KISSIMMEE, Fla. — With the threat of a company takeover hanging in the air, Aaron's franchisees met in Orlando on Monday to add their voices to discussions on the company's direction and whether to push for new ownership.
After a closed-door meeting that lasted more than five hours, the franchisees did not take a vote on whether to support the takeover bid. But Duffy Heath, president of the Aaron’s Franchisee Association, said that it appeared that the overwhelming majority of members backed the current management.
The franchisees, store operators and management will meet again today in a general session that is part awards ceremony and part pep rally for the 59-year-old Atlanta institution. Ron Allen, the company’s chief executive officer and former Delta Air Lines leader, will address the crowd of more than 2,000, along with John Schuerholz, president of the Atlanta Braves and member of the Aaron’s board of directors.
Monday’s meeting was critical for Aaron’s because the satisfaction of franchisees — they operate one-third of the Atlanta-based rental giant’s more than 2,100 stores — could have an impact on the decision of investors. Those investors, who are trying to decide whether to accept a $2.3 billion unsolicited bid by a Florida private equity firm to buy the company.
Business has been sluggish for Aaron’s stores because of a soft retail environment. Some franchisees last week said they were considering circulating a petition during the meeting that supported selling the company to Vintage Capital Management, a firm operated by Brian Kahn, a former Aaron’s franchisee.
Aaron’s may have sweetened the pot to win the franchisees over. The company announced in the meeting that franchisees would no longer have to contribute $800 per store per month for advertising. A requirement to renovate stores was also suspended.
Charles Smithgall, the chain’s largest franchisee with 106 stores, said the advertising change alone would save him more than $1 million. Smithgall, an Atlanta businessman who plans to retire soon and turn over the business to his son Chas Smithgall, had been on the fence about the takeover. But he sounded more supportive of management after Monday’s meeting.
“The tone in there was totally positive for them,” he said.
But Kahn said it does not change his goal because he wants to return Aaron’s to the sales it enjoyed in the past.
“Suspending the ‘store of the future’ renovations is a very good move. It’s something we wrote the board about,” Kahn said. “I’m pleased that changes that have been made have been repealed.”
The company has enjoyed strong annual sales since its founding in 1955 by Atlanta businessman Charlie Loudermilk. When most businesses foundered during the recent recession, Aaron’s sales soared as tighter credit made rent-to-own more attractive.
Growth has slowed in the last few years as the retail sector in general — from department stores to electronics — has faced stagnating sales. Aaron’s revenue barely increased in 2013 — just under 1 percent to $2.23 billion — while net profit dropped 30 percent to $120.7 million.
That encouraged some franchisees, unhappy with the company’s performance, to consider the petition calling on their colleagues to band with them against management. That petition never materialized.
Keeping the franchisees happy is important to Aaron’s. Leslie Kuban, a franchising expert at FranNet of Georgia, said a toxic relationship with franchisees can hurt efforts to attract new franchisees, which helps the company grow.
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