In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Midas franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Midas franchise, based on Item 7 of the company’s 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Midas franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Number of franchised and company-owned Midas outlets at the start of the year and the end of the year for 2014, 2015, and 2016, based on Item 20 of the company’s 2017 FDD
- Section V – Presentation and analysis of Midas’ financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average gross sales and ranges of actual gross sales for the 985 franchised Midas Shops in operation in the United States for more than 2 years as of December 31, 2016
- 2015 average sales, costs of goods sold, technician wages, franchise royalties, advertising royalties, other variable expenses, and other fixed expenses for the 42 franchised Midas Shops that submitted annual financial statements to the franchisor in the required format and had been open and operating for at least 24 months prior to the end date of the financial statements
Section I – Background Information
14 Things You Need to Know About the Midas Franchise
2018 Expansion Plans
1. Midas has been operating for over 60 years and continues to thrive despite a 12.8 percent drop in units since 2014. At the end of March, Lenny Valentino, vice president of franchise development for Midas’ parent company, TBC, said in an interview with Ratchet+Wrench that area development agreements are a major focal point for Midas’ expansion efforts. At the time of the interview, Midas had over 10 of these development agreements in place across the U.S., which can run from three locations to hundreds of stores.
2. Midas’ expansion efforts have extended all over the country, but the Carolinas, the Southwest, and the Southeast have all been hot spots for the brand.
3. Since 2014, Midas has seen its total U.S. locations dip from 1,239 to 1,080. As a 62-year-old brand, Valentino said that aging buildings and real estate are a big reason for many of these closings. Unfortunately, the brand has had to close some older locations that no longer fit with the vision of the brand going forward.
Leeds West Group Acquires 42 Locations
4. In late 2017, Leeds West Group (LWG), a capital group that acquires automotive franchises, announced that it had entered into an agreement to acquire Auto Systems Experts (ASE), a Midas franchisee headquartered in Davenport, Iowa that operates 42 Midas locations. LWG already owns and manages 55 big-name auto service branches like Big O Tires, SpeeDee Oil Change & Auto Service, and Midas in nine states.
5. At the time of the announcement, LWG said that once the deal closes, the company will own 97 automotive franchises in 15 states with 850 employees. According to Judd Kyle Shader, founder and CEO of Leeds West Group, “This acquisition represents a powerful opportunity for LWG to significantly expand our presence in the United States [and] in the franchise aftermarket automotive repair industry.”
6. The deal coincided with ASE’s 60th anniversary. It was founded in 1957 – a year after Midas started franchising – and is one of the oldest Midas franchisees in the United States. An employee stock option plan means that it was 100 percent under staff ownership. ASE’s leadership said it is working hard to ensure a smooth transition.
7. Ron Seagle, vice president of Midas, said, “The ASE and Leeds West Groups represent two of the finest dealer teams within the Midas system and we are extremely excited to work with both Judd and Alan as they continue to expand into new areas and grow market share.”
8. Midas, which is an acronym for Muffler Installation Dealers’ Associated Service, was founded in 1956 by Nate H. Sherman in Macon, Georgia. Before starting his own business, Sherman was a traveling auto parts salesman from Omaha, who realized that all of the new cars that were filling America’s roads would need replacement parts.
9. While traveling through Wisconsin in 1931, Sherman met a punch press operator named Joe Marx and asked him if he could manufacture mufflers. The two set up a factory and developed a muffler that they felt was superior to any others. Sherman and Marx made their mufflers even better by working with the Armour Institute of Technology to develop a coating to make the mufflers rust-resistant and added other design refinements to make their mufflers more durable.
10. Inspired by the high quality of their mufflers, Sherman got the idea to start selling the mufflers through franchised automotive repair shops. Midas was originally called Midas Mufflers because of its focus on selling Sherman and Marx’s mufflers.
11. Within a year of the first franchise opening in 1956, over 100 Midas repair shops were established. In the 1970s and 1980s, Midas diversified its services and started offering brakes, computerized suspension, and alignment. The company made major changes again in the early 1990s when it developed a Standards of Service — a set of guidelines that offers Midas technicians and consumers clear explanations of the difference between a required service and a suggested service.
12. Midas continued to expand over the next two decades, and it was acquired by TBC Corporation in 2012. Today, there are over 2,100 Midas repair shops around the world.
Entrepreneur’s Franchise 500
13. Midas has appeared on Entrepreneur’s annual Franchise 500 list every year for the past 10 years, except in 2018. The company’s highest rank was No. 23 in 2010, while its lowest rank was No. 301 in 2017.
Section II – Estimated Costs
- Please click here for detailed estimates of Midas franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Midas’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 1,072
- Outlets at the End of the Year: 1,042
- Net Change: -30
- Outlets at the Start of the Year: 1,042
- Outlets at the End of the Year: 1,034
- Net Change: -8
- Outlets at the Start of the Year: 1,034
- Outlets at the End of the Year: 1,017
- Net Change: -17
- Outlets at the Start of the Year: 3
- Outlets at the End of the Year: 2
- Net Change: -1
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 0
- Net Change: -2
Section V – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
Part 1 – Average Annual Gross Sales and Ranges of Annual Gross Sales
- Below are ranges of actual gross sales figures of 985 franchised Midas Shops in operation in the United States for more than 2 years as of December 31, 2016.
- All of these Midas Shops are generally comparable to the franchise being offered. Shops operating as Midas/SpeeDee Co-Branded Shops in 2016 are excluded from these results.
Range of Annual Sales: $900,000 and over