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Ace offers store owners a helping hand: The co-op reaches out to retailers opening a store or expanding to new locations

BY Lisa Girard

Andy Carlson spent 10 years in manufacturing and another 10 in marketing for a software company, and he was ready for a change. “My wife and I decided we wanted to do something on our own, something the kids could grow up in,” he said.

The Carlsons—residents of Denver—looked at several different franchise opportunities. Finally, in 2004, they logged onto Ace’s Web site, clicked on the option that said, “Own an Ace Store,” and started filling out forms.

Carlson is one of the new faces Oak Brook, Ill.-based Ace Hardware is bringing into the family through a program called “Branching Out.” Ace is offering grants of up to $195,000 to individuals opening their first store and $215,000 to current store owners opening additional locations.

“We were surprised when we got a call from an Ace rep, and then we went to an Ace convention and really liked the atmosphere there,” he said. “It seemed like a solid business.”

And there was the added incentive of Ace’s “Branching Out” credit, which for Carlson was about $175,000, as well as “equity match financing,” which is a loan against Ace’s patronage dividend. “Every year we get a rebate: half is cash, half is Ace stock. In lieu of the stock, we are repaying the loan,” Carlson said.

By 2005, Carlson had zeroed in on an area about a mile south of the heart of downtown Denver where, he said, there wasn’t a single hardware store. Ace didn’t have an urban format at the time (they have since developed one), so Carlson worked with the regional development staff to come up with a store that would appeal to condo dwellers in the area.

It took a year to put things together, but Ace Hardware–Alameda Station finally opened in July 2006, part of Ace’s citywide expansion effort. Carlson was lucky enough to find a location in a fairly traditional shopping center, which he said is rare in this part of Denver.

The store, with 13,000 square feet of retail selling space, is considered a “super format” Ace store, Carlson said. In addition to core categories, he offers a large lawn and garden selection, patio furniture, an outdoor garden center with house plants for condo balconies, and barbecues and smokers.

“We’re also right off the Light Rail Station, and we do a lot of deliveries to condos in the area—a barbecue for a deck, that sort of thing.”

Carlson’s goal is to eventually have two, three or even four stores in Denver and/or the surrounding suburbs. “We want to do one as soon as possible and continue to look in urban areas,” he said. “There’s the rent equation to consider: You can’t go and buy a prime corner because you don’t make as much per square foot as, say, a Walgreens. We’re looking for an 8,000- to 12,000-square-foot space in the urban corridor. Maybe by next spring.”

“Branching Out” also applies to Ace veterans. Pasquale Musto and his wife Patricia had 25 years experience running Trish Home Center in Little Egg Harbor, N.J., when they began thinking about retiring in 2003. But their daughters Suzanne Musto-Carrara and Samantha Colandrea—long gone from the nest and then living in Connecticut and California, respectively—intervened to keep the family business going.

“Suzanne was seven months old when they opened the store, so they put a nursery upstairs,” said Colandrea, 28, who is two years younger than her sister. “As soon as we were old enough, they gave us feather dusters to clean the bottom shelves, and eventually we were working the cash registers. It was a family business, and we didn’t want to see it go.”

But the family also realized that being successful in today’s market meant they had to grow. So last year—with the help of Ace’s “Branching Out” money—they opened a new 15,500-square-foot store in Clementon, N.J. They are also in the process of expanding the Little Egg Harbor store from 9,500 to 18,000 square feet, including the executive offices. The long-term goal is to have at least five stores in the fold within a five-year period.

“We really just came back to work in one store, and then Ace started talking about ‘Branching Out,’” Colandrea said. “We had a family meeting and discussed where we wanted to be in five years, and it led us to make the decision to do the expansion.”

“It’s a management thing,” Pasquale Musto added. “It allows you to build an infrastructure and have someone coordinate training, buying, advertising—instead of being the guy on the floor selling as well as managing the business.”

The Musto family stores are somewhat different in makeup and product mix. The Little Egg Harbor store is near the ocean and caters primarily to Jersey shore summer homeowners, while the Clementon store–about 50 miles inland–features a traditional DIY product offering.

About 80 percent to 85 percent of the products are the same, but the Little Egg Harbor store has more boating-related items and petite outdoor furniture for smaller yards, while Clementon has more leisure and backyard items because people live there year-round.

