Detailed Information on Ace Hardware’s Initial Franchise Fee, Royalty Fee + 37 Other Fees (Items 5 and 6, 2021 FDD)

1.  Affiliation Fee:  $5,000

• The affiliation fee for each new Ace Hardware location is $5,000.

• The affiliation fee will be billed on your first Ace Hardware store statement, which will be issued the month after your membership is approved and your store number is activated in Ace Hardware’s system.

• This processing affiliation fee is non-refundable.

• The affiliation fee is uniform for all members in the United States unless you qualify for a waiver.

• Ace Hardware will waive the $5,000 affiliation fee if you own a retail hardware store that is affiliated with another hardware wholesaler and convert to an Ace Hardware store; if you are purchasing a retail hardware store that is affiliated with another hardware wholesaler and convert to an Ace Hardware store; or there is a change of ownership among family members of an existing Ace Hardware store.

• Ace Hardware will also waive the $5,000 affiliation fee for any new Ace Hardware store if you are a veteran or an active duty serviceperson and qualify for the Veterans’ Incentive Program.

2.  Stock Subscription Fee:  $5,000

• If Ace Hardware approves your membership, you will be immediately billed the $5,000 stock subscription fee on your Ace Hardware store statement. The proceeds from these sales of shares of Ace Hardware’s stock are used for general working capital purposes.

3.  Opening Inventory:  $150,000 to $1,000,000

• The cost of opening inventory that may be purchased from Ace Hardware is estimated to be between $150,000 and $1,000,000 for a start-up business.

• If you participate in one of Ace Hardware’s new store incentive programs, these costs are payable in installments, otherwise they are payable in a lump sum.

4.  Interior Décor and Exterior Signage:  $15,000 to $32,000 for interior décor; $5,000 to $35,000 for exterior signage

• The cost of interior décor is estimated to be between $15,000 and $32,000 for both a start-up business and a conversion store. The cost of exterior signage is estimated to be between $5,000 and $35,000 for both a startup business and a conversion store.

• If you decide to establish an Ace Rental Place equipment rental center in your Ace Hardware store and you wish to purchase signage for it, Ace Hardware will sell you the signage.

• These expenditures are non-refundable and paid in a lump sum.

5.  Late Payment:  0.77% of the past due bi-weekly billing statement balance

• Due Date:  10 days after billing.

6.  Low Volume Service Charge:  $100.00 per bi-weekly billing period if annual volume purchased is less than $200,000

• Due Date:  10 days after billing.

7.  Freight Charge:  the freight rate is billed as a fixed percentage of your warehouse purchases, adjusted annually

• Due Date:  10 days after billing.

8.  Fuel Surcharge:  when the U.S. National Average price for diesel fuel exceeds $2.05 per gallon, a 0.50% fuel charge applies. The surcharge is adjusted (i.e., increased or decreased) weekly, 0.50% for every five-cent change (increase or decrease) in fuel price.

• Due Date:  10 days after billing.

9.  Core Retail Services:  $168 per month for all parent stores and $37 per month for each branch store

• Due Date:  10 days after billing.

10.  Regulatory:  varies by state and product (i.e., paint recycling fee)

• Due Date:  10 days after billing.

11.  Business Insurance:  will vary depending upon coverage purchased. Estimated annual cost of required coverage: $2,500 to $30,000.

• Due Date:  11-month installment plan with 2 months’ premium paid in month 1 and balance equally billed monthly over the next 10 months.

12.  Annual Brand Assessment:  store’s first calendar year: $6,000 flat fee per store. Subsequent years: 2% of prior year purchases subject to minimum and maximum assessments.

• Due Date:  10 days after billing.

13.  Computer Hardware and Software for Point of Sale System (POS):  $45,000 to $80,000. You will also incur charges for ongoing computer hardware and software maintenance services. Costs for these services will vary depending on the services selected by you, but are estimated to be $500 per month.

• Due Date:  Varies depending upon the vendor you contract with.

14.  Ace Bankcard Program:  $35 annual fee per store. A monthly non-qualified fee will be assessed to your statement based on card type and volume. This program is optional.

• Due Date:  10 days after billing.

15.  Customer Check Verification Service (Telecheck):  1% of face value of your customer’s check. This service is optional.

• Due Date:  10 days after billing (if billed through Ace Hardware).

16.  Ace Rewards Program:  $850 initial fee; $75 per month, per store thereafter. Additional fees for direct mail per piece ($0.32 to $0.42) apply. Each participating store is required to participate in all mandatory promotions under the program.

• Due Date:  10 days after billing.

