Ace Hardware Franchise Cost & Fees

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Description

Year Business Began: 1928 Franchising Since: 1928 Headquarters: Oak Brook, Illinois Estimated Number of Units: 5,070 Franchise Description: The franchisor, Ace Hardware Corporation, is a wholesaler of hardware and related products. The franchise offered is for the operation of a retail hardware store under the name “Ace Hardware.” In the United States Ace operates as a retailer-owned cooperative. If the franchisee’s application for membership is approved, the franchisor will grant the franchisee membership in the cooperative upon the franchisee’s purchase of shares of its stock. This membership entitles the franchisee to purchase merchandise and services from the franchisor. Franchisees may offer rental services from their Ace store under the name “Ace Rental Place” and they may offer various commercial-industrial products and services from their Ace store under the name “The Supply Place” or such other names as the franchisor may designate. Franchisees may also own and operate an existing separate business, such as a grocery store, and add an Ace Hardware store to or within the existing business. The franchisor refers to this as its “grocery format.” Training Overview: The Retail Training department continually seeks to enhance and develop training offerings for both online and instructor-led delivery. These sessions can be conducted at the franchisor’s headquarters in Oak Brook, Illinois, as well as at selected regional locations, in stores and at its annual conventions. Topics include: Management and Leadership, Retail Operations, Selling Skills and Customer Service, as well as select product and project training. The franchisor periodically schedules training sessions and seminars for individual retailers and retailer groups. The franchisor also provides training sessions and workshops on topics of interest to store owners and managers twice a year, at its spring and autumn conventions. Territory Granted: Franchisees will not receive an exclusive territory. Franchisees may face competition from other member stores, competitive brands, and/or from other channels of distribution. The franchisee’s membership is granted for the specific location of the store as stated in the Membership Agreement (Nonbranded) and Ace Brand Agreement.Obligations and Restrictions: It is the franchisor’s general policy not to grant a Membership unless the owner or one of the principal owners of the business participates personally and directly in its operation. The franchisor does not currently place any restrictions or limitations on whom franchisees may hire as managers, supervisors or other personnel to run the business. The franchisor does not restrict the types of goods and services that franchisees may offer, with some exceptions. Term of Agreement and Renewal: There is no specified term length for the franchise agreement. There are no fixed terms for renewal or extension.Financial Assistance: The franchisor offers several financial assistance programs, see FDD for details. The franchisor is the lender for all these programs. In limited circumstances, the franchisor has formed joint ventures. Each joint venture is formed on a case-by-case basis. Ace is also listed on the Small Business Administration (SBA) Franchise Registry. This listing means that if franchisees choose to apply for an SBA loan, they will receive a streamlined review process for their loan application. Investment Tables: Estimated Initial Investment for a Start-Up Business – Leased Premises Name of Fee Low High Initial Franchise Fee-Processing Charge $5,000 $5,000 Capital Stock Subscription $5,000 $5,000 Signage – Exterior Signage $2,500 $25,000 Signage – Interior Decor $7,000 $14,000 Leasehold Improvements – Decorating, Furniture and Fixtures ($8 per sq. ft.) $24,000 $120,000 Telephone and Other Equipment $10,000 $20,000 Computer System with Point-of-Sale (Hardware/Software) $45,000 $80,000 Rent – First 3 months $3,000 $60,000 Prepaid Expenses – Security Deposit, Dues, Permits, Subscriptions and other Prepaid Expenses $3,000 $15,000 Opening Inventory $150,000 $600,000 Initial Supplies $500 $2,500 Insurance $2,500 $30,000 New Investor Retail Training $0 $37,730 Additional Funds – Working capital for the first 90 days $15,000 $50,000 Total Estimated Initial Investment $272,500 $1,064,230 Estimated Initial Investment for a Start-Up Business – New Construction Name of Fee Low High Initial Franchise Fee-Processing Charge $5,000 $5,000 Capital Stock Subscription $5,000 $5,000 Signage – Exterior Signage $2,500 $25,000 Signage – Interior Decor $7,000 $14,000 Real Property Purchase Costs – Land $15,000 $200,000 Real Property Purchase Costs – Building $60,000 $240,000 Construction Costs, Fixtures, Decorating and other Improvements $24,000 $250,000 Prepaid Expenses – Security Deposit, Dues, Permits, Subscriptions and other Prepaid Expenses $3,000 $15,000 Telephone and other Equipment $10,000 $20,000 Computer System with Point-of-Sale (Hardware/Software) $45,000 $80,000 Opening Inventory $150,000 $600,000 Initial Supplies $500 $2,500 Insurance $2,500 $30,000 New Investor Retail Training $0 $37,730 Additional Funds – Working capital for the first 90 days $15,000 $50,000 Total Estimated Initial Investment $344,500 $1,574,230 Estimated Initial Investment for Conversion Name of Fee Low High Initial Franchise Fee-Processing Charge $5,000 $5,000 Capital Stock Subscription $5,000 $5,000 Signage – Exterior Signage $2,500 $25,000 Signage – Interior Decor $7,000 $14,000 Decorating – Decorating. Furniture and Fixtures ($1 per sq. ft) $3,000 $15,000 Other Equipment $0 $10,000 Computer System with Point-of-Sale (Hardware/Software) $8,000 $80,000 Opening Inventory $0 $600,000 Initial Supplies $500 $2,500 Insurance $2,500 $30,000 New Investor Retail Training $0 $37,730 Total Estimated Initial Investment $30,500 $824,230 Other Fees Type of Fee Amount Late Payment 0.77% of the past due bi-weekly billing statement balance. Low Volume $100 per bi-weekly billing period if annual volume purchased is less than $200,000 Freight Charge The freight rate is billed as a fixed percentage of the franchisee’s warehouse purchases, adjusted annually. 