Snap-on Franchise Costs: Estimated Initial Investment (Item 7, 2022 FDD)

Estimated Total Initial Investment Range

1.   Real Estate:  $0

• You do not have to purchase or lease real estate, unless local laws may prohibit you from parking your van at your residence, which will mean that you will be required to lease space to park your van away from your residence.

• If you desire office space for completing and maintaining your records, you would typically use a room in your residence.

2.   Initial License Fee:  $8,000 to $16,000

• Snap-on Credit may offer financing for the Initial License Fee through the Franchise Finance Program.

3.  Initial Inventory:  $114,500 to $125,000

• The franchisor sells products to you at a discount from suggested retail prices, currently ranging between 10% and 43.9%. The franchisor requires that you begin operations with an initial inventory having a suggested price approximately between $172,000 to $188,000 and a cost to you between $114,500 to $125,000.

• Your initial inventory may include up to $1,000, at franchisee cost, of demonstration tools (“Demonstration Tools”), which the franchisor selects for you. Demonstration Tools are not intended for resale, but rather to assist you in the sale of tools to your customers.

• If you are purchasing a Transfer Franchise, you may purchase all or part of this inventory from the franchisee whose assets you are buying. However, you may need to purchase additional inventory so that your total new, current, and saleable inventory has a suggested retail price approximately between $172,000 to $188,000 and a current franchisee cost between $114,500 and $125,000.

• All products are subject to the terms of the franchisor’s tool return policy in effect on the invoice date for the Product you return. Under the current policy, you may return current product you purchased from the franchisor (excluding tool storage, diagnostics, software, and various other categories that are designated as not returnable) in new, current, and saleable at full list condition and in original packaging.

• The franchisor does not give credit for products which it no longer manufactures or distributes or products specially made or ordered for you or a customer.

4.  Electronic Signature Pad:  $0 to $200

• If you elect to participate in the Extended Credit Program, you will need an apparatus that accepts electronic signatures.

• If you choose to lease the All-In-One Device that is available through Verifone, you will not need to purchase a separate electronic signature pad and you will not incur any additional cost above the cost of the lease.

• If you choose not to lease the All-In-One Device from Verifone, you will need to purchase the Topaz, T-s261-HSB, which will allow you to accept electronic signatures on EC Contacts. You may purchase the Topaz electronic signature pad through any retailer you choose. The Topaz electronic signature pad will cost you about $200.

5.  Supplies:  $0 to $400

• The franchisor provides you with supplies with an approximate franchisee cost of $400, which is included in the Initial License Fee, except in the case of a Transfer Franchise or Renewal Franchise.

6.  Van:  $45,000 to $155,000

7.  Van Insurance (3 months):  $688 to $2,063

• The franchisor estimates that your annual premium for your van insurance will range between $2,750 and $8,250; however, this amount may be higher based on the driving record of the individual primarily driving the van and location of your List of Calls.

• The annual premium may be paid monthly or quarterly. The figures above reflect the first quarterly payment for this premium as part of your initial investment.

8.  Van Delivery Charge:  $180 to $4,100

9.  License:  $200 to $2,400

• The estimated cost of this item reflects what the franchisor believes to be the initial cost of leasing or purchasing outright a fully-equipped van (including the required security system). Snap-on Credit offers van leasing under the Snap-on Credit Van Lease Program.

• Unless you are participating in the Franchise Finance Program, which requires a van lease and maintenance package, you may purchase or lease a van that meets specifications contained in the Snap-on Program from any supplier or leasing company with the franchisor’s prior approval, which will not be unreasonably withheld.

• The other expenses related to your van and included in the table above as part of your initial investment are the following:

• (i) Van Insurance. The franchisor estimates that your annual premium for your van insurance will range between $2,500 and $7,500, which can be paid monthly or quarterly. The table reflects the first quarterly payment for this premium as part of your initial investment.

• (ii) Van Delivery Charge. This is a one-time charge, which the franchisor estimates will range between $180 to $4,100 depending on where you are located within the continental United States. This amount will be exceeded in Alaska and Hawaii, but it is not possible to give an accurate estimate.