17.  Grocery Format Add-on to Ace Rewards Program:  grocery stores that add an Ace Hardware store as a store within a store (non-Epicor POS) must use AppCard. There is a one-time set-up fee of $1,000 and a weekly AppCard fee of $75.

• Due Date:  10 days after billing.

18.  Ace Gift Card Program:  $50 initial sign kit fee plus $0.25 per blank (inactivated) card stock. For stores using Epicor POS systems, there will be a $175 set up fee. If you have another POS provider, there may or may not be additional fees. Additional point-of-service processing fees apply per credit card transaction; such fees vary by card processor (VISA, MasterCard, etc.) and by number of transactions processed. Cost will also vary depending upon type of card, displays, and accessories purchased. There is a 10% marketing fee per transaction for redemption on Gift Card Mall gift cards.

• Due Date:  10 days after billing.

19.  Regional Advertising:  will vary depending on regional advertising programs. Participation is optional and program is market-specific.

• Due Date:  10 days after billing.

20.  Local Lift Program:  varies. Participation is optional.

• Due Date:  10 days after billing.

21.  Ace Marketing Muscle:  will vary based on the services utilized. This service is optional.

• Due Date:  10 days after billing.

22.  Group Preprint Program:  price varies by page count and group participation. This program is optional.

• Due Date:  10 days after billing.

23.  Monthly Sign Kit Program:  $175 per month for full kit; $75 for mini-kit

• Due Date:  10 days after billing.

24.  New Movers Program:  $0.38 per piece. This program is optional.

• Due Date:  10 to 22 days after billing.

25.  Customer Insights Program (Marketforce) (Mystery Shop, Customer Engagement, Employee Engagement):  for each in-store mystery shop, the fee is $46. For each phone mystery shop, the fee is $15. Employee
Engagement and Customer Experience Surveys are sold as a bundle for $28 per month.

• Due Date:  10 days after billing.

26.  Visual Merchandising Services:  price varies depending on project scope

• Due Date:  Project is billed upon completion. Standard due date is 10 days after billing (payment terms may vary subject to incentive program).

27.  Ace Rental Place:  will vary depending upon the rental equipment offered, fixtures needed, maintenance/repair shop needs, and any optional exterior signs selected. Minimum cost of implementation begins at approximately $30,000. This program is optional.

• Due Date:  10 days after billing.

28.  Store Planning Services:  minimum $6,000 flat fee for Full Services Package. Additional fees will vary depending on project scope. Store planning services are mandatory under certain new store incentive plans and are provided by Ace Hardware.

• Due Date:  Completion of project or 180 days from start of fixture plan (26 equal installments for existing retailers upon request).

29.  Retail Loss Prevention:  will vary depending upon equipment or services utilized. Estimated cost range per service: $30 to $4,000. Cost estimates do not include expenses for meeting rooms, travel, lodging, meals, or tax where applicable. These services and products are optional.

• Due Date:  As incurred or as agreed.

30.  Matching Funds:  member contributes up to $2,400 annually for group advertising. This program is optional.

• Due Date:  Quarterly assessment on Ace statement.

31.  Additional Training:  the cost will vary depending upon the type of training, duration, and location of sessions. Price does not include expenses for meeting rooms, travel, lodging, meals, or tax where applicable.

• Due Date:  Upon receipt of bill.

32.  SAVINGSource:  will vary depending on services utilized

• Due Date:  10 days after billing.

33.  Mango Report:  $43.50 per month (single or main store); $27.50 per month each additional store. Services are optional.

• Due Date:  10 days after billing.

34.  Snagajob:  $18 per month per store. Services are optional.

• Due Date:  10 days after billing.

35.  National Accounts Program:  varies by account. Participation is optional.

• Due Date:  Varies by account.

36.  Ace Handyman Services Rebate Program:  varies. Member funds a 10% rebate on items less than $49.99 or less purchased by Ace Handyman Services franchise owners.

• Due Date:  Monthly.

37.  Liquidated Damages:  $10,000 per month

• Due Date:  As incurred.

• Payable on the first day of each month during which, for a period of one or more days, you fail to remove all Ace identification, signs, decals, displays, or other materials bearing the Ace trademarks from your store after the termination of your membership.

• Such payments will continue until the first day of the month following the month in which all such Ace identification has been permanently removed from your store.

38.  Costs and Attorney’s Fees:  will vary under circumstances

• Due Date:  As incurred.

• Payable upon your failure to comply with the Membership Agreement, Brand Agreement, and/or certain other agreements you enter into with Ace Hardware.

39.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You may have to reimburse Ace Hardware if it is held liable for claims arising from your store’s operations.