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Jiffy Lube Franchise Grows Despite Lengthy Payback Period (2024)
Written by: Parth Parth
Last Updated by
Ailén Faiad: March 3, 2023
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This article is based on its most recent FDD (2022)
Jiffy Lube franchise is an automotive oil change company that was founded in 1971 but has been a subsidiary of Shell since 2002. It is currently led by W James Hindman, the CEO. As of 2021, they have over 2000 stores in operation.
Contents
How Is Jiffy Lube Franchise Positioned in the Automotive Industry?
The U.S. has one of the largest car industries in the world. Auto manufacturing deeply depends on thousands of suppliers, materials, retail and vehicle maintenance. Thus, it is an industry that delivers economic benefits and creates jobs in many different sectors in all 50 states. The Auto industry supports a total of 9.9 million American jobs, about 5.1% of private-sector employment. In addition, it is an industry that provides great global trade benefits: $99 billion in exports of cars and parts shipped from the U.S. ports in 2017.
Jiffy Lube competes in the Jiffy Lube market against other car repair shops.
Jiffy Lube Franchise Cost
The initial Jiffy Lube Franchise Fee is $35,000. You have to pay this upfront fee when opening a Jiffy Lube franchise. This fee is usually waived for U.S. veterans.
The estimated total investment necessary to begin the operation of a Jiffy Lube Franchise ranges from $232,000 to $442,650. The following costs are part of the upfront costs included in the initial investment for a Jiffy Lube. Many of these are one-time fees that you need to launch the franchise. Review the chart below to see how much it costs to buy a Jiffy Lube franchise in 2022.
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Franchise Fee | $0 – $35,000 | Us |
| Conversion Fee | $17,500 | Us |
| First month’s rent and security deposit | $16,000 to $40,000 | Us, Landlord |
| Equipment, signs and fixtures | $125,000 to $325,000 | Us, Vendors, Landlord |
| Initial inventory | $20,000 to $30,000 | Us, Vendors |
| Opening Marketing Expense | $15,000 to $20,000 | Adertising agencies, media, other vendors |
| Insurance | $10,000 to $20,000 | Insurance carriers |
| Training expenses incurred by you or your employees | $1,000 to $5,000; does not include wages or salaries of attendees | Airlines, hotels, etc |
| Additional funds (working capital) | $45,000 | Employees, suppliers, utilities, government agencies, etc |
| TOTAL EXPENDITURES | $207,000 to $500,000 | |
| Growth Funding | $0 to $77,350 | To franchisee |
| NET TOTAL | $232,000 to $442,650 |
Jiffy Lube Franchise Requirements
As noted above, you need liquid assets of at least $250,000, and be able to pay the franchise fee of $35,000.
How Much Do Jiffy Lube Franchise Owners Make?
| 2019 | 2020 | 2021 | |||||
|---|---|---|---|---|---|---|---|
| Range | Net Adjusted Sales | # of stores | Net Adjusted Sales | # of stores | Net Adjusted Sales | # of stores | |
| First Quartile | Low | $172,761.20 | $167,582.17 | $218,596.24 | |||
| Avg | $469,721.57 | 475 | $435,415.81 | 457 | $526,895.31 | 473 | |
| High | $589,555.01 | $573,893.53 | $659,681.79 | ||||
| Median | $487,858.82 | $480,279.73 | $542,589 | ||||
| Number/Percent above Avg | 270/56.8% | 263/57.5% | 261/55.2% | ||||
| Second Quartile | Low | $589,789.55 | $574,031.10 | $660,025.98 | |||
| Avg | $679,511.78 | 474 | $660,465.04 | 457 | $766,934.86 | 473 | |
| High | $772,215.54 | $748,139.02 | $870,466.22 | ||||
| Median | $678,367.79 | $661,325.72 | $770,125.69 | ||||
| Number/Percent above Avg | 230/48.5% | 230/50.3% | 246/52% | ||||
| Third Quartile | Low | $772,620.06 | $748,323.75 | $873,062.12 | |||
| Avg | $894,218.38 | 474 | $864,353.79 | 457 | $1,006,711.47 | 473 | |
| High | $1,053,916.01 | $1,007,179.49 | $1,165,600.09 | ||||
| Median | $884,084.42 | $858,710.15 | $1,000,689.20 | ||||
| Number/Percent above Avg | 221/46.6% | 219/47.9% | 228/48.2% | ||||
| Fourth Quartile | Low | $1,055,166.04 | $1,007,734.02 | $1,166,018.65 | |||
| Avg | $1,394,190.25 | $1,298,669.20 | 457 | $1,546,159.56 | 473 | ||
| High | $3,123,565.29 | $2,477,070.56 | $3,089,902.27 | ||||
| Median | $1,295,915.00 | $1,212,368.45 | |||||
| Number/Percent above Avg | 175/36.9% | 174/38.1% | 182/38.5% | ||||
| System | Low | $172,761.20 | $167,582.17 | $218,596.24 | |||
| Avg | $859,205.07 | 1,897 | $822,225.96 | 1,828 | $961,675.30 | 1,892 | |
| High | $3,123,565.29 | $2,477,070.56 | $3,089,902.27 | ||||
| Median | $772,215.54 | $748,231.38 | $871,764.17 | ||||
| Number/Percent above Avg | 763/40.2% | 748/40.9% | 770/40.7% | ||||
2020 Jiffy Lube Median Franchise Sales: $480,279
| Initial investment (midpoint) | %Profit margin of average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $337,325 | 5% | $24,013 | 15.5 years |
| $337,325 | 10% | $48,027 | 8.5 years |
| $337,325 | 15% | $72,041 | 6 years |
2021 Jiffy Lube Median Franchise Sales: $542,589
| Initial investment (midpoint) | %Profit margin of average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $337,325 | 5% | $27,129 | 14 years |
| $337,325 | 10% | $54,258 | 8 years |
| $337,325 | 15% | $81,387 | 5.5 years |
Based on the median sales provided by Jiffy Lube’s franchise locations, at the industry standard of a 5% profit margin it will take around 14 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 5% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, and competition in the marketplace. The quality of service and customer service is also a huge factor.
