Hardware Retail Franchise Business Plan Example

Last year, Wilusa Magazine surveyed downtown residents and found that hardware stores are essential for making downtown a great place to live and work. The demographics of home ownership in downtown Indianapolis have drastically changed, with the dominance of "big box stores" that are inconveniently located and uninviting. However, Hisarlik Hardware is uniquely positioned to meet the needs of the community. Conveniently located to serve various areas, including Troas, Sinope Bay, Miletus Square, Lycia, and Arazawa Township, Hisarlik Hardware offers a wide range of parts, materials, and advice for any home or do-it-yourself project. The store’s focus is on helping customers quickly identify their needs upon entering.

With superior customer attention, product selection, and reasonable prices, Hisarlik Hardware aims to capitalize on this promising opportunity. A location has been secured that offers excellent traffic, with the added benefit of being adjacent to downtown’s only grocery store. The Building Blocks parent organization will assist in optimizing the store layout and planning to drive sales and provide customers with exceptional attention. Hisarlik’s management team possesses extensive business, financial, and mechanical experience, ensuring a successful venture and a desirable investment. The projected growth rate for Hisarlik Hardware is steady and has the potential for exponential growth parallel to the increase in residential development downtown.

Hisarlik Hardware expects to generate positive cash flow and net profit in its first year of operation.

1.1 Objectives

This business plan has four major objectives, three of which are immediate and one that is long-term:

1. Determine the feasibility of a downtown hardware store.
2. Develop the strategy to open, manage, and grow a profitable downtown hardware store.
3. Establish a firm budget to operate and manage the business from concept to operation, with good cash flow and consistent profits.
4. Explore potential growth in the downtown market and find new sources of business.

1.2 Mission

The mission of Hisarlik Hardware is to create a reliable and convenient downtown hardware store. We offer great service and a wide selection of hardware and home improvement products in a customer-friendly environment. Our target customers include downtown residents, property managers, businesses, contractors, and suburban commuters. We aim to build customer loyalty by providing great advice, prompt service, good staff attitudes, quality shopping experiences, and solutions for their needs.

1.3 Feasibility of the Business

Hector Priamson and Troy Enterprises thoroughly evaluated different business ventures and identified retail hardware as a potential opportunity. The following items are essential to the feasibility and success of Hector Priamson and Troy Enterprises:

1. An industry that is healthy, resistant to economic swings, and allows an entrepreneur to influence store results.
2. A profitable market with growth potential.
3. A store location that is easy to find, provides ample parking, and has favorable economic terms.
4. A successful and cooperative partner like Building Blocks, a national hardware co-operative, that can assist with research, planning, marketing, and operations.
5. A financial package that allows realistic and successful operations.
6. Participants with the necessary business skills, work ethic, and competitiveness to succeed.

Building Blocks provides the tools needed for success in the hardware business, while Hector Priamson possesses the financial, entrepreneurial, mechanical, and management skills required.

1.4 Keys to Success

• Hardware Industry: The Home Improvement industry has consistently grown at a rate of 7% per year, with total US sales of over $313 billion in 2002.
• Location: The proposed location for Hisarlik Hardware is Troas Marketplace, a retail and commercial property in downtown Wilusa. The marketplace offers plenty of parking, easy access from major thoroughfares, and proximity to other popular businesses.
• Urban Products: The downtown location requires a product mix tailored to the urban market. Building Blocks will help determine the right mix through their IAIS program.
• Commercial Customers: Hisarlik Hardware aims to become the go-to hardware store for downtown building owners and businesses. A delivery service will be established to cater to their needs.
• Building Blocks: Building Blocks provides valuable support and resources for opening and operating a hardware store.
• Service and Convenience: Independent hardware stores excel in service and convenience. Hisarlik Hardware will be easily accessible, provide pleasant shopping experiences, keep track of customer needs, and offer a delivery program.

All these keys will drive sales and ensure profitability.

Company Summary

In this section, we will review the Troy Enterprises business and corporate entity, Building Blocks’ involvement, the proposed location, and start-up costs and funding.

2.1 Start-up Summary

Hisarlik Hardware has collaborated closely with Building Blocks Hardware to establish a detailed start-up cost list. Building Blocks’ knowledge, track record, and expertise have been invaluable in setting up this venture.

