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

• Section I – Background information on the Costa Oil franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Costa Oil franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Costa Oil franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Costa Oil outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Costa Oil’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, highest, and lowest gross revenues, cost of goods sold, gross profit, operating expenses, net income, and estimated royalty/brand fees for the 4 affiliate-owned Costa Oil outlets that have been open at least 24 months as of the end of 2020 and are “standalone” locations

Section I – Background Information

14 Things You Need to Know About the Costa Oil Franchise

Signs First Franchise

1.  In late April 2021, Costa Oil announced that its first franchise location would open in Katy, Texas. A press release from developer FranCoDev said the franchise award is the start of a nationwide franchise plan. Costa Oil founder Costa Kapothanasis said the company is focused on new builds for low-overhead quick lube service shops. Kapothanasis added, “We’re putting together a model that really closely aligns with the original quick lube model. We don’t think it should cost a million dollars to build a quick lube.”

Awards New Franchises in Texas and North Carolina

2.  In mid-July 2021, Costa Oil announced that it has awarded two new franchises in Texas and North Carolina. According to Costa Oil founder Costa Kapothanasis, one new store will open in the Dallas-Fort Worth market, and three will open in East Charlotte. Kapothanasis also hinted at more moves that could happen in the near future. He said, “We have tremendous momentum in the Texas market with several potential stores in the pipeline.”

3.  Since starting a nationwide franchising effort in April 2021, Costa Oil has added five total franchises in Texas, Ohio, Missouri, and North Carolina.

Expands Presence in the South

4.  In mid-August 2021, Costa Oil announced that it was expanding its reach to the Southern market. The company said that it would be adding a franchised location in Hattiesburg, Mississippi, about 100 miles southeast of Jackson. The location is the first in the state for the quick lube shop chain.

5.  The Hattiesburg location is the latest in a series of new locations for Costa Oil as it continues to expand its brand beyond the Northeast and Midwest markets. Costa Oil founder and CEO Costa Kapothanasis said, “We are extremely excited about this first connection into the Mississippi market and we look forward to creating a quick, efficient quick lube.”

Moves Corporate Headquarters to Bigger Location

6.  In mid-November 2021, Costa Oil completed its corporate location move to Hanover, PA at 316 Broadway in Hanover, Pennsylvania. Founder and CEO Costa Kapothanasis said, “We are super excited for this move. Hanover is like a second home to me. Our inspiration for our franchise concept building is our Hanover store. To be able to be in walking distance for viewing and our in-store training is a great part of being located here.”

7.  The new location is a 10,000 sq. ft. building that is located right on Broadway. The space has an openness to it that just makes everyone more comfortable and free to work alongside one another. The office will have a larger conference room, and also an area for training new employees.

Announces New Franchise and Corporate Store Openings

8.  In mid-December 2021, Costa Oil announced the opening of new franchise and company-owned locations. Construction is under way for four franchised locations. Three are in the Ohio markets of Akron, Warren, and Perry. The fourth is in Albans, W.Va. Two of those are built according to the single-bay concept that Costa Oil unveiled in early 2021.

9.  A fifth franchised location planned in Mesa, Arizona, is an acquired and renovated building. In addition, three company-owned locations are going up in Endicott, N.Y., Lorain, Ohio, and Mckeesport, Pa. Those are all single-bay kiosk models.

10.  The company continues to add franchise agreements and is up to more than 60 units sold, according to founder Costa Kapothanasis.

Company History

11.  Costa Oil was founded in 2014 by Costa Kapothanasis and is headquartered in Hanover, Pennsylvania. The brand specializes in no appointment, drive-thru 10-minute oil changes. Kapothanasis had been working in finance, but always wanted to start his own business. He was given the opportunity to take over a quick lube store in Harrisburg, Pennsylvania, from a couple that was ready to retire and settle down. This store became the first Costa Oil location.

12.  Following the success of the first Costa Oil location, Kapothanasis began opening additional locations around Pennsylvania and neighboring states like Illinois, Ohio, and Maryland. After a few more years of growth, Kapothanasis began franchising Costa Oil in 2021.

