Aaron's Franchise Opportunities - History

R. Charles Loudermilk founded Aaron's Rents in 1955 in North Carolina. The company's name was a marketing tactic designed to secure a top spot in the Yellow Pages' alphabetical ordering system. Loudermilk turned to expansion in the 60's and by 1969 had four locations generating a hefty $2 million annually. Over the next 15 years, Aaron's Rentals grew tremendously and began to focus specifically on targeting the office market. 

The new brand focus was successful, and by the end of 1983, Aaron's Rentals was operating 92 stores across 14 states. As the company's popularity grew, manufacturers could not keep up with inventory production. Loudermilk began in-house manufacturing, which in turn decreased the amount of money he was spending on stockpile. 

The rental chain became a franchised company in 1992 and continued its rapid growth to 368 locations by 1999, eventually cresting $3.2bn in company-wide sales and 2,000 stores in 2013-2014. In recent years, however, the franchise and leasing segment of the company has experienced contraction in both revenue and store count, while other segments of the parent company Aaron, Inc. (in particular, the Progressive Leasing business, which focuses on virtual lease-to-own financing products for retail partners) have driven forward growth.

Aaron's Franchise Cost / Initial Investment / Aaron's Franchise Income

Initial Investment

To open an Aaron's Sales & Leasing location, you should expect to invest as little as $283,270 and as much as $852,820, including a franchise fee of $15,000 to $50,000. To qualify financially, franchisees must have at least $450,000 in liquid capital and demonstrate a net worth of at least $550,000.

Ongoing Royalties and Advertising Fund Contributions

Aaron's franchisees pay a 6% monthly royalty on gross revenues to the franchisor. In addition, franchisees must contribute 2% of monthly gross revenues toward the systemwide ad fund.

Aaron's Franchise System Size and Composition

The Aaron's rental and leasing business is one segment in a much larger parent company, Aaron's, Inc., which is comprised of the following business lines:

• Aaron's: lease-to-own stores (including corporate locations and the franchise business) serving customers seeking furniture, electronics, appliances, and computers
• Aaron's.com: virtual / ecommerce channel
• Progressive Leasing: Virtual lease-to-own model serving retail partners who sell furniture, mattresses, jewelry, mobile & electronics
• The HelpCard: secondary financing market offering    

Overall, Aaron's, Inc., generated approximately $3.8 billion of revenues and $386 million of adjusted EBITDA (a proxy for cash flow) in 2018. Of that, the Progressive Leasing segment produced around $2 billion of the revenue and $219 million of the EBITDA, while The Aaron's Business (including corporate and franchised stores as well as ecommerce) generated around $1.8 billion of the revenue and $171 million of the EBITDA. (The combined segment numbers don't add up precisely to the corporate totals because of corporate costs and eliminations.) In addition, the Progressive Leasing segment of Aaron's, Inc., grew topline revenue by almost 28% in 2018, while The Aaron's Business (franchised and corporate stores) grew annual sales by just 0.5%.

Aaron's franchise segment has recently undergone a period of contraction. From a peak of over 2,000 locations a few year ago, the system now has a footprint of approximately 1,700 stores, around 78% of which are franchised. Increasingly, Aaron's has been buying back franchised stores and converting them into corporate-owned and operated locations. In 2018, for example, the company purchased 152 franchised units, representing over 25% of the franchised units the brand started the year with.