In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Metal Supermarkets franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Metal Supermarkets franchise, based on Item 7 of the company’s 2020 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Metal Supermarkets franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned Metal Supermarkets outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Metal Supermarkets’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2016, 2017, 2018, and 2019 average, median, high average, and low average invoice value; and average and median number of invoices per month per store for the 37 franchised Metal Supermarkets stores that operated for the entire four-year period from the company’s fiscal year 2016 to fiscal year 2019
- 2016, 2017, 2018, and 2019 average store gross margin; and average, median, high, and low gross profit per store for the 37 franchised Metal Supermarkets stores that operated for the entire four-year period from the company’s fiscal year 2016 to fiscal year 2019
- 2016, 2017, 2018, and 2019 average, median, high, and low annual gross sales for the 37 franchised Metal Supermarkets stores that operated for the entire four-year period from the company’s fiscal year 2016 to fiscal year 2019
- first year quarterly gross sales for the 33 franchised Metal Supermarkets stores opened in fiscal years 2013, 2014, 2015, 2016, 2017, and 2018 and that have been open for at least 12 full months as of September 30, 2019
- second year quarterly gross sales for the 27 franchised Metal Supermarkets stores opened in fiscal years 2014, 2015, 2016, 2017, and 2018 and that have been open for at least 24 full months as of September 30, 2019
Section I – Background Information
18 Things You Need to Know About the Metal Supermarkets Franchise
Experiences Record Franchise Growth
1. In late July 2020, Metal Supermarkets announced that it had experienced record growth, consistent customer sales, and an increase in franchise leads and unit sales in the first half of 2020. Metal Supermarkets opened five stores in the first six months of 2020, quickly surpassing their entire 2019 total of four new stores.
2. The franchise added locations in Cleveland, OH; Indianapolis, IN; Warwick, RI; Hackensack, NJ; and Appleton, WI earlier in the year. Metal Supermarkets was also planning on opening four additional stores across the United States in August – San Diego, CA; West Palm Beach, FL; Pico Rivera, CA; and Cedar Rapids, IA. The brand also announced plans to add new stores in Washington, DC; San Jose, CA; Houston, TX; and Kansas City, MO by the end of the year.
3. With 13 confirmed store openings in 2020, Metal Supermarkets more than tripled the number of store openings from 2019. Metal Supermarkets finished 2020 with more than 100 locations in the United States, Canada, and the United Kingdom.
4. The Canadian-based franchise got off to a fast start over the first three months of 2020 with 375 franchise leads, a 26 percent increase over the same period in the previous year. It also experienced a 33 percent increase in deals signed in January through March, and a 60 percent increase in the number of units sold compared to the same period in 2019.
5. Part of what makes Metal Supermarkets so attractive to franchise candidates is the sales growth, which were up as much as 15 percent prior to the COVID-19 outbreak. Stores were also able to thrive during the pandemic. The business was deemed as an essential service and none of the stores were forced to close due to government regulations. Metal Supermarkets has a large B2B customer base with a high demand for metal products needed for infrastructure, manufacturing, maintenance, and other services critical to combating COVID-19, including personal protective equipment.
6. Andrew Arminen, vice president of franchising for Metal Supermarkets, said, “Under some very trying circumstances in 2020, Metal Supermarkets has shown its value to both customers and franchise owners. There is a constant need for metal products and the services we provide regardless of the economic climate. Franchise prospects see our essential business with a stable customer base as a very important and attractive option when selecting a franchise. That helps position Metal Supermarkets for continued success for the remainder of 2020 and beyond.”
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7. Metal Supermarkets has continued to see a high number of franchise candidates over the past several months. Since the pandemic started, the company has hosted several virtual discovery days with multiple candidates at each event, and 90 percent of the candidates in attendance said that they would be proceeding with the franchise. The virtual discovery days feature one full day of presentations and a second day of individual meetings with senior level executives.
8. At the time of the announcement, Metal Supermarkets was working on finalizing seven more franchise units to open in early 2021.
Celebrates Opening of 100th Location
9. In late September 2020, Metal Supermarkets announced that it would be opening its 100th location on Monday, October 5 with a new store in San Diego, California. The newest store was the ninth new Metal Supermarkets location to open in 2020, with more locations scheduled to open in Pico Rivera, CA; Washington, DC; San Jose, CA; Houston, TX; and Lewisville, TX by the end of the year.
10. The newest store in San Diego marked the 69th Metal Supermarkets location in the United States. At the time of the announcement, the franchise had stores in 32 states, including multiple locations in 18 of those states. Additionally, there were 24 Metal Supermarkets stores in Canada and seven in the United Kingdom. Ninety of the Metal Supermarkets stores are franchise owned, with six corporately-owned locations in the U.K. and four in the U.S.
