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Aaron's Franchise ProfileIndustrial Franchises > Equipment Rental |
What Are the Initial Investment Requirements for an Aaron's Franchise?
To open an Aaron's franchise, you should be prepared for a significant initial investment ranging from $283,270 to $852,975. The franchise fee varies between $15,000 and $50,000, with a cash requirement of $100,000 to $240,000. Additionally, prospective franchisees must meet a net worth requirement of $250,000 to $500,000. Understanding these financial commitments is crucial for determining if this franchise aligns with your budget and financial goals.
What Are the Ongoing Fees for an Aaron's Franchise?
Aaron's franchisees are subject to ongoing fees, including a royalty fee of 6% on gross sales and a marketing fee of 2%. These fees are essential for maintaining brand presence and supporting marketing initiatives. It's important to factor these ongoing costs into your financial projections, as they can significantly impact your profitability and cash flow over time.
What Is the Average Revenue and Profitability for Aaron's Franchisees?
The average annual revenue per unit for Aaron's franchisees is approximately $4,774, with a median annual revenue of $196,210. The lowest annual revenue reported is around $30,000, while the highest can reach up to $80,000. With an average EBITDA of $289,608, representing 7.6% of total revenue, franchisees can see a reasonable return on investment. Understanding these metrics can help you assess the potential profitability of owning an Aaron's franchise.
What Is the Breakeven Timeline for an Aaron's Franchise?
Franchisees of Aaron's can expect a breakeven time of approximately 12 months, with an investment payback period of around 18 months. This timeline is critical for new franchisees as it provides insight into how quickly they can expect to recover their initial investment and begin generating profit. Being aware of these timelines can help you plan your financial strategy effectively.
Aaron's Franchise Financial Requirements
Below, you’ll find an overview of the initial investment needed to launch the business, along with the ongoing fees required by the franchisor to maintain operations over time.
The minimum total assets (minus liabilities) you must possess.
Net Worth Required:
The estimated period to recoup your total investment.
Investment Payback:
The initial fee paid to join the franchise system.
Franchise Fee:
Ongoing percentage of revenue paid to the franchisor.
Royalty Fee:
Regular contribution toward the franchise’s advertising fund.
Marketing Fee:
The estimated timeframe to recover your initial costs.
Breakeven Time:
The total amount required to launch the franchise.
Initial Investment:
The minimum liquid capital you must have on hand.
Cash Required:
The typical yearly revenue generated per franchise location.
Average Revenue:
The middle value of yearly revenue among franchise locations.
Median Revenue:
The largest reported annual revenue among franchisees.
Highest Revenue:
The smallest reported annual revenue among franchisees.
Lowest Revenue:
A broad sector defining similar types of franchise businesses.
Industry:
A more specific division within the broader industry.
Category:
The key individuals guiding the franchise’s strategy and growth.
Leadership:
The official business address of the franchisor’s headquarters.
Corporate Address:
Available financing options to help start the franchise.
Funding Year:
The main organization that owns the franchise brand.
Parent Company:
Aaron's Franchise Unit Growth Summary
A breakdown of corporate, franchised, and total units, with yearly net changes.
Total Units
Franchised Units
Corporate Units
| Units | 2016 | 2017 | 2018 |
|---|---|---|---|
| Total Units | 1,905 | 1,824 | 1,847 |
| Net Change YoY | -81 | 23 | |
| Franchised Units | 693 | 676 | 535 |
| Net Change YoY | -17 | -141 | |
| Corporate Units | 1,212 | 1,148 | 1,312 |
| Net Change YoY | -64 | 164 |
Investment Overview
Aaron's franchise offers a range of initial investment options, with costs ranging from $283,270 to $852,975. The franchise fee varies between $15,000 and $50,000. Potential franchisees should be prepared for additional expenses, including a 6% royalty fee on gross sales and a 2% marketing fee. A cash requirement of $100,000 to $240,000 is necessary to ensure adequate working capital for operations.
Financial Performance
On average, each Aaron's unit generates annual revenue of approximately $4,774, with a median revenue of $196,210. However, revenues can vary significantly, with the lowest reported at $30,000 and the highest at $80,000. The breakeven point for new units is typically around 12 months, while franchisees can expect to recoup their initial investment within 18 months.
Franchise Growth
Aaron's has seen fluctuations in its franchise unit count over recent years. In 2016, there were 693 franchised units, which decreased to 676 in 2017, and further declined to 535 in 2018. Conversely, corporate-owned units have shown some growth, with 1,312 units reported in 2018, up from 1,212 in 2016. This trend highlights the evolving landscape of the franchise model within the company.
Operational Costs
The average annual operating expenses for an Aaron's franchise unit total approximately $1,618,423. Key components of these expenses include personnel costs at $664,412 and occupancy costs at $223,304. Other significant expenses include provisions for lease merchandise write-offs and bad debt expenses, which contribute to the overall operating cost structure.
Corporate Structure
Aaron's, Inc. operates as a publicly traded company with a focus on rental and retail sales of furniture, electronics, and appliances. The company has established a strong presence in the market, leveraging both franchised and corporate-owned units to expand its reach. This dual structure allows for flexibility and adaptability in meeting consumer demands while maintaining brand consistency.
Franchise Support
Aaron's provides comprehensive support to its franchisees, including training programs, marketing assistance, and ongoing operational guidance. The franchise team is dedicated to helping franchisees navigate challenges and optimize their business performance. This level of support is crucial for ensuring that franchisees can effectively manage their operations and achieve long-term success in the competitive rental industry.
Frequently Asked Questions
The initial investment for an Aaron's franchise ranges from $283,270 to $852,975, which includes the franchise fee and other startup costs.