Home Hardware, which is based in St Jacobs, is an icon of the Canadian lumber and building supply industry. The company is really just a buying group, which is explained nicely in this recent story which was published in the Toronto Star.
The Home Hardware name will be attempting to grow in upcoming years to better compete with box stores.
()()()()()()()
Hardware franchise chains are similar, but different
By James Daw, Toronto Star, Personal Finance Columnist
Malcolm Firkser and Delip Chook watched their fathers learn the business ropes by running neighbourhood hardware stores.
Firkser’s family came to Canada from South Africa; Chook’s from India, via Afghanistan. Their parents sought out a business they could afford, one from which they could benefit from customer loyalty built up by previous owners.
Rather than compete alone against the major chains that dominate Canada’s retail hardware industry, they stepped under their umbrella — the Firksers with Home Hardware and the Chooks with Rona.
Firkser’s father began running Sunnybrook Home Hardware at Eglinton and Bayview Aves. in 1980. Malcolm, 51, took it over in 1988. He recently opened two more stores.
Chook, 25, says his father, Parshot, and mother, Sima, collected welfare upon arriving in Canada penniless and knowing relatively little English. After working hard, operating a series of gift stores and buying a home and commercial real estate, they approached Rona about six years ago to open a hardware store on Queen St. E. (A Home Hardware store had just closed.)
After his father was injured in a car crash, Chook took on the management duties, such as ordering inventory, at the store. His skills caught Rona’s attention. Now, he’s working there as an assistant project manager while studying part-time. He’s weighing his father’s offer to take over the store.
Both Rona and Home Hardware are looking to expand their number of locations, in response to increasing competition from the big-box stores of Canadian Tire, Home Depot and Lowes.
Home Hardware is particularly interested in expanding beyond 100 stores in Quebec. Rona expects half of its dealers will retire over the next 10 to 15 years, and also has expansion plans.
Based in Boucherville, Que., Rona is a public corporation that owns its biggest stores. Home Hardware, of St. Jacobs, Ont., is a buying co-operative owned by its members, who now number more than 1,000.
Instead of selling franchises, both chains work with aspiring entrepreneurs to open hardware stores and larger building centres under their banners.
Like franchise chains, both offer their members or dealers access to group purchasing power, enormous supply chains, advice and consulting services, and advertising support.
Dealers say they enjoy fewer restrictions than franchisees, lower upfront costs, the freedom to sell their businesses and some other advantages.
Both Firkser and Chook rave about their chain’s selection of suppliers, inventory control, ordering and warehouse delivery systems.
Rona’s goal is to capture 30 per cent of the hardware and building-centre market across Canada. Its first priority is to open large company stores and help existing dealers expand into larger locations, where their adult children can earn enough profit to earn an income and buy their parents out.
“We are trying to get close to the customer,” says Jean-Luc Meunier, senior vice-president of business development for Rona.
Home Hardware and Rona have different requirements and financial arrangements that are only disclosed in detail to their independent dealers.
Meunier offers only general information about the startup cost for a small Rona hardware store. Rona usually controls the lease on its dealers’ stores.
“The inventory would cost about $75,000 to $100,000,” he estimates, adding a person with equity of $200,000 to $250,000 could go to the bank to arrange financing.
Rona will sometimes help promising young people finance a startup, he adds. Before accepting a dealer, he or she will be put through a battery of tests.
It could take a year or two before a new dealer could draw much income from a small store, longer for a larger store.
Home Hardware charges a $300 application fee and $1,500 for shares in the co-operative. It directs 5 per cent of sales to an interest-bearing account.
The co-operative’s members may access some of the money later for an expansion or renovation, but most of the money in their interest-bearing account will only be repaid in five annual installments after selling or closing the business.
Firkser negotiated his own leases for his two new stores, and is looking for space for a fourth store.
“I still think Home Hardware is the best format in the business,” he insists. “When you retire, you will have a large chunk of money. With Rona, you walk away with your inventory, bank loan, and fixtures and fittings that will be worth nothing.”
Consultant Eugene Duynstee, president of KPM Enterprises Inc., offers general advice to prospective dealers or co-op members.
“When you are getting into a business relationship, a long-term view is very important. When you build a relationship with customers, where does that value go when you want to retire? Can you sell the business to someone else?”
Chook, whose customers saw him grow up from age 13 to 25 in his parent’s stores, admits he has a difficult decision to make: Build a career within the Rona organization or buy his father’s small business.
He says he has learned a lot about tools and home renovation projects in the past six years. He enjoys helping customers solve problems, and would be the most capable successor. “My brother should be on Canada’s Worst Handyman,” he says.
Firkser is committed to small hardware stores, and is looking to open a fourth in central Toronto. He uses a recent trip to a department store to buy a wallet as a lesson for his son on the value of personal service. They found plenty of wallets, but no price stickers or advice.
“I asked my son: How do these places survive? ... I think they are chasing money away.”
This comment has been removed by the author.
ReplyDelete