In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Snap-on Tools franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Snap-on Tools franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Snap-on Tools franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Snap-on Tools outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Snap-on Tools’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- number and percentage of Snap-on Tools franchisees for each of the given ranges of “Paid Sales” during the 2017 reporting period, presented in $25,000 increments between $175,000 and $1,500,000+ per year (the sample includes only those franchisees who operated for all 12 months of the 2017 reporting period and for which the franchisor has received Paid Sales information for the full period)
- average discount to franchisees from suggested prices, based on all franchisee purchases of Products from Snap-on Tools in 2017
Section I – Background Information
13 Things You Need to Know About the Snap-on Tools Franchise
Acquires Norbar Torque Tools
1. In early May 2017, Snap-on Tools announced that it had acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures, for approximately $72 million. Norbar, which is based in the United Kingdom, is a leading European manufacturer of a full range of torque products, including wrenches, multipliers, and calibrators and has a strong presence in critical industries, including power generation, oil and gas, mining, and railroad.
2. In a press release discussing the acquisition, it was reported that Norbar’s annual sales equal about $41 million. The acquisition of Norbar, which will be part of Snap-on Tools’ Commercial & Industrial Group, complements and expands Snap-on’s existing torque offering to critical industries, particularly in powered torque products.
Enhances Compare & Configure Website Feature
3. At the end of February 2018, Snap-on Tools announced that it had recently enhanced the Compare & Configure feature on its website by adding the latest diagnostic tool features, including access to Intelligent Diagnostics and oil specs and resets. This will allow professional technicians to compare two to four platforms at once to see the features that are offered and the differences between them.
4. The Compare & Configure feature can be accessed from the Platforms & Software website page by clicking on the compare box under the platforms and then clicking the red compare button.
5. Helen Taylor, senior marketing manager of Snap-on Diagnostics, said, “The latest Compare & Configure update makes it even easier for customers to compare all of the different features of our Snap-on diagnostic tools in order to choose the right tool to fit their own specific needs.”
New Catalog Features 1,300 New Products
6. Snap-on Tools started 2018 with the release of its new CAT1400 catalog, which features 1,300 new items. The 824-page catalog showcases more than 23,000 total products, including the latest in hand tools, tool storage, power tools, diagnostics, and shop and tech equipment. A digital version of the catalog was also released on its website as well as on the Snap-on app for tablets and smartphones.
7. Yvette Morrison, vice president of marketing for Snap-on Tools, said, “The Snap-on catalog continues to grow as we create innovative new products to meet customers’ ever-changing needs. Incorporating customer and franchisee feedback, our catalog features easy-to-navigate organization and layout, along with enhanced images and stories of the people who bring our products to life.”
8. Snap-on Tools, which was originally called Snap-on Wrench Company, was founded in 1920 by Joseph Johnson and William Seidemann in Milwaukee, Wisconsin. Initially, the company manufactured and marketed ten sockets that would “snap on” to five interchangeable handles, which was a revolutionary idea at the time.
9. To sell the products, Johnson and Seideman worked with Stanton Palmer, who took the tools directly to customers at their places of business and demonstrated the benefits, which became the cornerstone of the company’s marketing success. This approach was successful and Palmer brought on Newton Tarble to help with the increased workload.
10. In the 1930s, Snap-on entered the international market and was the first company in the tool industry to start offering credit to customers. Two decades later, Snap-on innovated again and started bringing products to the customer by using fully stocked walk-in vans and, as a result, pioneered today’s familiar franchisee van channel.
11. Over the next few decades, the Snap-on brand continued to grow and in 1991, the brand established a franchise program. In recent years, Snap-on has acquired several businesses in its industry, including Pro-Cut for $42 million, Car-O-Liner Holding AB for $155 million, Sturtevant Richmont for $13 million, and Norbar Torque Tools Holdings Limited for $72 million.
12. Today, there are nearly 5,000 Snap-on Tools units around the world.
Entrepreneur’s Franchise 500
13. Snap-on Tools ranked at No. 30 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Snap-on Tools franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Snap-on Tools’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 3,267
- Outlets at the End of the Year: 3,295
- Net Change: +28
- Outlets at the Start of the Year: 3,295
- Outlets at the End of the Year: 3,340
- Net Change: +45
- Outlets at the Start of the Year: 3,340
- Outlets at the End of the Year: 3,340
- Net Change: 0
- Outlets at the Start of the Year: 155
- Outlets at the End of the Year: 130
- Net Change: -25
- Outlets at the Start of the Year: 130
- Outlets at the End of the Year: 117
- Net Change: -13
- Outlets at the Start of the Year: 117
- Outlets at the End of the Year: 121
- Net Change: +4
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Part 1 – Paid Sales
- The following Statement of Paid Sales (“Statement”) illustrates various levels of sales reported by numerous franchisees in the Snap-on system for sales activity during the 2017 reporting period.