2.1.1 Start-up Expenses

The start-up costs of Hisarlik Hardware consist primarily of inventory, equipment, fixtures, and leasehold improvements. Hector Priamson will invest cash, benefits, and labor into the start-up, while investors will also contribute. The company will secure an SBA 7(a) loan to be paid back on a 7-year amortization.

Leasehold improvements will include minor modifications to the proposed site, such as replacing missing ceiling tiles and cleaning or redoing the floor tile. The new floor tile can be laid over the existing tile for cost savings without compromising quality or durability.

2.2 Building Blocks’ Role

The cooperative known as Building Blocks is comprised of entrepreneur-retailers who are committed to empowering independent retailers. Building Blocks sets industry and market standards with their unique brand of marketing, product assortment, merchandising, technology, and training. Their buying power of over $2.5 billion annually benefits independent members.

Building Blocks has been a world leader in the hardware industry since 1948.

• Retail and commercial solutions
• Assortments to support solutions
• Operational excellence

2.2.1 Market Research

Building Blocks has experience in opening new hardware stores worldwide. They have become a leader in determining what factors make a hardware retailer successful.

Building Blocks currently uses a service called Yorikle to define demographics and expenditure potential of new markets. The report for Hisarlik Hardware showed exceptional business potential with no direct competition in the area. The reports also provide specific market information and expected growth.

2.2.2 Planning

Building Blocks provides professional design services for maximum merchandisable space and traffic flow. Services include fixture plans, interior signage and decor, merchandising plans, lighting, basic site plans, and exterior storefront elevations. These plans are custom developed for each location.

A unique plan will be developed for the proposed site for Hisarlik Hardware as soon as the lease is signed.

2.2.3 Support

Building Blocks provides support to current and prospective members in the form of retail consultants, knowledge, profit building programs, retail automation, training, advertising & promotion, a national brand, buying power, semi-annual markets, and an operations and distribution network.

Retail consultants and retail operations specialists work with members to ensure success. Regional marketing staff and individual Building Blocks staff are available for marketing support.

Specialists share their knowledge and experience, helping members become successful business people.

Building Blocks offers various profit building programs for entrepreneurs, including retail pricing systems, electronic order entry systems, sales programs, and direct mail circulars.

2.2.4 Retail Automation

Building Blocks leads the industry in automating their stores. Their automation system, Delian, helps with inventory control, ordering, sales, and accounts receivable.

Technical support personnel ensure compatibility with Delian and provide assistance to members.

• Inventory: Building Blocks’ retail merchandise approach organizes departments and maximizes space. Guidelines and planograms maximize sales and inventory turns.
• Ordering: Delian helps track inventory needs and generate necessary levels. Orders can be placed through Building Blocks’ electronic order Entry System.
• Pricing: Building Blocks’ Retail Pricing System maintains competitive pricing and maximizes profitability.

2.2.5 Training

Building Blocks offers educational programs through Building Blocks University, including certificate programs for new members. Core training programs cover business management, marketing management, ownership management, retail and sales management, and human resource management. Additional training is available for Tool Room Rentals and on CD-ROM and video.

2.2.6 Advertising and Promotion

Building Blocks offers marketing programs to help members succeed in the retail hardware business. Programs include Power Events, interior and exterior signage, online programs, and custom circulars.

Each member store is assigned a field marketing manager who helps members utilize marketing tools effectively.

• Marketing Strategies: Field marketing managers work with each member to develop programs based on market penetration and awareness. Local store marketing tool kits are provided along with national programs.
• Increasing Traffic: Programs are designed to drive traffic to stores, including bargain of the month, circulars, Yellow Page programs, and local media advertising. Power Events are nationally advertised programs.
• Increasing Transactions: Programs are developed to increase transaction amounts, such as display shelving, online sign making programs, and in-store audio and messaging.
• Brand Building: Programs reinforce the Building Blocks brand through interior and exterior signage and vehicle graphics.

2.2.7 National Brand

Building Blocks is a trusted name in hardware retailing. Their brand positioning statement is "Building Blocks is the best place to complete home repair and maintenance projects quickly and easily."

The Building Blocks name is recognized for hardware, which is a valuable asset for new businesses.

