If you are considering a Matco Tools franchise, don’t get blindsided by these 17 important franchise fees (from the initial franchise fee, to the royalty fee, to 15 other fees found in Items 5 and 6 of Matco Tools’ 2016 FDD).
- Each fee is imposed by and payable to Matco, and is uniformly imposed on all distributors (unless otherwise noted).
- All fees are nonrefundable. However, the Product inventory that you are required to purchase on a weekly basis is resalable.
- Matco does not have advertising cooperatives.
1. Initial Franchise Fee for New Distributors: $3,600 to $6,000
- When you sign the Franchise Agreement, you must pay Matco an initial franchise fee of $6,000 (the “Initial Franchise Fee”). The Initial Franchise Fee for a new “225 Distributor” will be $3,600.
- The Initial Franchise Fee must be paid in full, unless Matco agrees to finance all or a portion of the Initial Franchise Fee.
- The Initial Franchise Fee is fully-earned and nonrefundable when you sign the Distributorship Agreement. However, Matco will refund the Initial Franchise Fee paid if you elect to terminate the Distributorship Agreement within the first 6 months after signing through the “6 Month Test Drive.”
2. Initial Franchise Fee for Renewing Distributors: $0 or renewal fee
- If you are renewing your right to operate a Distributorship under a Distributorship Agreement that was signed before March 2014 (which did not have a requirement to pay a renewal fee), Matco will waive the Initial Franchise Fee, and will not charge a renewal fee.
- If your Distributorship Agreement was signed after March 2014, you must pay the renewal fee set forth in your Distributorship Agreement in lieu of the Initial Franchise Fee.
3. Initial Inventory Purchases: $41,000 to $86,000
- You are required to purchase an initial inventory of Products from Matco (the “New Distributor Starter Inventory”) before the date you begin operating your Distributorship. In some instances, your initial inventory may be acquired from a predecessor distributor.
- Currently, the minimum New Distributor Starter Inventory is generally $66,000 but may be higher (as discussed in the next paragraph). This amount may not be uniform for all Distributors, and Matco expects that the amount will range, generally, from $63,000 to $86,000.
- If you qualify, all or a portion of the cost of the New Distributor Starter Inventory may be financed through Matco.
- The required initial inventory for a new 225 Distributorship will be lower than that of a standard Distributorship, depending on the number of Potential Customers in the 225 Distributor’s Territory. In 2015, the minimum New Distributor Starter Inventory for a new 225 Distributorship was generally $42,000, even though the New Distributor Starter Inventory ranged from $41,000 to $63,000.
- Matco participates in the VetFran Program (Veterans Transition Franchise Initiative). Matco will provide to each new distributor who is an honorably-discharged U.S. veteran $6,750 of hand tools (valued at list price) at no charge.
- The VetFran Program incentive may be used only once by a veteran and will not apply to additional franchises, or modifications to existing franchises, or distributorships such as the Distributor Plus Program.
4. Computer Software License Expenses: $799 (initial license fee); $100 (one-time license fee for credit card processing software); $45 (one-time license fee for signature pad processing software); $425 (annual software maintenance fee)
- Matco has developed computer software for the exclusive use of its distributors. Matco’s proprietary copyrighted software system, called the Matco Distributor Business System (“MDBS Software”), is designed to assist you in minimizing paperwork, managing your List of Calls and route, handling inventory, receivables and order processing functions, and performing other tasks relating to operating the Distributorship.
- You must sign the Matco Distributor Business System Software License, Maintenance, and Support Agreement (the “Software License Agreement”) attached to the Disclosure Document and pay Matco the initial software licensed which is currently $799, prior to the date you begin operating your Distributorship.
- There will be a one-time charge of an additional $100 for licensing Credit Card Processing Software and $45 license fee for Signature Pad Processing Software that interfaces with the MDBS Software.
- The Software License Agreement is for an initial term of one year, with automatic renewals for additional one year terms. Beginning with the second month of the Software License Agreement and each year thereafter, you will be required to pay an annual software maintenance fee, which is currently $425 for systems meeting Matco’s required specifications.
