FDD Talk 2019: Matco Tools Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Matco Tools franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Matco Tools franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Matco Tools franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Matco Tools outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Matco Tools’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 Average Total Completed Business for the top third, middle third, and bottom third of the 1,394 Matco Distributors in the United States that were in business for all of 2018, and that reported sales for at least 48 weeks during 2018

• 2018 National Distributor Sales Average for the 1,394 Matco Distributors in the United States who (i) were in business at the beginning of 2018, (ii) were operating at the end of 2018, and (iii) reported sales close-outs at least 48 weeks during 2018

Section I – Background Information

14 Things You Need to Know About the Matco Tools Franchise

Launches New Scan Tool Tablet

1.  At the end of September 2018, Matco Tools announced the launch of its Maximus 3.0 (part number MDMAX3), a full featured, diagnostic scan tool tablet that is taking the Matco Tools diagnostic platform to the next level with access to a game-changing repair database. The Maximus 3.0 is not only the fastest, strongest, and most intuitive member of the Maximus diagnostic tool family, but it also equips professional automotive technicians with the information and resources they need to complete a job.

2.  Once a technician scans a vehicle, the Maximus 3.0 will automatically link the vehicle make, model, and year information, as well as diagnostic reporting, to an exclusive automotive repair database called MaximusFix. This database will provide full technical service bulletins, flow charts, wiring diagrams, and other manufacturer documents needed to help the technician get to the fix and efficiently complete the job.

3.  Ben Gambrel, vice president of marketing for Matco Tools, said, “Automotive technology is constantly advancing, changing and becoming more complex. Because of this, we recognized the need to arm automotive technicians with all the information they need to make the vehicle repair, saving them time and frustration. We wanted to put the power directly in the hands of our customers with our most powerful diagnostic scan tool yet.”

4.  This unit was designed to save time and make it easier to fix vehicles. By simply plugging in the dongle, the Maximus 3.0 automatically identifies the vehicle and performs OE-level diagnostic testing. The tablet provides a data sampling feature, so the technician can quickly compare the vehicle’s readings against the optimal levels for that vehicle.

5.  The Maximus 3.0 also ensures that a technician can get the most out of estimates by allowing them to print and email customized health reports before and after repairs are made. It also features Tech 2 Tech remote diagnostics which allows a technician to remotely log in and make the repair even from thousands of miles away.

6.  Maximus 3.0 runs on an upgraded open Android system on a 10.1″ touch screen display, allowing multiple applications to be used at once with high speeds. The Maximus 3.0 is IP65 rated to withstand dust, debris, and water; features a built-in foldable kickstand; and lasts up to eight hours on a single charge.

Celebrates Tools for the Cause

7.  In early May 2018, Matco Tools announced that the company would donate 15% of the proceeds from the sale of Tools for the Cause products and merchandise to the Fisher House Foundation. Some of the Tools for the Cause products include t-shirts, caps, mugs, decals, and can koozies. Donations to the Fisher House could also be made at Fisher House’s website.

8.  For more than 25 years, the Fisher House Foundation has provided a “home away from home” for families of patients receiving medical care at major military and VA medical centers. These homes offer free temporary lodging to military and veterans’ families throughout the United States, Germany, and the United Kingdom.

9.  Since Tools for the Cause began in 2012, Matco Tools has donated nearly $800,000 to research and community-based organizations. Along with partnering with the Fisher House Foundation, the Matco Tools for the Cause program also supports the Breast Cancer Research Foundation.

10.  Ben Gambrel, vice president of marketing for Matco Tools, said, “Many of our distributors and associates have either served or have a family member who has served in one of the branches of the military. With its efforts to ease the burden on military families, the Fisher House Foundation is an excellent addition to the Tools for the Cause Program.”

Company History

11.  Matco Tools was founded in 1946 as the box manufacturing division of Mac Tools. However, Matco Tools has been operating as its own company since 1979 and has not been associated with Mac Tools since then. That same year, Matco Tools began selling its products directly to professional mechanics.

