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Buying an Ace Hardware Franchise? Here’s the REAL cost breakdown
From grills and pressure washers to patio furniture and Holiday decorations, people across the globe turn to a trusty shop – Ace Hardware. And with most homeowners eager to take on new home improvement projects on the regular, customers are never in short supply. If you’ve always wondered about Ace Hardware franchise cost, this article will discuss the initial investment you’ll need as well as additional expenses you must be ready for.
Franchise Description
Before getting into the details of an Ace Hardware franchise cost, let’s get to know the brand a bit better. The business started in 1924 by a group of Chicago hardware store owners. The brand is a game-changer in retail because it allowed individual stores to buy products in bulk and get them at the lowest possible rates. The company, with its main office in Oak Brook, Illinois, now has over 5,000 stores around the globe.
The franchisor of the brand is Ace Hardware Corporation. In the US, Ace operates as a retailer-owned cooperative. To explain, franchisees with approved applications get a membership in the coop upon purchase of stock shares. This membership also gives a person the right to buy products and services from the franchisor.
Location owners can operate a separate business or add an Ace Hardware store to an existing venture. The franchisor calls this type of franchise “grocery format.” However, franchise owners shouldn’t offer in-home services under Ace trademark unless they buy a separate Ace Handyman Services franchise.
Training Overview
There’s a required training program in the Oak Brook main office called New Owners Institute. Under this course, new owners learn the tools and resources, and best practices in the trade. Included in the program are lessons about managing finance, inventory, marketing, human resources, and other facets.
Aside from this, the main office’s retail training department schedules additional training sessions that seek to boost store operations. These may include both online and instructor-led training programs. The programs are held at the main office or in regional locations and annual conventions. The range of topics varies to cover the components needed to run the businesses, such as leadership and management, selling skills, and product training. The franchisor offers training programs two times a year, during spring and autumn conventions.
Obligations and Restrictions
Aside from the Ace Hardware franchise cost, the franchisor also requires the principal owners of the business to participate directly in its operation. In fact, there’s a general policy not to grant membership to a person unless they commit to this requirement.
There are no restrictions or limitations on whom franchise owners may hire to be managers or personnel to run the store. In addition to that, there are also no restricted types of goods and services that store owners may offer save for the exceptions detailed in the franchise disclosure document.
How Much Does an Ace Hardware franchise cost?
Your Investment
| Name of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee – Affiliation Fee | $5,000 | $5,000 |
| Capital Stock Subscription | $5,000 | $5,000 |
| Initial Brand Assessment (advertising) | $6,000 | $12,000 |
| Signage – Exterior Signage | $5,000 | $35,000 |
| Signage – Interior Decor | $15,000 | $32,000 |
| Leasehold Improvements – Decorating, Furniture and Fixtures ($9 per sq. ft.) | $27,000 | $135,000 |
| Telephone, In-store Communications 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 | $1,000,000 |
| 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 | $150,000 |
| ESTIMATED TOTAL | $292,000 | $1,079,230 |
Other Costs
| 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. |
| Regulatory | Varies by state and product (i.e. paint recycling fee). |
| 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 $500 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 using 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 | $51.50 initial sign kit fee plus 25¢ per blank (unactivated) card stock. For stores using Eagle/Epicor POS systems, there will be a $175 set up fee and $5.00 monthly fee. If franchisees have another POS provider, there may or may not be additional fees. Cost will also vary depending upon type of card, displays and accessories purchased. |
| Regional Advertising (optional) | Will vary depending on regional advertising programs. |
| Ace Marketing Muscle (optional) | Will vary based on the services utilized. |
| Group Preprint Program (optional) | Price varies by page count and group participation. For example, group pricing for an eight tab is $50 per thousand, while individual store orders are $78 per thousand. See order form for specific pricing. |
| Monthly Sign Kit Program (recommended) | $175 per month for full kit; $75 for mini-kit. |
| New Movers Program (optional) | $0.38 per piece. |
| Customer Insights Program (Mystery Shop, Customer Engagement, Employee Engagement) (optional) | For each in-store mystery shop, the fee is $46. Meanwhile, if it’s a phone mystery shop, it’s $15. On the other hand, a 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). |
| Visual Merchandising Services | Price varies depending on the size of the store. |
| Ace Rental Place (optional) | 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. |
| Retail Loss Prevention (optional) | 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. |
| Matching Funds (optional) | 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. |
| SAVINGSource | Will vary depending on services utilized. |
| Mango Report (optional) | $43.50 per month (single or main store); $27.50 per month each additional store. |
| Snagajob (optional) | $18 per month per store. |
| National Accounts Program (optional) | Varies by account. |
| 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. |
| Liquidated Damages | $10,000 per month. |
| Costs and Attorney’s Fees | Varies. |
| Indemnification | Varies. |
Did You Know?
Here are a few fun facts to know about the brand:
- Given that its origins root back to people coming together for the greater good, it’s not surprising that they give back to the community. For instance, they’ve been a partner of Children’s Miracle Network (CMN) Hospitals and the American Red Cross during disaster relief efforts since 1991. Ace has raised over $100 million for both organizations through monetary and product donations.
- The company holds an annual Ace Shootout that brings together teams of celebrities who compete in fun challenges on the golf course. The fun day aims to raise funds and awareness for Children’s Miracle Network Hospitals.
- Ace encourages its communities to share stories of amazing and touching moments connected with their local Ace Hardware. In a program called “Heartware Stories,” the brand encourages people to submit their anecdotes through social media or by sending a snail mail to their main office.
- If you’re still not convinced about Ace Hardware’s service quality, then this will change your mind. The brand ranked “Highest in Customer Satisfaction among Home Improvement Retail Stores” in the JD Power 2020 US Home Improvement Retailer Satisfaction Study. Since the annual survey began in 2006, Ace ranked as highest in customer satisfaction, 13 out of the last 14 years. In fact, the survey had nearly 2,626 respondents who purchased home improvement products or services over the past 12 months.
- Ace offers a myriad of in-store services – from key cutting to utility payment. No wonder it has become a favorite one-stop-shop in many communities.
As seen from these factoids, the community is in the heart of the brand. If you’re looking for a business that gives back to the people and puts a premium on people, then Ace Hardware franchise cost is surely worth the investment.
Want to know more about franchise information? Check out other articles here at Franchise How!