13.  Currently, all operating Costa Oil stores are corporate-owned locations. However, franchise locations are set to open soon in Georgia, North Carolina, Texas, Massachusetts, Missouri, Michigan, Mississippi, New York, Colorado, Virginia, West Virginia, Arizona, Florida, and California. Costa Oil is seeking additional franchisees across the United States.

Entrepreneur’s Franchise 500

14.  Costa Oil did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Costa Oil franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Detailed information on Costa Oil’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

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

2019

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

2020

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

Company-Owned

2018

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  8
• Net Change:  +2

2019

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  10
• Net Change:  +2

2020

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  13
• Net Change:  +3

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The following chart contains selected 2020 financial performance information for four of the Costa Oil outlets, each of which is owned by the franchisor’s affiliate, Costa Oils, Inc.

• While there were 13 Costa Oil outlets open at various times during 2020, Costa Oil is only including the information for the 4 outlets (“Designated Outlets”) that have been open at least 24 months as of the end of 2020 and are “standalone” locations which would be comparable to the franchise businesses offered in the disclosure document.

• Of the other 9 locations, 4 are not “standalone” locations (meaning that they are connected with a car wash or a part of an auto mall), 1 was open for less than 24 months, 3 were not open throughout 2020 as they opened during 2020, and 1 was not open throughout 2020 as it closed during 2020.

• All of the Designated Outlets are located in Pennsylvania.

Part 1 – 2020 Gross Revenues from Designated Outlets

• Median:  $335,627.09
• Average:  $334,265.05 (100.0%)
• Number and Percent of Sample That Achieved or Surpassed Average:  2/50%
• Highest:  $450,953.21
• Lowest:  $214,852.80

Part 2 – Certain 2020 Expenses for Designated Outlets

Total Cost of Goods Sold

• Median:  $137,648.91
• Average:  $141,472.49 (42.3%)
• Highest:  $152,943.24
• Lowest:  $137,648.91

Gross Profit

• Median:  $197,978.17
• Average:  $192,792.55 (57.7%)
• Highest:  $298,009.57
• Lowest:  $77,203.89

Operating Expenses

• Median:  $66,510.04
• Average:  $68,005.08 (20.3%)
• Highest:  $78,847.00
• Lowest:  $60,153.25

Net Income

• Median:  $136,507.88
• Average:  $124,787.47 (37.3%)
• Highest:  $219,162.97
• Lowest:  $6,917.13

Estimated Royalty/Brand Fees

• Median:  $28,528.30
• Average:  $28,413.53 (8.5%)
• Highest:  $38,331.02
• Lowest:  $18,262.49

• The foregoing information shows historical financial performance and is not a projection of future performance. Part 1 describes the gross revenues for the 4 Designated Outlets covered by the disclosure during calendar year 2020. Part 2 describes certain expenses for the 4 Designated Outlets covered by the disclosure document during calendar year 2020.

• “Gross Revenues” means total of all revenue in a period, not including discounts, taxes, voids, or refunds for each location.

• “Cost of Goods Sold” means the cost of all oil, oil filters, payroll for direct management and operations, and supplies/materials used in operating the franchised business.

• “Operating Expenses” means the cost of rent, insurance, bank charges, retirement accounts, utilities, sales tax, and other expenses associated with operating the franchised business. These expenses will vary per location and in how you choose to operate the franchised business. A few minor, individual items comprising Operating Expenses (specifically bank charges, vehicle expenses, insurance, software expenses, and meals & entertainment) are an average as these items are not accounted separately by outlet.

• “Net Income” means Gross Revenues minus Cost of Goods Sold and Operating Expenses.

• “Estimated Royalty/Brand Fees” reflect the 6.5% royalty plus the 2% Brand Fund Contribution that these outlets would have paid if they were franchised.

• The COVID-19 pandemic has materially affected the financial performance of the Costa Oil businesses described in this Item 19. Shelter-in-place orders, mandated closures, limits on operations, consumer sentiment, and other disruptions to business operations have adversely impacted sales and will continue to impact sales.

• Some outlets have sold these amounts. Your individual results may differ. There is no assurance that you’ll sell as much.

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