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Ace Hardware Has Best First Quarter Ever; Reshuffles Board

Ace Hardware
An Ace Hardware retail store in South Central Kentucky. photo/bmm

OAK BROOK, Ill. – Ace Hardware Corporation, an international franchising firm that is owned and led by its retail store franchisees, has announced a stellar first quarter in 2014. It also announced several changes to the corporation's board of directors, filled by its franchise owners.

Best quarter in its history

What are the results of store owners leading the retail chain?

For one, they collectively provide a better customer experience. JD Powers has surveyed and ranked Ace Hardware for eight straight years as "Highest in Customer Satisfaction among Home Improvement Stores." Their customer satisfaction score, 791 out of 1,000 points, is above retail giants Lowe's or The Home Depot, respectively 779 and 763.

Second, revenue and profits are good. Really good. On May 14, Ace Hardware Corporation reported its best first quarter for both revenues and net income in its 90 year history. Total revenues were $1.1 billion for the first quarter of 2014, an increase of $155.5 million or 16.8 percent over the first quarter of 2013. Its net income was $24.4 million for the first quarter of 2014, an increase of $20.0 million or an incredible 454.5 percent from the first quarter of 2013, which was also a good quarter and a good year.

At Ace Retail Holdings, the cooperative's new retailing arm that was created with the buyout of the Westlake Ace Hardware chain in 2012, same store sales were up a whopping 10.1 percent versus the prior year. ARH says that improvement was driven by effective execution as well as a rise in the heating and lawn & garden categories caused by last winter's extreme weather.

"I'm so proud and appreciative of the entire Ace team for using last year's record performance as a springboard to even greater success," said John Venhuizen, Ace president and chief executive officer. The CEO went on to report that the 3,100 Ace Hardware store owners, who transmit daily retail POS data to the head office, enjoyed an increase in customer count and average transaction, which contributed to a 5.2 percent same-store-sale increase. "Serving well is the passion of this Company," said Venhuizen. "And there is no one who does that more effectively than the local Ace owner; many of whom spent a good portion of Q1 serving their neighbors during record snow and cold."

Franchisees tweak Ace Hardware's board of directors

Ace's franchise owners fill nine seats of the franchising firm's board of directors to set strategic policy and direction for Ace management. Two seats are filled by external business professionals to help complement Ace's internal skills and strategic insights.

The board of directors elected their new chairman, Jim Ackroyd, whose company, Vision Ace Hardware, is a Florida multiunit owner of 11 Ace Hardware stores. Ackroyd, 58, was elected vice chairman in 2013 as part of a planned chairman transition. A member of Ace's board of directors since 2008, he was re-elected by the chain's body of franchisees to another three-year term as a member director of the Ace Hardware board of directors.

Nell Minow, a corporate governance expert with GMI Ratings, a firm that gathers corporate governance data and provides analysis, thinks this franchisee cooperative model is interesting. "I specialize in public companies which have a very different set of challenges and conflicts," she says by way of pointing out that her business expertise is in a different area than the Ace's retailer cooperative in which franchisees elect a board for the firm. Unlike other franchise chains in which a potential buyer pays $40,000 to be granted a franchise license, when Ace's 3,100 plus store owners enter the system, their franchise fee is applied to ownership, or shares, in the franchisor. As partial owners, franchisees receive Ace's quarterly and annual financial statements. Minow says, "If I were going to buy a franchise, I'd want to do it via a cooperative like this."

Ackroyd previously worked for Arthur Young, Congoleum Corporation, and Ackroyd Consulting (real estate consulting). He was the chief financial officer for Incon Corp. and the Wynn Group of Companies. Ackroyd holds a Bachelor of Science degree in accounting from Bentley College and is a certified public accountant.

One of the two external directors, John Costello, president of global marketing and innovation officer for Dunkin' Brands, stepped down due to scheduling conflicts with his employer. Unlike Ace Hardware's board of directors being led by franchisees, Dunkin' has a traditional franchisee advisory council that provides suggestions on how Dunkin' might improve its restaurant and business operating dictates for its franchise owners. "John would be a fish out of water in a franchisee cooperative," says the president and founder of a multiunit franchised company under Dunkin' Donuts. He thinks the top-down culture and command structure of the doughnut chain ill prepares Costello and his skill set for the bottom-up franchise dynamics at a brand like Ace Hardware. However, the franchisee insider from Dunkin' is first to admit that the affable Mr. Costello has a broad range of leadership skills and is quite approachable for franchise owners.

In Costello's place, Ace's board of directors appointed Richard W. Bennet as non-member director. Bennet is co-chief executive officer of CCA Global Partners, an international franchisee cooperative that provides retail infrastructure to more than 2,700 independent and franchise operations in flooring and other industries.

Ace franchisees elected multiunit franchisee Mark Schulein, a second generation owner of 16-store Crown Ace Hardware based in Huntington Beach, Calif., to be a director on Ace Hardware's board. Ace's retailers also re-elected board members David Karsten and Gina Schaefer.


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