- Paid Sales are presented in $25,000 increments for paid sales between $175,000 and $1,499,999 per year.
- The franchisor compiled the Statement from information reported to it by its franchisees.
- The Statement includes only information received from franchisees who operated for all 12 months of the 2017 reporting period and for which the franchisor has received Paid Sales information for the full period. Accordingly, franchisees who began or ended operations during calendar year 2017 are not included in the Statement nor are franchisees who failed to submit all Paid Sales information for all of 2017.
- Snap-on had 3,649 franchises that operated in all or part of 2017. Of those 3,649 franchises, there were 311 franchises that ceased operations due to retirement, transfer, cancellation, non-renewal, or other termination. Of the 311 franchises that ended operations during 2017, 19 franchises operated for less than twelve months. Included in that 19 are 6 that transferred and 2 that became Snap-on employees.
- Some franchisees reporting Paid Sales information have chosen to operate with a sales employee on either a full or part-time basis. Having an employee may impact their Paid Sales. Snap-on does not track which franchisees have sales employees.
- If a franchisee operated an additional franchise, that additional franchise is reported as a separate “franchise” in the Statement.
- The Statement does not include information on Paid Sales for Snap-on employees who sell tools and equipment to customers that are similar to a franchisee’s customers or Paid Sales of Independents because Independents are not required to submit Paid Sales information.
- Snap-on franchisees do not have to report their total revenue to the franchisor. A franchisee’s Paid Sales (defined below) should approximate “total revenues,” except that a franchisee’s sales of tools and equipment purchased from a source other than Snap-on and the value of tools and equipment accepted by a franchisee as a trade-in may not be included in the Paid Sales figures reported to the franchisor.
- A franchisee’s Paid Sales means the sum of: (1) all of the franchisee’s cash sales and revolving account collections; and (2) all open accounts and credit sales assigned to Snap-on or Snap-on Credit by the franchisee.
- To the extent sales taxes are reported to Snap-on by the franchisee, they are included in Paid Sales.
- All franchisees included in the Statement were requested to use the same definition of Paid Sales in the reports submitted to Snap-on.
- Cash Sales are those sales for which a franchisee receives a cash payment at the time of the sale, including any cash down payment received on an open account, credit sale, or a lease.
- Revolving Account Sales are credit sales between a franchisee and a franchisee’s customer where a franchisee extends personal credit, usually at no interest, to finance the customer’s purchase of tools and equipment.
- Revolving Account Collections are the collections made by a franchisee on revolving account financing extended by the franchisee.
- Open Account Sales are short term credit sales made by a franchisee to businesses which the franchisee assigns to Snap-on and for which Snap-on gives the franchisee immediate credit as if the franchisee’s customer had paid in cash. Included in Paid Sales is the dollar amount of the credit (which excludes any down payment and trade-in allowance) given to a franchisee when Snap-on accepted assignment of an open account.
- For certain customer purchases, a franchisee may assign to Snap-on Credit, with Snap-on Credit’s consent, the Credit Sales contracts (including “Extended Credit Contracts”) for customer purchases. Snap-on Credit credits a franchisee the net sales price (which excludes any down payment and trade-in allowance) for the tools or equipment being sold. This credit is included in Paid Sales.
- Most states require that a franchisee collect and pay sales tax on purchases made by the franchisee’s customers. To the extent sales taxes are reported to Snap-on by the franchisee, they are included in Paid Sales.
- Percentage totals may not equal 100% due to rounding.
- Reported Paid Sales are based on franchisee reports submitted weekly and do not correspond exactly with the calendar year. Some weekly reports cover Paid Sales beginning a few days before the start of the calendar year; others end a few days after. In all cases, Paid Sales figures above reflect no more than one year’s Paid Sales.
- The Statement reflects the various levels of Paid Sales in all parts of the United States and the level of sales may vary based on several factors such as: your management skills, experience and business acumen, local economic conditions, local market for your Products and services, and competition.
Number and Percentage of Franchisees Reporting Per Paid Sales Level