11. Stephen Schober, president and CEO of Metal Supermarkets, said, “We are extremely proud to be opening our 100th store. This opening marks a major milestone in the history of our franchise. Along with the record number of store openings in 2020, reaching the 100-store mark is a testament to the Metal Supermarkets business system, our dedicated franchisees and the demand for our products and services.”
Widens U.S. Franchise Expansion Plans
12. In mid-December 2020, Metal Supermarkets said that it achieved something that few others in 2020 have been able to do – it has consistently broken year-over-year monthly revenue records, truly living up to “Big things come in small packages.”
13. Stephen Schober, the 14-year president and CEO of Metal Supermarkets and an executive with more than 30 years in the franchise industry, said, “The strong momentum we’re demonstrating now has been brewing for several years. Our ability to withstand the pressures of the pandemic was no surprise because we’re set up to thrive in every type of economic condition. When you blend our niche market with a solid business system and an unrelenting commitment to customer experience by our franchisee partners, Metal Supermarkets emerges as the standout metals supplier in every community that we serve.”
14. Known for its convenience, speed, product variety, and fixation on customer service, Metal Supermarkets announced that it is riding this wave of progress to move ahead with a strategic franchise growth initiative that will expand its presence to 150 locations by 2024. Already, eight openings are slated for 2021 in Albuquerque, NM; Reston, Virginia, Houston, and Lewisville, TX; New Orleans, LA; The Bronx and Queens, NY; and San Jose, CA.
15. Schober added, “Remaining dedicated to our proven business system, while focusing on our core value of constant improvement has allowed us to establish Metal Supermarkets as the local one-stop shop for countless businesses and individuals who need metal. To make sure that we’re always operating at peak performance across the franchise system, we offer opening and ongoing training and support. Plus, the comprehensive marketing programs and operational support we provide to our franchisees allow them to focus on delivering outstanding customer service, a key to earning customer loyalty and repeat business.”
16. Metal Supermarkets was founded in 1985 by William “Bill” Mair in Mississauga, Ontario, Canada. Mair had previously worked in the metals industry for over 30 years and envisioned a new kind of metal distributor that would cater to small-quantity buyers and serve a wide and diverse range of industries. Metal Supermarkets adopted a business model based on cut-to-size metals and no minimum order size, which led to the company’s early success. After just two years, Mair began franchising Metal Supermarkets in 1987 and the first franchised location opened in Scarborough, Ontario.
17. Over the next few years, Metal Supermarkets continued to expand around Canada and in 1994, the company opened its first international location in the United Kingdom. Following its successful launch in the U.K., Metal Supermarkets expanded into the United States in 1996 with its first location in Atlanta, Georgia. Over the following two decades, Metal Supermarkets grew steadily in North America and in 2020, the company opened its 100th store, located in San Diego, California.
Entrepreneur’s Franchise 500
18. Metal Supermarkets ranked No. 433 on Entrepreneur’s 2020 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Metal Supermarkets franchise costs, based on Item 7 of the company’s 2020 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Metal Supermarkets’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 57
- Outlets at the End of the Year: 53
- Net Change: -4
- Outlets at the Start of the Year: 53
- Outlets at the End of the Year: 55
- Net Change: +2
- Outlets at the Start of the Year: 55
- Outlets at the End of the Year: 58
- Net Change: +3
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 4
- Net Change: +4
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 4
- Net Change: -1
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- Parts 1-3 below show the actual average invoice values, gross margins, and sales per store for Metal Supermarkets’ 2016, 2017, 2018, and 2019 fiscal years (which run from October 1 to September 30 of each year). The figures are based on the 37 franchised stores that operated for the entire four-year period either on Metal Supermarkets’ server-based platform, or that converted from a standalone system to Metal Supermarkets’ server-based platform.
- The figures do not include information on 21 currently operating franchised Stores that were not open for the entire four-year period, eight of which were opened in 2016, two of which were opened in 2017, six of which were opened in 2018, and five of which were opened in 2019; and six franchised Stores that closed during the four-year period, one of which closed in 2016, two of which closed in 2017, three of which closed in 2018, and none of which closed in 2019.
- Parts 4 and 5 below provide quarterly Gross Sales information for each new franchised Store that was first opened during Metal Supermarkets’ 2013, 2014, 2015, 2016, 2017, and 2018 fiscal years (the period from October 1, 2012 to September 30, 2018) and that operated for at least 12 or 24 full months since then until Metal Supermarkets’ fiscal year end on September 30, 2019.
Part 1 – Average Invoice Value (Franchised Stores)