Franchise Costs: Detailed Estimates of Matco Tools Franchise Costs (2019 FDD)

Updated April 27, 2019.

Detailed Estimates of Matco Tools Franchise Costs Based on Item 7 (Estimated Initial Investment) of Matco Tools’ 2019 Franchise Disclosure Document

1.  Initial Franchise Fee:  $7,000

• The Initial Franchise Fee must be paid in full, unless Matco agrees to finance all or a portion of the Initial Fee.

• The Initial Franchise Fee is fully earned and non-refundable when you sign the Distributorship Agreement. However, Matco will refund the Initial Franchise Fee paid if you elect to terminate the Distributorship Agreement within 6 months after signing, if you comply with all post-term obligations as described in Item 5.

2.  Initial Inventory:  $65,000 to $88,000

• The current Distributor Starter Inventory is generally $68,000, but Matco Tools may permit some Distributors to purchase up to $88,000 of initial inventory.

• You must maintain or exceed this amount of inventory during the term of your Distributorship.

• If you qualify, Matco Tools may finance up to $87,000 of your initial investment with no down payment, which will consist of up to $80,000 in financing which must be applied towards your Distributor Starter Inventory and up to $7,000 in financing which must be applied towards the Initial Franchise Fee.

3.  Acquisition and Establishment of Time Payment Reserve Accounts:  $22,000 (or Time Payment Line of Credit:  $4,700 to $9,325)

• If your initial investment is not financed by Matco Tools, you will be required to deposit $22,000 in a Time Payment Reserve account.

4.  Mobile Store (3 months’ lease payments):  $5,525 to $125,000

• The Mobile Store is the required vehicle, or truck, that you will use to visit customers, stock inventory, and sell products.

• The lower range of the estimated cost is an amount equal to 3 monthly lease payments of $1,685 (although payments are made weekly) and down payment of $445 on a used Mobile Store.

• The higher range of the estimated cost is an amount equal to the full cash purchase price of a new Mobile Store.

• Matco Tools estimates that the average initial costs for the required Mobile Store will reflect a lease of a new Mobile Store, with a down payment of $3,945 to $5,525 and 6 weekly payments of $385 to $425 each for an average cost of $2,310 to $2,550 (plus the down payment).

5.  Computer Hardware:  $2,800 to $3,400

• You are required to purchase or lease a new (not previously owned or refurbished) personal computer (a “laptop”) as specified by Matco. Matco will provide you with its specifications for hardware (such as the operating system, hard drive size, memory, maintenance/warranty, printers, etc.), Matco-specified barcode reading and label printing equipment, Signature Pad, and Matco specified credit card swipe device.

6.  Computer Software and Internet Service (3 months’ payments):  $2,050 to $2,750

• You must sign the Software License Agreement and pay the specified initial software license fee for the MDBS Software which is currently $899, and a $100 license fee for the credit card processing software and $45 license fee for the Signature Pad software, as well as the specified annual fee of $450 for the Systems Maintenance Support upon the second month of the Software License Agreement.

• In addition, if you attend training and your computer does not meet Matco’s previously published standards, you may be charged an additional fee of $400, which will be assessed annually thereafter until your computer meets Matco’s published compliance standards.

7.  Insurance (3 months’ premiums):  $525 to $3,525

• You must purchase comprehensive general liability insurance, including products liability coverage and vehicle liability insurance coverages, with minimum limits of each policy of at least $2,000,000 and a maximum deductible of $1,000.

• Additionally, you must purchase all risk Inland Marine coverage for full replacement value equal to the New Distributor Starter Inventory. You must also purchase “replacement cost” coverage for your Mobile Store, computer system, inventory, and other items used in operating the Distributorship.

8.  Travel, Lodging, and Meal Expenses:  $170 to $2,515

• Travel expenses include the estimated cost of travel to and from the location of the initial training program and your home, and the cost of travel to the dealership to take delivery of your Mobile Store and to drive it home.

9.  Professional Services:  $150 to $2,000

• Professional services may include those provided directly to you for accounting, legal, and other consulting services.

10.  Fixtures, Supplies, Licenses:  $500 to $3,000

• The costs for initial fixtures, supplies, and licenses will vary by the specific requirements of each Distributor and the requirements of the local laws in which business will be conducted.

• Supplies include items such as work uniforms, business forms, stationery, business cards, catalogs, promotional literature, and sales materials.

• Licenses typically include general business licenses required by cities and localities in which you will do business.

11.  Additional Funds for 3 Months:  $5,000 to $13,500

• Your requirement for additional funds will vary. You will require an amount of initial capital at the time of start-up and will need working funds throughout the operation of your business.

• The estimated additional funds will help finance business expenses (e.g., Mobile Store operating expenses, freight (including packaging and shipping warranty and overstock items to Matco as well as shipping for certain items from Matco), loan payments, cell phone, and bad debt on receivables) during start-up and during periods in which collections from customers are not adequate.

• This amount represents Matco’s estimate of the costs associated with the first three months of operating your Distributorship and is based on Matco’s working knowledge of the operating experiences of its existing Distributors.

• You must have funds committed for the start-up period of the Distributorship, including, but not limited to, the expenditures associated with initial fixtures, supplies, and licenses, prior to and as a pre-condition to commencing operation of the Distributorship.

• Matco reserves the right to require that certain distributors pay to it an amount, determined by Matco, that will be designated as a reserve and set aside for payment of a portion of these initial costs and expenses (the “Initial Investment Reserve”).

• The amount of the initial costs and expenses that the Distributor incurs in connection with commencing operations and operating during the start-up period of the Distributorship will exceed the Initial Investment Reserve, and the Initial Investment Reserve is intended only to offset these initial expenditures.

• Matco will disburse the Initial Investment Reserve to the Distributor at a time determined by Matco so that the Distributor may make payments to third parties, which will typically be approximately two months after the effective date of the Distributorship Agreement.

12.  Total:  $93,420 to $272,690