- If you have a system that does not meet Matco’s required specifications, including manufacturer, model, configuration, operating system, virus protection, and/or non-Matco-specified use of third-party software and Internet sites, the annual charge for systems maintenance and support will include, in addition to the $425 fee, an annual charge of $400 until you comply, to Matco’s satisfaction, with Matco’s required and exact PC configuration and/or removal of non-Matco specified third party software.
- Computer software license expenses are nonrefundable, and are uniformly imposed on all distributors.
5. Web Page Set Up Fee: $195
- Matco has established a Website for the entire system and offers you a web page (or subpage) on Matco’s Website.
- You are required to sign the Matco Tools Web Page Agreement. Under this Agreement, you will have your own subpage on Matco’s website. Also, you must pay Matco a one-time web page set-up fee of $195 at the execution of the Web Page Agreement.
6. Document Processing Fee: $99
- When you elect to start a Matco franchise, Matco will review and execute, and, if necessary, will file applicable documents with state agencies as required. The processing/filing fees will be $99. You must pay this fee to Matco upon signing the Distributorship Agreement.
7. Drug Test: $50 per test
- As of April 1, 2009, Matco implemented a drug testing policy for prospective franchisees/distributors. If you are interested in acquiring a Matco franchise, and you proceed successfully through the application process, before Matco grants a franchise to you, you must take and pass a drug test.
- The test, which is currently intended to test for alcohol and illegal drugs, will be administered by a third party testing company, and the results will be provided to you and to Matco. The current cost of the test, or lab fee, is approximately $50 per test, per applicant.
- If you fail the test, you will not be granted a franchise, and you will not be required to pay the fee. If you pass the test, you will be granted a franchise, and the cost of the test, or lab fee, will be charged to your “Open Purchase Account” (or “OPA”), and will be repaid over time based on your collections or revenues in your business.
8. Minimum Inventory Purchases: maintain an inventory of Products at least equal to the starter inventory; and maintain a ratio of purchase average to total sales of at least 60%. Also, during your first year of operations, you must participate in the NPP program.
- Due Date: Weekly.
- You are not required to pay any monthly or periodic royalty, franchise, license, advertising, or other fee (except the annual software maintenance fee described below) during the term of the Distributorship Agreement.
- You must purchase a minimum amount of Products from Matco on a regular basis, in order to maintain a minimum inventory of Products equal to or in excess of the New Distributor Starter Inventory.
- As described above, new and existing Distributors who sign a 225 Amendment will have a lower New Distributor Starter Inventory level or threshold.
- Also, you must maintain a minimum ratio of 60% of your year-to-date purchases divided by your year-to-date sales.
- In addition, during your first year of operation, you must participate in Matco’s New Product Pipeline (“NPP”) program. Under the NPP program, whenever Matco develops or acquires a new Product, Matco will ship the new Product to you promptly upon introduction, according to the pricing “Tier” and the number of units designated by you at the time of enrollment into the NPP program.
- Matco’s current plan is to send you no more than two new Products through the NPP program per month.
- Matco will charge your Open Purchase Account for the cost of the Product. If you do not want the Product, or cannot sell the Product, then you may return the Product to Matco within 60 days of receipt, and you will receive a credit of the full cost of the product to your Open Purchase Account.
9. Computer Maintenance and Support Charge: $425 or $825
- Due Date: Annually.
- The computer maintenance and support charge is payable on the second month of the term of the Software License Agreement and annually thereafter upon the anniversary date of the Software License Agreement.
- The current annual charge is $425, and this amount is subject to change by Matco from time to time.
- Matco has set specific hardware requirements in order to ensure proper functioning of the MDBS Software.
- Matco may offer a Conversion Incentive Program to qualified Conversion Distributors. If you qualify, some of the initial incentives may reduce your first year’s fees and costs for the MDBS system.
- In each year of the Software License Agreement, the annual maintenance and support charge may include an additional $400 charge if your system does not satisfy Matco’s required and exact PC manufacturer, model, configuration operating system, virus protection, and/or non-Matco specified use of third-party software and Internet sites.
- Software maintenance and support does not include MDBS Software support services assisting in the removal of viruses, worms, or spyware of any nature. This service may be available from Matco at $50/hour.