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. Core Retail Services $168 per month for all parent stores and $37 per month for each branch store. Business Insurance Will vary depending upon coverage purchased. Estimated annual cost of required coverage: $2,500 – $30,000 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. Computer Hardware and Software for Point of Sale System $45,000 – $80,000 Computer Hardware and Software Maintenance Franchisees will also incur charges for ongoing computer hardware and software maintenance services. Costs for these services will vary depending on the services selected by franchisees, but are estimated to be $580 per month. If franchisees use a point of sale system from Epicor Software Corporation, they will also pay an additional $7.50 per payment device, per month, for transactional security (i.e. point to point encryption). If franchisees use a different point of sale vendor, the fee for point to point encryption will vary. Store Planning Services Minimum $6,000 flat fee for basic services package. Additional fees will vary depending on project scope. Ace BankCard Program $35 annual fee per store. A monthly non-qualified fee will be assessed to the franchisee’s statement based on card type and volume. Customer Check Verification Service (Telecheck) 1% of face value of the customer’s check. Ace Rewards Program $850 initial fee; $75 per month, per store thereafter. $0.31 per direct mail piece. Each participating store is required to send in three Ace Rewards specific direct mail promotions per year. Grocery Format Add-on to Ace Rewards Program If franchisees are a grocery format, there is a one-time set-up fee of $1,000 if franchisees do not already use products provided by Ace’s chosen vendor, ProLogic. There is an additional program tee of $300 per Cycle. There are 13 non-overlapping Cycles per calendar year. Ace Gift Card Program $50 initial sign kit fee plus $0.50 per blank (unactivated) card stock. 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 card, displays and accessories purchased. Regional Advertising Will vary depending on regional advertising programs. Broadcast Media Services Free downloads from ACENET for copies of Ace radio and TV ads that the franchisee may download or request from Ace and then customize for the store. Franchisees pay for all air-time fees charged by radio/TV stations they contract with; these vary depending upon the media services chosen. Group Preprint Program Price varies by page count and group participation. For example, group pricing for an eight tab is $45 per thousand, while individual store orders are $72 per thousand. See order form for specific pricing. New Movers Program $0.21 per piece. Monthly Sign Kit Program $175 per month for full kit; $75 for mini-kit. Customer Insights Program (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. For each competitor mystery shop the fee is $46. Franchisees can also purchase customer engagement and employee engagement services, in addition to the mystery shop services, for a monthly bundle fee of $67 per month (which is billed as a $46 mystery shop fee and a $21 customer and employee engagement survey fee). Customer Comment Cards $38 per pack of 50 stock (blank) cards. $5 per holder. Visual Merchandising Services Price varies depending on the size of the store. 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 $15,000. The Supply Place – Certification (B2B) Will vary depending upon the implementation method, marketing material and signage purchased to promote business to business. Estimated cost for implementation ranges from $0 to $5,500. The Supply Place – eCommerce A one-time initial set up charge of $1,000; a $100 monthly charge for first store; and a $75 monthly charge for unlimited number of additional stores in a chain. Retail Loss Prevention Will vary depending upon equipment or services utilized. Estimated cost range per service: $30 – $3,500. Costs do not include expenses for meeting rooms, travel, lodging, meals or tax where applicable. National Catalogues $29 per month for one set of catalogs per year (18 total). Additional sets are billed at a rate of $16 per month, per set. Ace Catalogue on DVD One DVD is included with the Core Retail Services fee. Additional DVDs cost $ 15 per DVD. Matching Funds Member contributes up to $2,400 annually for group advertising. 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. Workforce Management (Kronos Software License) One-time implementation fee of $799 per parent store and $499 each additional branch store. Monthly Service fee of $4.00 per associate. Liquidated Damages $10,000 per month. Costs and Attorney’s Fees Will vary under circumstances. Indemnification Will vary under circumstances. Charitable Donations Will vary depending upon donations the franchisee may decide to make, if any, subject to a minimum total contribution of $20 if the franchisee chooses to make a contribution. The above information has been taken from the FDD of Ace Hardware. Year of FDD: 2018Franchise Direct’s Disclaimer

Estimated Initial Investment for a Start-Up Business – New Construction
Name of Fee Low High
Initial Franchise Fee-Processing Charge $5,000 $5,000
Capital Stock Subscription $5,000 $5,000
Signage – Exterior Signage $2,500 $25,000
Signage – Interior Decor $7,000 $14,000
Real Property Purchase Costs – Land $15,000 $200,000
Real Property Purchase Costs – Building $60,000 $240,000
Construction Costs, Fixtures, Decorating and other Improvements $24,000 $250,000
Prepaid Expenses – Security Deposit, Dues, Permits, Subscriptions and other Prepaid Expenses $3,000 $15,000
Telephone and other Equipment $10,000 $20,000
Computer System with Point-of-Sale (Hardware/Software) $45,000 $80,000
Opening Inventory $150,000 $600,000
Initial Supplies $500 $2,500
Insurance $2,500 $30,000
New Investor Retail Training $0 $37,730
Additional Funds – Working capital for the first 90 days $15,000 $50,000
Total Estimated Initial Investment $344,500 $1,574,230