Ace Hardware FDD Item 19 is the section of the Franchise Disclosure Document that contains the financial performance representations for one of the most recognized hardware and home improvement retail brands in the United States. With over 4,600 stores and a unique retailer-owned cooperative model, the financial data in Item 19 must be understood within the context of how the Ace cooperative structure affects revenue, costs, and profitability. At Lopes Law LLC, we review Ace Hardware FDDs to help prospective retailers interpret the financial performance data and build realistic profitability projections that account for the cooperative’s unique economics.

This guide breaks down what Ace Hardware discloses in Item 19, explains how to interpret the data within the cooperative framework, and identifies the key factors that drive profitability for Ace retailers.

What Is FDD Item 19 and Why Does It Matter for Ace Hardware?

Item 19 of any Franchise Disclosure Document is titled “Financial Performance Representations.” Under the FTC Franchise Rule (16 C.F.R. Part 436), franchisors are not required to include Item 19 data, but if they choose to make financial performance claims, those claims must appear in Item 19 and must have a reasonable basis. Ace Hardware includes Item 19 data, providing prospective retailers with a starting point for evaluating the financial opportunity.

For Ace Hardware, the financial data must be interpreted differently than for traditional franchise systems because of the cooperative ownership structure. Revenue, cost of goods, and profitability are all affected by the wholesale purchasing relationship and patronage dividend system that are unique to the Ace model.

What Does Ace Hardware Disclose in Item 19?

Based on publicly available FDD information, Ace Hardware’s Item 19 provides data on store-level financial performance for domestic Ace stores. Key metrics include:

The data is typically segmented by store volume category, geographic region, and store format (traditional, large format, rural, urban). This segmentation is important because performance varies dramatically based on location, store size, and market demographics.

How Does the Cooperative Model Affect Financial Performance?

The Ace Hardware cooperative model affects the financial performance data in several ways that distinguish it from traditional franchise Item 19 disclosures:

• Cost of goods sold: Ace retailers purchase merchandise through the cooperative’s wholesale distribution system. The wholesale pricing includes the cooperative’s operating margin, but may be offset by patronage dividends, effectively reducing COGS.
• Patronage dividends: Based on purchase volume, Ace distributes patronage dividends to member retailers. These dividends can represent a significant economic benefit and should be factored into profitability analysis. Historical patronage dividend rates provide insight into the effective discount on merchandise.
• No royalty deduction: Unlike traditional franchises where 4% to 8% royalty is deducted from gross sales, Ace retailers do not pay a percentage royalty. This means a larger share of gross margin is available to cover operating expenses and generate profit.
• Buying power advantage: The cooperative’s collective purchasing power provides access to manufacturer pricing that independent hardware stores cannot match, creating a structural cost advantage.

What Do the Numbers Mean for Retailer Profitability?

Translating the Item 19 data into realistic owner profitability requires modeling the complete cost structure:

How Should You Interpret the Average vs. Top-Quartile Figures?

The gap between the average ($2.1 million) and top-quartile ($3.5 million+) stores highlights the wide performance distribution across the Ace system. Factors that drive top-quartile performance include:

• Location quality: High-traffic locations with strong demographics and limited direct competition from big-box retailers.
• Store size: Larger format stores can carry broader assortments and generate higher sales per customer visit.
• Service departments: Paint mixing, key cutting, small engine repair, rental, and other service departments generate higher-margin revenue.
• Community engagement: Ace retailers who are active in their communities, known by name to customers, and perceived as the trusted local expert outperform stores that compete primarily on price.
• Experienced operators: Multi-generation hardware retailers and experienced retail operators consistently outperform first-time store owners during the initial years.

The median figure, being lower than the average, indicates that high-volume stores are pulling the average upward. More than half of Ace stores generate less than the $2.1 million average. Prospective retailers should evaluate which quartile their target location and experience level most closely align with.

What Does Item 19 Exclude?

Like most franchise Item 19 disclosures, Ace Hardware’s financial performance data typically does not include a complete profit and loss statement. Items commonly excluded include:

• Owner’s salary or draw: The disclosed figures may not account for a market-rate salary for the owner-operator.
• Debt service: If you financed the initial investment, loan payments reduce your actual cash flow.
• Depreciation and amortization: Non-cash expenses that affect tax liability.
• Income taxes: Federal, state, and local tax obligations.
• One-time costs: Initial buildout costs, opening inventory above normal levels, and other startup expenses are not reflected in ongoing financial data.

What Questions Should You Ask Current Ace Retailers?

Item 21 of the Ace Hardware FDD provides contact information for current and former retailers. At Lopes Law LLC, we recommend contacting at least 10 to 15 current retailers and asking:

• What is your actual net income after all expenses? The gross sales figure is just the starting point.
• What are your patronage dividends as a percentage of purchases? This directly affects your effective cost of goods.
• How long did it take to reach profitability? New stores typically take 12 to 24 months to stabilize.
• What are your biggest operating cost challenges? Labor, rent, and shrinkage are common pressure points.
• How much do you invest in local marketing beyond the required advertising?
• Would you make the same investment again?

For guidance on the full scope of an FDD review, see our article on what to expect from an FDD review.

Why Legal Review of Item 19 Is Essential Before Investing

The cooperative model adds a layer of complexity to Ace Hardware’s financial performance data that does not exist in traditional franchise systems. A franchise attorney can help you interpret the gross sales and margin data within the cooperative framework, model patronage dividends and their effect on profitability, build a location-specific financial projection using Item 19 data as a baseline, and compare the Ace Hardware opportunity to other retail hardware options including independent operation.

At Lopes Law LLC, our flat-fee FDD validation review is $3,000 and covers all 23 items of the Ace Hardware FDD. We pay particular attention to Item 19 because the cooperative economics require specialized analysis. For additional context on franchise agreement provisions, read our analysis of franchise agreement red flags to watch for. If you are an existing Ace retailer considering your options, learn about our franchise exit audit services.

Frequently Asked Questions About Ace Hardware FDD Item 19

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Last updated: March 12, 2026