• (iii) License. The franchisor estimates that your annual license fee paid to your state will range between $200 and $2,400. The table reflects your first year’s license payment as part of your initial investment.

10.  Acquisition/Development of Revolving Accounts:  $0 to $85,000

• Revolving Account or “RA” sales will typically make up a large percentage of your sales. RA sales are credit sales between you and a customer to whom you extend personal credit, usually at no interest, to finance the customer’s purchase of products. You and the customer decide terms, such as price, down payment, and repayment schedules.  Since you extend your own credit, you bear 100% of the risk of loss if the customer defaults on an RA.

• RA sales typically create cash flow demands on the operation of your franchise. You will have the immediate expense of purchasing products from the franchisor, but customers will pay you over time. The high percentage of RA sales also means that you will typically carry a substantial amount of accounts receivable owed to you by your customers.

• Your RAs are created two ways. The first method for creating RAs is for products you sell to your customers as RA sales, which is RA Development.

• The second method is RA Acquisition where the predecessor franchisee who previously sold to customers on your List of Calls or Snap-on, if Snap-on purchased the predecessor franchisee’s RAs, will usually offer you the opportunity to purchase his or her RAs.

• The purchase price for the RAs you purchase is 75% of the balance due of each RA sold unless you and the predecessor franchisee agree to a different amount. This discount from the balance due is intended to compensate the purchaser for collecting the RAs and assuming the bad debt risk on the RAs.

11.  Other Equipment, Fixtures, and Expenses:  $150 to $170

• This item covers miscellaneous expense items and optional items you choose to purchase to assist you in the operation of your franchise.

12.  Computer Software License Fee:  $1,800

• This is a one-time license fee that you pay the franchisor for the initial installation of the proprietary software necessary to operate your store.

13.  Additional Funds for 3 Months:  $4,628 to $19,808

• This item estimates initial start-up expenses for your first three months of operation. This item includes expenses for accounting service, legal entity incorporation or organization, fuel, telephone, and other communications; van maintenance; van lease payments; required insurance (other than van insurance); monthly license fee; monthly software maintenance fee; sales materials; bank and credit card service charges; and certain miscellaneous expenses.

• The estimate of Additional Funds does not include any draw or salary for you or any employee salary or other expenses applicable to your employees, such as workers’ compensation, unemployment, and employer’s contribution to social security tax.

14.  Estimated Total Initial Franchise Expense:  $175,146 to $411,941

Out-of-Pocket Expenses with Franchise Finance Program Financing

1.   Real Estate:  $0

2.   Initial License Fee:  $0

3.  Initial Inventory:  $0

4.  Electronic Signature Pad:  $0 to $200

5.  Supplies:  $0 to $400

6.  Van:  $2,889 to $3,397

7.  Van Insurance (3 months):  $688 to $2,063

8.  Van Delivery Charge:  $180 to $4,100

9.  License:  $200 to $2,400

10.  Acquisition/Development of Revolving Accounts:  $0

11.  Other Equipment, Fixtures, and Expenses:  $150 to $170

12.  Computer Software License Fee:  $0

13.  Documentation Fee with Snap-On Franchise Finance Loan:  $100 to $250

• A one-time documentation fee is required by Snap-on Credit at the time loan documents are signed. It is $250, but if you are an existing franchisee purchasing an additional franchise, it will be $100.

14.  Minimum Down Payment with Franchise Finance Loan:  $21,500

• If you take part in the Franchise Finance Program, you must make a minimum down payment of $21,500, although Snap-on Credit may require a higher down payment or reduce the down payment.

• As used in this disclosure document, down payment shall represent funds deposited into the operation of the business for which your business assets are not used as collateral.

• If you obtain financing from a lender other than Snap-on Credit, that lender will determine the amount of any required down payment.

15.  Additional Funds for 3 Months:  $12,419 to $19,808

16.  Estimated Total Initial Franchise Expense:  $38,126 to $54,288