KISSIMMEE, Fla. — Aaron's Chief Executive Officer Ron Allen defended himself Tuesday against accusations that he has mismanaged the nation's second largest rent-to-own company, his first public statements since a private equity firm launched a $2.3 billion takeover bid of the Atlanta company in February.
Standing before a room of more than 2,000 franchisees, staffers and store operators, Allen said that, when he took the reins in 2011, the company was facing a mountain of problems.
They included a $95 million sexual harassment lawsuit, allegations Aaron’s spied on customers through rented computers, and an investigation into the company’s business practices by the California attorney general’s office.
“Because of these many issues and the surrounding publicity, we had a very large target on our back for plaintiffs’ lawyers and federal and state regulators all over the country,” Allen said at the company’s national managers meeting in Kissimmee, Fla.
“We were recognized as a large public company, and we simply could not continue to pretend to be a 100-store chain from the 1980s and ‘90s and expect to survive and be successful without significant changes,” he said.
Allen’s talk came at a time when he himself has had a target on his back. Franchisees, some of whom have called for his ouster, have blamed Allen for sluggish sales, the sudden departure of a number of top leaders and what they see as a failed marketing strategy to broaden the company’s appeal to middle-and high-end consumers.
A day earlier, the franchisees met with Allen to air their grievances in a closed-door meeting that some said grew contentious. Franchisees had a list of more than 40 issues to raise with Allen, former leader of Delta Air Lines. Among those issues were questions about his vision for the company, and his thoughts on raising prices and broadening the product mix to include new furniture vendors.
In an effort to show good faith to the franchisees, the company announced that franchisees would no longer have to contribute $800 per store per month for advertising and suspended a requirement to renovate stores.
Meanwhile, former Aaron’s franchisee Brian Kahn, managing partner of Florida-based Vintage Capital Management, is seeking to buy Aaron’s. Aaron’s board is reviewing the proposal but has not said when a decision will be made.
Economist Tim Mescon said showing franchisees and staffers the big picture is a smart strategy if Allen is to keep his job.
“As a public company, you can never err too much on the side of transparency,” he said. Franchisees “need to have a context into which these big decisions are made.”
Charlie Smithgall, Aaron’s largest franchisee with 106 stores, said the drama has been good for the 59-year-old company in some ways because it has encouraged dialogue and focused store owners and management on improving the company over the long-run.
Allen’s speech came on a day that is traditionally designed to be a company pep rally. Led by a charismatic master of ceremonies, the crowd cheered as music boomed and leaders, doing their best “YMCA” impression, spelled out Aaron’s onstage. Atlanta Braves President John Schuerholz, a member of Aaron’s board, captivated the audience for more than 30 minutes with a talk on turning around a losing team.
But it was Allen who brought a hush over the cavernous ballroom.
“Candidly it has not been easy for some of our long-time leaders to acknowledge and address these issues and the resulting changes,” he said. “This is human nature, and it happens in every organization.”
He also addressed one of the most burning issues among those present: the loss of long-time leaders such as Chief Operation Officer Ken Butler and Vice President for Franchise Todd Evans.
“Did some folks leave? Yes, they did,” he said. “Did we bring in some new, experienced leadership to help us address these issues as rapidly and efficiently as possible? Yes, we did.”
About the Author
