience including in-store pick-up and product assembly at participating retailers. Customers have access to an average of 25,000 products in-store and thousands more online. Ace Rewards members can earn and redeem points online and receive instant online savings. Customers can also check product availability as well as services offered at participating local Ace stores.
11. Kiss added, “In-store or online, we want Ace to be the go-to place for our customers’ home improvement needs. The new delivery options allow us to combine a hyper-convenient and
high-quality shopping experience that our customers have come to expect from their local Ace
Locally Owned Stores Across the U.S. Plan to Hire More Than 30,000 Employees Collectively to Support Local Communities
12. At the beginning of April 2020, as the Covid-19 pandemic continues to grip the world, Ace Hardware announced that with increased demand for essential products and services, the company and its independent retailers plan to hire more than 30,000 people collectively to further support the communities they serve when they need it most.
13. Full-time, part-time, and seasonal positions are available at Ace Hardware’s Retail Support Centers (RSCs) and more than 4,300 locally owned stores across the United States.
14. According to John Venhuizen, president and CEO of Ace Hardware Corporation, “When a ‘Help Wanted’ sign hangs in the window of a local Ace store, it means way more than just, ‘we’re hiring.’ It means we are further serving our neighbors. For 95 years we believe we’ve been blessed to be in the business of serving others. Over these 95 years, our local owners have weathered their community through a crisis or two and these ‘red-vested heroes’ stand ready to do it again. We feel fortunate that we are able to provide employment opportunities for those who may be looking for work, with our growing need for more helpful associates.”
15. In addition to an increased workforce, Ace Hardware, along with its independent retailers, continues to prioritize the health and safety of their employees and customers by following guidance from the Centers for Disease Control and Prevention (CDC) and practicing social distancing. At participating locations across the country, customers also have the option to buy online at acehardware.com and select curbside pickup or delivery from their local store, limiting in-person contact.
16. Ace Hardware was founded in 1924 when entrepreneurs Richard Hesse, E. Gunnard Lindquist, Frank Burke, and Oscar Fisher united their Chicago, Illinois hardware stores to increase buying power and profits. The company was named after the ace fighter pilots of World War I, who were able to overcome all odds.
17. Ace changed the retail landscape by allowing individual stores to purchase merchandise in bulk to save money and buy at the lowest possible price. This partnership enabled even the smaller stores to compete effectively at retail despite larger stores in their market.
18. Ace Stores was incorporated in 1928, and the company opened its first warehouse a year later. A few years later, in 1931, the company settled on the name Ace Hardware Corporation. After World War II, Ace Hardware grew exponentially and by the end of the 1940s, the company had wholesale sales of more than $7 million from the 133 stores it supplied. This growth continued over the next few decades.
19. In 1973, Richard Hesse, co-founder and longtime president of Ace Hardware, retired and the company was sold to its retailers and restructured as a cooperative. Shifting to a cooperative was successful and since then Ace Hardware has grown into one of the largest home improvement chains in the United States as well as internationally.
Entrepreneur’s Franchise 500
20. Ace Hardware ranked No. 6 on Entrepreneur’s 2020 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 2019 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 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- 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: 4,310
- Outlets at the End of the Year: 4,353
- Net Change: +43
- 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
- Outlets at the Start of the Year: 108
- Outlets at the End of the Year: 123
- Net Change: +15
Section V – Financial Performance Representations (Item 19, 2019 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 2017 RFR prepared by PPG used single store operations data voluntarily supplied by 1,051 of Ace Hardware’s members which includes 91 of Ace Hardware’s nonbranded stores. There were 960 Ace Hardware branded stores participating in the RFR Report (“Reporting Stores”). (Note: The actual number of stores included in the table below is 953.)
- 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 24% of total domestic member stores operating as of December 31, 2017, which was 4,418.
- All but 12 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 2017, was approximately 18.45 years, ranging from 0 to 51 years.
- As of December 31, 2018, 946 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)