How RONA is Keeping its Franchises Intact

A five-step succession plan for maintaining market share

RONA is the largest Canadian distributor and retailer of hardware and home renovation and gardening products. The corporation operates a network of nearly 1,000 corporate, franchise, and affiliate stores under several banners, and a network of 17 hardware and construction materials distribution centres, which are flexible and perfectly adapted to the diverse needs of its clientele. Last year, the company had revenue of $4.7 billion.

Selling hardware and home-improvement products, RONA has built great success over the years. The company is the top retailer in its industry and currently controls two-thirds of the market, with corporate and franchise stores across Canada. Four years ago, however, the company faced a dilemma: Some franchise owners—many with rural locations—were looking to retire but didn’t have an exit strategy. Instead of closing stores, executives at the corporate headquarters opened their toolboxes and got to work, creating a plan to help owners find successors and keep their equity.

“A significant chunk of our business is distributing products to independent dealers and owners,” says Christian Proulx, senior vice president of people and culture. “It’s how our company started 72 years ago. It’s the soul of our business. When we saw our core of dealer owners getting older, we became concerned about what would be next. We decided to put together an initiative, take the pulse of youth and see if there were people interested in taking over.”

Proulx says finding ambitious potential owners wasn’t difficult, but most lacked the funding to purchase a franchise. RONA executives talked to their bankers and created a $100 million succession fund, to help new owners get started. And then they set about creating a five-step succession plan.

1. Prescreen

A lot of candidates raise their hands to buy business, but RONA is looking for qualified candidates—well-rounded individuals with entrepreneurial spirit.

The first step is prescreening. Candidates must possess a number of important characteristics, says Francois Hardy, vice president of dealer network development. “We developed a competency model, looking at things like background, desires, an ability to manage a store and personnel, and relationship-building skills,” he says. “We assess these strengths before we look at their financial history.”

“We also look at their view on risk,” says Proulx. “Corporate managers score very differently on their feeling about risk than an entrepreneur. If you can’t deal with risk, you will sleep very badly.”

2. Train

RONA has created a training and mentorship program to prepare screened candidates. Each potential owner enters an incubation process, where they spend time with another owner to get a feel for what it will be like running store. Candidates also spend time at RONA’s headquarters in Boucherville, Québec, where they receive personal development and business education training. Courses at schools and universities round out the candidate’s knowledge.

3. Match

Once candidates are trained, they are matched with potential opportunities. Store size, expertise, location, and money are all considerations, as is chemistry.
“The seller must fall in love with the buyer,” says Hardy. “The sellers have owned and operated the business for 30 years. They must be sure it is in good hands for the next 30 years.”

4. Sell

Next, RONA helps with the transaction. Drawing upon its financial, accounting, and legal groups, support is available for the buyer and the seller.

“We help the owners who built the company pass the torch,” says Hardy. “We offer a five-page checklist of elements to take into account. Everything from assessing assets to legal structure to finances.”

5. Support

Finally, RONA offers new owners continued support, helping them with issues such as hiring, merchandising, marketing, and accounting. Proulx says the company’s team of experts is available to help its dealers.

“We look at financials once a year, meet with teams each month and help them make the right decisions,” he says. “We follow our investment into the future and help them grow a successful business. The uniqueness of this program is that we literally pull from our corporate expertise to assist our franchisees. No other company does this.”