2.2.8 Buying Power

Building Blocks’ members benefit from $2.5 billion in buying power, making it the largest co-op of its kind in North America.

This buying power ensures members get products at the best prices to maximize profits.

2.2.9 Semi-Annual Markets

Building Blocks holds semi-annual markets for members to purchase products and plan for upcoming seasons. Markets are held in March and October, providing opportunities to learn about new items and industry trends.

Purchasing commitments can be made at these markets to save on expenses.

2.2.10 Operations and Distribution Network

Building Blocks has strategically placed distribution centers throughout the United States for timely deliveries to member stores. Trucks deliver once or twice per week, keeping excess inventory in the distribution center instead of store shelves. Over 64,000 items can be purchased on a per piece basis.

2.3 Company Ownership

Troy Enterprises, Inc. is a privately-held S corporation currently owned by its founder and president, Hector Priamson, and his wife Andromache Eetion. The business will operate as Hisarlik Hardware and is open to potential investors. Individual investors will own no more than 15% of the company and will not be involved in management decisions.

In order to make Troy Enterprises financially viable, three factors are necessary: a feasible concept, a qualified manager, and financial support from Hector Priamson, investors, and a financial institution.

2.3.1 Hector Priamson

Hector Priamson is the founder and president of Troy Enterprises. He has a wealth of experience in business, including accounting, marketing, inventory management, and staff management.

Hector will dedicate 100% of his time to the new venture, utilizing his expertise to make sound business decisions.

2.4 Company Locations and Facilities

The proposed site for Hisarlik Hardware was chosen based on criteria such as size, price, parking, access, signage, commercial neighbors, and neighborhood makeup.

The selected location at 310 East Anglia Street is within the Troas Marketplace, sharing a parking lot with Scamander’s Food Market and Buckbasket Cleaners. This location generates significant traffic and provides convenience for customers.

The site has ample parking, easy access from major thoroughfares, and visible signage. It measures 9,509 sq. ft. and requires minimal tenant improvements.

The neighborhood has undergone renovation and is now an upscale area. It is also experiencing new development, making it an ideal location for Hisarlik Hardware.

Products and Services

Hisarlik Hardware will offer traditional retail hardware products, including electrical supplies, automotive, hardware, housewares, lawn and garden, building supplies, paint, plumbing, tools, and rental. The store will also provide small services such as key cutting, glass cutting, and screen repairs.

Building Blocks will work with Hisarlik Hardware to develop the product mix, taking into consideration the urban location. The IAIS inventory management program will be used to optimize inventory and maximize profits.

3.1 Product and Service Description

Hisarlik Hardware will stock traditional retail hardware items, with the product mix tailored to the urban store. The store will also include a Tool Room Rentals store for additional cash flow and accessory sales.

Key cutting, glass cutting, and other small services will be offered at Hisarlik Hardware.

3.1.1 IAIS

IAIS (Inventory Always In Stock) is a program developed by Building Blocks to help members manage their departments and optimize inventory. Benefits of IAIS include organized departments, removal of non-selling inventory, and valuable floor space.

"Building Blocks" provides IAIS merchandising and assortment guides to member stores and recommends inventory. This is valuable for new members because they can rely on the history of current stores for merchandising.

"Hisarlik Hardware" will rely on "Building Blocks" for the correct pricing. Low cost is not a main factor for customers, so "Hisarlik" will work with "Building Blocks" to charge the right price for maximum profits.

"Hisarlik Hardware" will listen to customers to understand unmet needs. This could include store expansions and new products and services. There may be other businesses that can serve "Hisarlik" customers.

The Market Analysis examines potential customers and business. It determines if there is a need for a hardware store downtown. The customer makeup and how to attract them to "Hisarlik Hardware" are also analyzed.

There are six major market segments: Downtown Residents, Property Managers, Contractors, Downtown Businesses, Suburban Commuters, and Commercial Sales. Each segment has specific needs that "Hisarlik Hardware" can fulfill.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5 CAGR

Potential Customers Growth

Downtown Residents 0% 450,000 450,000 450,000 450,000 450,000 0.00%

Property Managers 0% 297,000 297,000 297,000 297,000 297,000 0.00%

Contractors 0% 255,000 255,000 255,000 255,000 255,000 0.00%

Downtown Businesses 0% 180,000 180,000 180,000 180,000 180,000 0.00%

Suburban Commuters 0% 110,000 110,000 110,000 110,000 110,000 0.00%

Commercial Sales 0% 38,930 38,930 38,930 38,930 38,930 0.00%

Total 0.00% 1,330,930 1,330,930 1,330,930 1,330,930 1,330,930 0.00%

4.2 Target Market Segment Strategy

Each market segment requires different marketing to attract them.