“You start with the premise of having basic hardware, but then you appeal to the needs of the local population,” Musto said.

And not only have Musto-Carrara and Colandrea taken on major roles in the business, but Musto-Carrara recently gave birth to a boy named Nicholas, so there’s a third generation waiting in the wings. “He’ll grow up around the business, just like Suzanne and I did,” Colandrea said.

As for putting off dad’s retirement, she added, “He’s happy; he didn’t want to retire, anyway.”

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The return of a market

BY HBSDEALER Staff

San Diego Two relatively optimistic housing market forecasts factored heavily in an active day of seminars and award presentations at the ProDealer Conference held here last week.

In the conference’s kickoff presentation, Joshua Rosenbaum, director of the UBS Global Industrial Group, explained that only a matter of time stood between the current housing problems and a return to normalcy. “It really is a question of when, not if,” he said.

Of the six key macroeconomic factors — described as “pillars” — of the housing industry, five remain solid: GDP growth, interest rates, unemployment, inflation and non-residential construction spending. Housing starts, the sixth pillar, lags dramatically from 2006.

The question of “when” the return would come was addressed in detail at a later presentation on commodity pricing given by Paul Jannke, senior vp-wood and timber information for RISI. He pointed to research that predicts housing starts will remain weak until late 2008. Pointing to underlying demand created by population growth and household formation, Jannke described the overbuilding of 2003, 2004 and 2005 as a key cause of the dramatic decline in housing starts in 2007. The good news, said Jannke, is that 2009 should see starts jump back to the 1.7 million to 1.8 million level, following a 2008 housing start figure in excess of 1.5 million.

“With the weaknesses forecast in 2007 and 2008, we will have completely made up for the overbuilding” of the previous four years, he said.

If housing starts fall further to the 1 million level, as some expect, the silver lining would be a faster correction and a faster return to housing starts more in line with the underlying demand, he added.

The 11th ProDealer Conference held here at the Loews Coronado Bay Resort wasn’t all about forecasting and finance. A “Custom Builder Panel” on Thursday morning focused on the needs of custom builders and their expectations from pro dealers.

The best way to build a relationship with the custom builder is to do the research and bring solutions to the table, said David Payne, vp-Payne & Payne Builders. Sometimes, the solutions for builders address problems that they didn’t know they had, he said. “The smartest thing for a dealer is to find the time to talk to us to identify our faults, then provide solutions.”

And the panel agreed that when the relationship between the dealer and the builder loses the qualities of a partnership, the relationship is in jeopardy.

In addition, Basketball star Bill Walton, who rose to fame playing for the Boston Celtics and the Portland Trail Blazers, gave some advice on what to do “when the ball bounces the wrong way” during his Sept. 19 talk. He also reminisced about his days at Dixieline Lumber in San Diego, where the 15-year-old freckled redhead unloaded lumber as a part-time job.

Also at the conference, the annual ProDealer of the Year Awards Dinner recognized two companies that represent innovation and success in the LBM market — Kent, Ohio-based Carter Lumber and Fairfax, Calif-based Fairfax  Lumber & Hardware, the respective recipients of the ProDealer of the Year and Independent ProDealer of the Year awards.

The 11th Annual ProDealer Conference, sponsored by Home Channel News, kicked off with a City of Hope golf tournament. The first place team, winning with a score of 142, was Bruce Brushwood of Moulding & Millwork, Mark Donovan of Forest City Trading Group, Laura Dwyer of Dupont and Mike Fletcher of Moulding & Millwork.

The ProDealer Conference ran through Sept. 21.

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Toro names new member to board of directors

BY HBSDEALER Staff

Outdoor products company Toro has named Inge Thulin, vp-international operations for 3M, to its board of directors.

Thulin joined 3M in 1979 and served in various sales and marketing roles at its location in Stockholm, Sweden. He subsequently served as area vp for Europe, Asia and the Middle East and was named executive vp-international operations in 2003.

“As Toro’s revenue from non-U.S. markets continues to rise and we expand our manufacturing, design and distribution capabilities around the world, his perspectives will be invaluable in positioning the company for long-term growth and profitability,” said Michael Hoffman, chairman and CEO of Toro.

Thulin’s appointment brings the Toro board to 11 members.

Toro had sales of $1.8 billion in 2006 and is a leading provider of outdoor beautification products.

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