Aaron’s
- Founded: By Charlie Loudermilk in Atlanta in 1955
- Stores: 2,037 (1,261 company-operated and 776 franchised)
- Leadership: CEO and President Ron Allen, a former chief of Delta Air Lines who took the helm in February 2012
- 2013 revenue: $2.23 billion, up 1 percent
- Net profit: $120.7 million, down 30 percent
Atlanta rent-to-own giant Aaron’s, already under pressure because of an unsolicited bid to take over the company, can add another worry to its list of woes: growing franchisee discontent that threatens to erupt into a full-fledged mutiny.
Unhappy store operators say the company, once one of Atlanta’s most successful, has lost its way since former Delta Air Lines CEO Ron Allen took the reins in 2012 and Aaron’s de-emphasized its traditional low-income customers to attract more middle-income and upscale shoppers. Aaron’s leases furniture, appliances, computers and other items to customers on a monthly basis for a pre-determined period of time.
The disaffected franchisees, believing the current leadership needs to be replaced quickly, are trying to organize a big show of force at the Aaron’s Franchisee Association meeting next Monday in Orlando.
The unusual business drama comes as Aaron’s tries to regain its footing with customers and beat back a $2.3 billion takeover bid from Vintage Capital Management, a Florida private equity firm headed by a former Aaron’s franchisee. Vintage is running a slate of five board candidates to try to increase its leverage.
In a recent statement, Aaron’s said it has formed a board committee “to carefully review and evaluate Vintage Capital’s unsolicited proposal with the assistance of its professional advisors.”
Also on Friday, the company released a statement saying its “franchisees are integral to the success of our business and we value these important relationships. Aaron’s has always maintained positive, ongoing communications with all of the company’s franchisees, and will continue to do so.”
Allen, the CEO, declined to be interviewed for this story.
Founded in 1955 by Charlie Loudermilk, a well-known Atlanta businessman, Aaron’s enjoyed strong sales for decades. But the company’s revenue barely increased in 2013 — just under 1 percent to $2.23 billion — while net profit dropped 30 percent to $120.7 million.
Upset franchisees said they are circulating a number of petitions about dissatisfaction with management.
“There is a sense of urgency (that there be a change),” said Aaron’s franchisee Adam Marlin, who owns two stores and is working on a third location. “We are not waiting.”
Not everyone blames Aaron’s woes on its leaders. AFA president Duffy Heath said the rent-to-own industry is generally struggling. He hopes to encourage his colleagues to build bridges with management at the association’s Orlando meeting — not tear them down.
“In this climate, it is natural and healthy for business owners to be concerned about their investment,” Heath said. “Franchisees and Aaron’s corporate are asking whether the market and the economy in general have changed, necessitating changes to our business model. We are on the front end of this process – asking questions and beginning the search for answers.”
The disgruntled operators, who spent much of last week trying to persuade franchisees sitting on the sidelines to take a position, also believe the chain has been hurt because Aaron’s current leadership pushed out some key, long-time leaders.
“In the last two years, every department head has changed,” said Spencer Smith, who operates 43 Aaron’s stores and has been nominated by Vintage to run for an Aaron’s board seat. “The lion share of all those key leaders are gone.”
Atlanta businessman Charles Smithgall, Aaron’s largest franchisee with 106 stores, said he has not taken a side yet, but has lots of concerns about the company. The 72-year-old businessman said he has never seen sales as bad as they have been in the more than 20 years he’s been a franchisee. He also doesn’t understand why the company spends less than 2 percent on advertising, which is lower than the retail average.
But he also has faith in Aaron’s board and is looking to their expertise to offer ideas.
“I’m just as concerned as they (disgruntled franchisees) are. I just don’t know what to do,” he said.
Franchisee Wallace Vernon, who operates 14 stores in Texas, said he favored sticking with the current management. More change would only cause further problems in a retail environment in which everyone is struggling.
“I would view it (changing leadership) as a detriment more than a positive,” he said.
Brian Kahn, Vintage’s founder and managing partner, is curious to see what happens in Orlando and beyond.
“It will be very difficult for the board of Aaron’s to not pay attention to what Aaron’s franchisees are saying,” he said. “You just can’t ignore them.”
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