Is the Jiffy Lube Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Jiffy Lube franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.49
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.56
When you go to sell a Jiffy Lube franchise based on the median multiple of .49 and net sales averaging between 2020 and 2021 of $511,434, it will sell for $250,602. This is lower than the midpoint investment of $337,325.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Looking at the businesses listed for sale on BizBuySell, however, it is seen that the multiple is actually closer to 1.1. Based on the new multiple, when you go to sell a Jiffy Lube franchise with net sales averaging between 2020 and 2021 of $511,434, it will sell for $562,577. This is higher than the midpoint investment of $337,325. Selling a franchise for that much will instantly recuperate your initial investment not adjusting for inflation. That said, Jiffy Lube franchise sales close for around 10% less than the asking price. Therefore, your revenue and final selling price are going to be closer to a 1:1 ratio.
Income Statement Key Insights:
Shell USA, Inc. and Subsidiaries Consolidated Statements of Operations, Other Comprehensive Income / (LoddLoss) and Accumulated Deficit
| 2022 | 2021 | |
|---|---|---|
| Revenue | ||
| Sales and other operating revenue: | $18,408 | $14,520 |
| Income from equity method investments | 365 | 103 |
| Net gain (loss) on sale of assets | 150 | (74) |
| Interest income | 11 | 19 |
| Other income | 37 | 48 |
| Total revenue | 18,971 | 14,616 |
| Costs and expenses | ||
| Purchased raw materials and products | 13,710 | 10,248 |
| Operating expenses | 1,123 | 1,934 |
| Selling, general and administrative expenses | 723 | 644 |
| Exploration | 39 | 141 |
| Research and Development | 19 | 20 |
| Depreciation, depletion and amortization | 1,352 | 1,622 |
| Asset impairments and write-offs | 8 | 45 |
| Interest expense | 8 | 75 |
| Total costs and expenses | 16,982 | 14,729 |
| Income / (loss) before income tax | 1,989 | (113) |
| Income tax (expense) / benefit | (444) | 62 |
| Net income / (loss) | 1,545 | (51) |
Jiffy Lube is a very profitable business for the franchisor with retained earnings of $1.9 billion in 2022 Q1 comparing with a loss of $133 million in 2020 Q1. The automotive industry is growing overall, but more people are switching from gas to electric cars which might start showing in Shell’s financials in the future.
How Many Jiffy Lube Units Have Opened and Closed?
System-wide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 1917 | 1922 | 5 |
| 2020 | 1922 | 1920 | -2 | |
| 2021 | 1920 | 1951 | 31 | |
| Company-Owned | 2019 | 0 | 10 | 10 |
| 2020 | 10 | 33 | 23 | |
| 2021 | 33 | 55 | 22 | |
| Total Outlets | 2019 | 1917 | 1932 | 15 |
| 2020 | 1932 | 1953 | 21 | |
| 2021 | 1953 | 2006 | 53 |
Over the last three years, the company has been in expanding. Both franchising units and company-operated stores have increased. Over the last three years, franchises have opened at a rate of 12 units a year. This is an indicator that these stores are performing well but compared to the aggregate number of stores, it might indicate saturation in the market.
Conclusion
Jiffy Lube offers an opportunity to be a part of an industry that has long stood its ground. Automobiles are a necessity for most of the American population. However, with the introduction and rise in popularity of electric cars, it is possible that the oil change business will adjust.
While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Automotive Industry.
