Aarons 2002 Annual Report Download - page 8

6
monthly payments for lease ownership
compared to the traditional weekly
payment system of the rent-to-own
industry. The net effect is that Aaron’s
account base has been somewhat
upgraded while the processing expense
per account has been reduced. Our cus-
tomers are typically credit-constrained
but losses are consistently between 2%
and 3% of revenues. This loss experience
has been stable during periods of both
economic expansion and contraction.
Aaron’s customers are automatically
approved since the transaction is a
lease-to-own plan rather than a credit
relationship. The lease-to-own plan
requires no long-term obligation and the
customer is free to return the merchan-
dise at any time without additional
financial obligation. Delivery of mer-
chandise is speedy, either same or next
day. There are no delivery charges, no
application fees, and no balloon pay-
ments. Terms are fully disclosed: cash
and carry price; monthly payment; and
total cost under the lease ownership
plan. The payment options include cash,
check, and credit cards. With the Aaron
Sales & Lease Ownership concept, the
Company can now service a broad
range of consumers with a variety of
payment schedules under rent and
lease-to-own concepts.
Compared to traditional rent-to-own
stores, the Aaron’s stores tend to be
larger (normally three times the size
of a typical competitor’s store) with
more attractive merchandising and store
décor. Aaron’s product offerings are typ-
ically new whereas many competitors
primarily display rental return merchan-
dise. The Aaron’s stores are usually
located in suburban areas and attract
generally higher income level customers
than the traditional rent-to-own busi-
ness. Aaron’s “Dream Products” line-up
includes highly popular big-screen
televisions, stainless steel refrigerators,
leather upholstered furniture, and lead-
ing brands of appliances. Professionally
designed and coordinated furniture
suites produced by the Company’s
MacTavish Furniture Industries divi-
sion and top national manufacturers
better serve the slightly more upscale
consumer. These products generate
higher revenues per customer than the
traditional rent-to-own contract. Aaron’s
continues to build on the success of offer-
ing personal computers in its product line
with brand name emphasis on Dell and
Hewlett Packard products, which has
proven a competitive advantage.
The Aaron’s Sales & Lease Ownership
concept has been successfully executed
in small markets and large cities. The
rapid market penetration of new stores
underscores the strength of this concept.
Operational improvements and unifor-
mity of customer experience continue to
be priorities. The Aaron’s University
SALES & LEASE OWNERSHIP
SYSTEMWIDE REVENUE GROWTH
AND STORE COUNT
SALES & LEASE OWNERSHIP
RENTAL REVENUES
’98 ’99 ’00 ’01 ’02
$800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
($ in 000s)
Franchise Revenues
Company-Operated Revenues
*Number of Stores
318*
368*
456*
573*
644*
Electronics and Appliances 54%
Furniture 35%
Computers 10%
Other 1%