12.  Similar to other mobile tool franchises, including Mac Tools, Matco Tools products are sold by local tool distributors who own a territory by means of a franchise. The franchise owner drives to the work locations of potential customers, and typically offers financing to individuals looking to buy their tools. Matco Tools trucks are easily identified by their white color with a large blue and red Matco Tools logo on the side.

13.  In 2016, Matco Tools’ former owner Danaher, spun off several subsidiaries, including Matco Tools, to form Fortive, which is now Matco Tools’ parent company. Today, there are Matco Tools franchises across the United States and Canada.

Entrepreneur’s Franchise 500

14.  Matco Tools ranked No. 37 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Matco Tools franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Matco Tools’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  1,616
• Outlets at the End of the Year:  1,682
• Net Change:  +66

2017

• Outlets at the Start of the Year:  1,682
• Outlets at the End of the Year:  1,721
• Net Change:  +39

2018

• Outlets at the Start of the Year:  1,721
• Outlets at the End of the Year:  1,711
• Net Change:  -10

Company-Owned

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  2
• Net Change:  +1

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  1
• Net Change:  -1

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• Presented below in Charts A and B are certain operating and sales results from 1,394 Distributors during the period from January 1, 2018 through December 31, 2018.

• Chart A reflects the average gross revenue figures, referred to as “Average Total Completed Business,” for the Matco Distributors, which includes the revenue from the sales of Matco Products and other products. Chart A also includes the median, and the highest and lowest gross revenue figures.

• The information is segregated into thirds, based on Total Completed Business.

• Chart B reflects the average weekly sales figures for the Matco Distributors for 2018. Chart B also includes the median, and the highest and lowest weekly sales figures.

• The data in the charts are obtained from the Distributors through the MDBS system. As Distributors purchase Products from Matco, they also report on sales made and revenue received. A weekly sales report is generated if the Distributor places an order to purchase Products in a given week.

• Therefore, the information in the charts is based solely on data received from the Distributors through MDBS. These figures have not been reviewed or audited by Matco.

• Other than the revenue figures below, the charts do not include any estimate of, or specific or historic data regarding, costs, expenses, or debts that a Distributor has incurred, or may in the future incur.

Chart A – Average, Median, Highest, and Lowest Numbers in the Range of Total Completed Business – 2018

• The chart reflects the operating data for 1,394 Matco Distributors in the United States that were in business for all of 2018, and that reported sales for at least 48 weeks during 2018.

• Matco is not providing, and this chart does not reflect, information regarding Distributors who started during 2018, or those who left the system or stopped selling Matco products during 2018.

• The 3 groupings of Distributors (Top 1/3, Middle 1/3, and Bottom 1/3) included 465 Distributors in the Top 1/3 group, 465 Distributors in the Middle 1/3 group, and 464 Distributors in the Bottom 1/3 group.

• The term “Total Completed Business” means the total cash or revenue a Distributor received during 2018 including sales tax collected, from the sale of all products and services. This includes revenue from the sale of Matco Products and products acquired from third parties.

• The revenue received by the Distributors is comprised of cash sales, Time Payment collections from previous sales, credits received by the Distributor from the sale of Purchase Security Agreements (which are installment contracts), cash received based on monthly invoices and customers (usually products sold to a shop or business and not an individual), and rebates based on timely payments for products.

• One of the differences between “Total Completed Business” and “Sales” is that “Sales” reflects all sales, even if some payments have not been received, and “Total Completed Business” reflects sales only based on cash collected and PSA credits collected. Therefore, there is a difference due to timing and collections.

• Another difference between “Total Completed Business” and “Sales” is that the figures reported by Distributors for Total Completed Business include sales tax collected, and that the figures for Sales do not include sales tax.

• The “average” is calculated by adding the total business for all Distributors in the group, and dividing that number by the number of Distributors in the group. This does not include any Volume Payment to Terms bonus, or rebate payments.

• The term “median” means the data point that is in the center of all data points used.

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