Aarons 2012 Annual Report Download - page 27

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17
Aaron’s existing business. Integration of an acquired business may be more difficult when we acquire a business in an
unfamiliar market, or a business with a different management philosophy or operating style.
Our competitors could impede our ability to attract new customers, or cause current customers to cease doing
business with us.
The industries in which we compete are highly competitive. In the sales and lease ownership market, our competitors
include national, regional and local operators of rent-to-own stores and traditional retailers. Our competitors in the sales
and lease ownership and traditional retail markets may have significantly greater financial and operating resources, and
greater name recognition in certain markets, than we have. Greater financial resources may allow our competitors to
grow faster than us, including through acquisitions. This in turn may enable them to enter new markets before we can,
which may decrease our opportunities in those markets. Greater name recognition, or better public perception of a
competitor's reputation, may help them divert market share away from us, even in our established markets.
In addition, new competitors may emerge. Current and potential competitors may establish financial or strategic
relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances
among competitors could emerge and rapidly acquire significant market share.
If our independent franchisees fail to meet their debt service payments or other obligations under outstanding
loans guaranteed by us as part of a franchise loan program, we may be required to pay to satisfy these
obligations which could have a material adverse effect on our business and financial condition.
We have guaranteed the borrowings of certain franchisees under a franchise loan program with several banks with a
maximum commitment amount of $200.0 million. In the event these franchisees are unable to meet their debt service
payments or otherwise experience an event of default, we would be unconditionally liable for a portion of the
outstanding balance of the franchisees’ debt obligations, which at December 31, 2012 was $117.3 million. Although we
have had no significant losses associated with the franchise loan and guaranty program since its inception, and we
believe that any losses associated with any defaults would be mitigated through recovery of lease merchandise and other
assets, we cannot guarantee that there will be no significant losses in the future or that we will be able to adequately
mitigate any such losses. If we fail to adequately mitigate any such future losses, our business and financial condition
could be materially adversely impacted.
Any loss of the services of our key executives, or our inability to attract and retain qualified managers, could
have a material adverse impact on our operations.
We believe that we have benefited substantially from our current executive leadership and that the loss of their services
at any time in the near future could adversely affect our business and operations. We also depend on the continued
services of the rest of our management team. The loss of these individuals without adequate replacement could also
adversely affect our business. Although we have employment agreements with the majority of our key executives, they
are generally terminable on short notice and we do not carry key man life insurance on any of our officers.
Additionally, we need a growing number of qualified managers to operate our stores successfully. The inability to
attract and retain qualified individuals, or a significant increase in the costs to do so, would materially adversely affect
our operations.
You should not rely solely on our same store revenues as an indication of our future results of operations because
they fluctuate significantly.
Our historical same store revenue growth figures have fluctuated significantly from year to year. For example, we
experienced same store revenue growth of 5.1% in 2012 and 4.4% in 2011. We calculate same store revenue growth by
comparing revenues for comparable periods for all stores open during the entirety of those periods. Even though we