-Downtown Residents: The proposed location shares the parking lot with Scamander’s, the only grocery store downtown, which will bring people to Hisarlik Hardware. Direct mail programs and circulars will be used to convert residents and a loyalty program, Building Blocks Rewards, will be implemented to gather research data and understand buying habits.

-Property Managers: A sales program will be used to establish accounts with property managers and inform them about the available great service. A delivery option will also be important to this group.

-Contractors: Hisarlik Hardware will actively pursue contractors by visiting job sites and promoting itself as the most viable option. Delivery and hours of operation will be important to this group.

-Downtown Businesses: A direct mail program will be used to make businesses aware of the store and its offerings. Convenience will be a key factor for this group.

-Suburban Commuters: The direct mail program targeting businesses will also create awareness with suburban commuters. Outdoor signage on high traffic streets will be used to attract attention.

-Commercial Sales: Dedicated sales efforts will be made to attract commercial customers and build strong revenue streams.

4.2.1 Market Needs

Downtown residents have expressed the need for a local hardware store, as documented in the April 2003 issue of Wilusa Magazine. The population within two miles of the proposed location is nearly 53,000 people and more than 20,000 households. The area could support a 19,000 sq. ft. store, and Hisarlik Hardware is proposing a 9,500 sq. ft. store, indicating there is enough business to support a store twice the proposed size. The potential sales revenue is estimated to be more than $2.5 million, expected to grow to more than $3.0 million by 2007.

4.2.2 Market Trends

The home improvement retailing industry has consistently grown at a rate of 7% for the past decade and similar growth is expected for the foreseeable future. 93% of all Americans plan to stay in their current homes and 78% of homeowners plan to undertake home improvement projects in the next year. 69% of homeowners plan to spend as much or more on home improvement in the coming year. Home improvement budgets have grown 31% since 2000.

4.3 Service Business Analysis

Hisarlik Hardware is being encouraged by Building Blocks to enter the equipment and party rental business. The rental component has been a success for other stores and adds to the cash flow and overall profitability. Hisarlik Hardware will work with Building Blocks Rental to determine the inventory and rely on their expertise. An initial investment is required for the equipment, and Building Blocks will provide necessary training and support.

4.3.1 Competition and Buying Patterns

The "Big Boxes" like Lowe’s, Menard’s, and Home Depot have expanded the market, increasing consumer participation in home improvement. However, independent hardware stores have prospered by focusing on their strengths, such as service and convenience. Hisarlik Hardware has no immediate local competition and is conveniently located for downtown residents. The "Big Box" stores are not convenient for downtown residents and require significant travel time. Hisarlik Hardware aims to provide excellent service and convenience to attract customers.

4.3.2 Main Competitors

Hardware: The nearest hardware store is 1.8 miles away and is not current in its products or presentation. Other hardware stores are located further away and do not serve the downtown market. Hisarlik Hardware’s convenience and location will be major selling points.

Rentals: Hisarlik Hardware’s competitors in equipment and party rental are located 1.5 to 2.3 miles away. Hisarlik Hardware aims to offer a wider variety of equipment and supplies, in addition to clean new equipment and great service.

Strategy and Implementation Summary

-Emphasize Customer Service: Building upon the reputation of Building Blocks stores, Hisarlik Hardware will provide fantastic customer service and become a clear leader in retail hardware in downtown Wilusa.

-Build a Relationship-Oriented Business: Focus on developing long-term relationships with customers based on fantastic service. The goal is to become the go-to store for their hardware needs.

-Focus on Target Markets: Implement sales initiatives targeted at each market segment identified earlier.

-Differentiate and Fulfill the Promise: Actually deliver the knowledge-intensive and service-intensive business that Hisarlik Hardware claims to have.

