Aarons 2005 Annual Report Download - page 9

1986 –Annual
revenues pass
$100,000,000
7
1987 –The rent-to-
own concept, the
predecessor of the sales
and lease ownership
program, introduced
The Franchise System
By1992, the Company was ready to launch a fran-
chise program as an additional growth vehicle and
as a way to extend the sales and lease ownership
concept into new markets. Franchising has allowed the
Company to establish a national presence much more
quickly than would have been possible with only
Company-operated stores. In addition, franchising
leverages the Company’s manufacturing and distribution
systems as well as marketing programs. Typically, a
franchisee initially acquires the rights for one to six
stores. The typical franchisee owns and operates three
to four stores, but several franchisee groups operate over
10 locations. There are over 100 different franchisee
organizations with the largest franchisee owning and
operating over 50 stores. Franchised stores are located
in 43 states and Canada,
and at the end of 2005
there were 272 franchise
stores awarded that are
expected to open within the
next three to four years.
Franchise fees and royalties
now contribute over 20%
of the Company’s earnings.
Since the inception of the
franchise program, Aaron
Rents has acquired over
The space shuttle was first
launched in 1981 and the Berlin Wall
fell in 1989. The Global Positioning System
(GPS) was launched with orbiting
satellites. Aaron Rents completed
an initial public offering of stock
and introduced a new concept,
rent-to-own, the predecessor of
the sales and lease ownership
program.
1982 –Starts
manufacturing
operations in
Coolidge, Georgia
1987 –
First cash
dividend
130 franchised stores, providing franchisees with an
attractive exit strategy and the Company with additional
high performing stores. The franchisees have access to
all of the Company’s expertise including site selection,
merchandising, training and assistance in obtaining
inventory financing. Initial franchise terms are for
10-year periods, and many franchisees have renewed
for a second 10-year term. Franchisees pay a $50,000
franchise fee for each store opened and a royalty
of either 5% or 6% which affords full access to the
Company’s marketing and promotional programs
as well as management training programs through
“Aaron’s University.” Periodic meetings of the franchise
association provide venues to discuss current issues and
operational strategies and to preview new merchandise
and marketing initiatives.
Company Revenues
From Franchising
Company Pre-tax Profit
From Franchising
2001 2002 2003 2004
0
5,000
10,000
15,000
20,000
$25,000
2005
($ in thousands)
0
5,000
10,000
15,000
20,000
25,000
$30,000
2004 20052001 2002 2003
($ in thousands)
The 1980s
1982 –Initial
public offering
of stock
1985 –Ed Quiñones
joins the Company