10. Additional Training Fee (for spouse): $295
- Due Date: On or before training starts.
- If you or your initial operator elects to bring your or his/her respective spouse to the Matco Business System Training Program (the “MBST Program”), Matco will charge you a flat fee in the amount of $295 for food, lodging, and local transportation.
- Matco encourages you to bring your spouse to the New Distributorship Training Program.
11. Field Training for Additional or Replacement Employees and Operators: $1,250 per week for field training provided to the 3rd and subsequent employees/operators
- Due Date: On or before training starts.
- Matco will provide the MBST Program, at the time and place Matco designates, to any new or replacement employees or operators that you hire, subject to the availability of Matco’s personnel.
- Matco will provide the MBST Program for your first and second additional or replacement employees free of charge.
- However, for the third and subsequent employees or operators that you hire who will not be operating new Mobile Stores, Matco will charge its then-current weekly fee for the in-field portion of the MBST Program, which includes its travel, meal, lodging, and payroll expenses to send a trainer to you.
- Matco’s current fee is $1,250 per week, but Matco may change this amount at anytime.
- You are responsible for your employees’ and operators’ travel, meal, and lodging expenses associated with attending the MBST Program, as well as your salary and fringe benefit expenses associated with sending employees and operators to, and attending, the MBST program.
12. Web Page Maintenance Fee: $195
- Due Date: Annually, on the anniversary date of Web Page Agreement.
- Matco created and maintains a Website, and offers all Distributors the opportunity to have his/her own web page on the Matco Website. The Distributor must sign Matco’s “Matco Tools Web Page Agreement.”
- The Web Page Agreement requires a one-time $195 set-up fee, and an annual maintenance fee of $195 per year.
- The Distributor must comply with Matco’s web page policies which can be modified at Matco’s discretion.
13. Insurance: varies
- If you do not obtain and maintain the required proper insurance coverage required under the Distributorship Agreement, Matco may purchase the insurance policy on your behalf and will charge your Open Purchase Account for the premiums paid.
14. Late Fee on OPA: 5% of amount due, per week; maximum $100
- Due Date: Upon invoice or demand.
15. Inventory Returns, Restocking Fee: 15% restocking fee (35% in limited circumstances)
- Due Date: Upon invoice or demand, charged to OPA (restocking fee).
- Matco’s current tool return policy provides that a distributor may return eligible tools and other inventory that the distributor purchased from Matco for credit.
- Matco will charge a 15% restocking fee for many, but not all, returned products. The 15% restocking fee is based on the distributor’s price paid for the Product at the original date of purchase (to the extent records are available).
- For items returned without the proper paperwork, the restocking fee will be 15%, plus an additional 20% of the distributor purchase price of the Product.
- For warranty items that are returned for repair, there is no restocking fee (except if the products are returned without the proper paperwork or shipping documents, Matco will charge a fee equal to 20% of the distributor purchase price of the product).
- The restocking fees will be charged to the distributor’s Open Purchase Account.
16. Repair Kits: $10 to $40 per kit (but, generally $10 per kit)
- Due Date: Upon invoice or demand.
- As a distributor you must perform certain warranty service functions in the field at the customer’s place of business. These “in the field” services include the repair of ratchets and toolboxes.
- For ratchet warranty repairs, you must purchase ratchet repair kits, at a cost of $10 to $40 per kit (but most kits are $10 per kit).
- You must return the defective part to Matco, and pay the shipping/freight charges.
- Matco will credit the cost of the ratchet warranty repair kit upon return of the defective parts to Matco. Matco includes ratchet warranty repair instructions on its website for distributors.
17. Successor Distributorship Fee: 50% of Matco’s then-current Initial Franchise Fee
- Due Date: On or before the date you sign a Successor Distributorship Agreement.
- You must pay a Successor Distributorship Fee equal to 50% of Matco’s then-current Initial Franchise Fee if you choose to reacquire your Distributorship for an additional 10-year period.
- If you are renewing a “225 Distributorship,” the Successor Distributorship Fee will be 50% of Matco’s then-current initial franchise fee for “225 Distributorships.”