5.1 Marketing Strategy

Hisarlik Hardware will participate in Building Blocks’ Power Events advertising programs, which focus on peak buying periods for planned home care products. Advertising will be done through various mediums such as television, radio, circulars, and POP sign kits. Hisarlik Hardware will also place ads in the Yellow Pages and utilize local media to spread awareness about the store.

5.1.1 Potential Customers

Every person is a potential customer for a hardware store. Hisarlik Hardware aims to offer convenience, service, reliability, knowledgeable staff, and a progressive approach to meet customers’ needs.

5.2 Sales Strategy

Hisarlik Hardware will attract customers through targeted advertising, direct mail, signage, and word of mouth. Additionally, a sales force will focus on property managers, downtown businesses, and commercial accounts to create awareness and generate sales.

5.2.1 Sales Forecast

Sales projections show steady growth throughout the year, with a small dip in September and a peak in December. The immediate goal is to achieve robust sales in the first year and maintain double-digit percentage increases throughout the five years of the business plan.

Sales Forecast

5.2.2 Sales Programs

Building Blocks offers loyalty programs like Building Blocks Rewards for Hisarlik Hardware to participate in. This program builds a loyal customer base by providing shopping benefits.

By the second year, accounts will be set up for businesses, property managers, and contractors to simplify shopping and payment. Proper management of these accounts is crucial, and Hector Priamson’s financial background will be instrumental.

5.3 Strategic Alliances

Hisarlik Hardware has contacted Scamander’s Food Market and received interest from the General Store Manager in developing collaborative programs for mutual growth.

5.4 Milestones

Hisarlik True Value has collaborated with True Value to establish a realistic timeline for opening the store in March 2004. The timeline is listed in the Milestones table below.

Milestones:

5.5 Competitive Edge

The competitive edge has been covered throughout this document. Location is crucial to our business in downtown Wilusa. We have no true competitors in our area. Our customers have had to work harder to get the same or lesser service. We will be conveniently located in their back yard and provide the products they need.

Hisarlik Hardware has staff that understand customer service and how to treat customers, creating an enjoyable shopping experience.

Web Plan Summary

In today’s digital age, customers prioritize simplicity, reliability, and efficiency in obtaining goods and services. A solid web strategy is essential to keep up with changing trends and potential competitors. Customers who shop online value reputation and reliability, regardless of a business’s physical location.

6.1 Website Marketing Strategy

Building Blocks offers a fantastic program for members. It allows members to create their own websites featuring member information and a link to buildingblockshardware.com. Customers can easily browse and order products online. This program is an affordable and valuable asset for small businesses.

The website also serves as a valuable communication tool with customers. It features a custom home page, store location with a map, store hours, services and selection, in-store coupons, a catalog of 1,000 items, and customizable pages.

Management Summary

Hector Priamson will be the full-time manager of Hisarlik Hardware. He will be joined by Penthesilea Thracian and Glaucus Sarpedon, who bring their unique and valuable skills to the venture. The company expects to have a total of 17 employees, both full-time and part-time.

7.1 Organizational Structure

Hisarlik Hardware will be managed by Hector Priamson, with Penthesilea Thracian and Glaucus Sarpedon as key employees. The three have a long history together, having previously worked in the oarsports industry. Each of them will oversee specific departments and a staff that will report to them. An incentive plan will be implemented to reward successful departments and promote sales growth.

7.2 Management Team Gaps

Despite lacking direct experience in the hardware store business, the expertise and support provided by Building Blocks will compensate for this gap. The organization is dedicated to sharing knowledge and helping members succeed.

7.3 Personnel Plan

The personnel plan was developed in collaboration with Building Blocks and Konya Building Blocks Hardware in Catalhoyuk. The plan ensures that there are always at least 2 managers, 1 cashier, and 2 specialists on duty. The average number of employees working at any given time is between 5.5 and 7.1 on busy Saturdays. All employees will be trained to operate cash registers.

Hector Priamson, Penthesilea Thracian, and Glaucus Sarpedon will receive base pay as outlined in the table below. Cashiers will earn $7-$8 per hour, full-time specialists between $9 and $10 per hour, and other part-time staff will be paid $6 per hour. Retired handymen and high school/college students are expected to fill some of these positions.

Hiring will begin in January, followed by training in February, and work commencing in March.

Andrew Brooks

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