Jiffy Lube Franchise Grows Despite Lengthy Payback Period (2022)

Written by: Parth Parth
Last Updated by Ailén Faiad: June 24, 2022
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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.

 

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 - Up To 45% Off | Groupon

 

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 ExpenditureAmountTo Whom Payment is to be Made
Initial Franchise Fee$0 – $35,000Us
Conversion Fee$17,500Us
First month’s rent and security deposit$16,000 to $40,000Us, Landlord
Equipment, signs and fixtures$125,000 to $325,000Us, Vendors, Landlord
Initial inventory$20,000 to $30,000Us, Vendors
Opening Marketing Expense$15,000 to $20,000Adertising agencies, media, other vendors
Insurance$10,000 to $20,000Insurance carriers
Training expenses incurred by you or your employees$1,000 to $5,000; does not include wages or salaries of attendeesAirlines, hotels, etc
Additional funds (working capital)$45,000Employees, suppliers, utilities, government agencies, etc
TOTAL EXPENDITURES$207,000 to $500,000 
Growth Funding$0 to $77,350To 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.

Owning a Jiffy Lube Franchise Requires Ongoing Fees

Royalty: 5% (or 4% of Gross Sales if paid before due date)

Marketing Fee: 1.5% of Gross Sales

Local Marketing: 2.5% of Gross Sales otherwise 5% if under a non-supply agreement

How much do Jiffy Lube franchise owners make?

 201920202021
 RangeNet Adjusted Sales# of storesNet Adjusted Sales# of storesNet Adjusted Sales# of stores
First QuartileLow$172,761.20 $167,582.17 $218,596.24 
Avg$469,721.57475$435,415.81457$526,895.31473
High$589,555.01 $573,893.53 $659,681.79 
Median$487,858.82 $480,279.73 $542,589
Number/Percent above Avg270/56.8%263/57.5%261/55.2%
Second QuartileLow$589,789.55 $574,031.10 $660,025.98 
Avg$679,511.78474$660,465.04457$766,934.86473
High$772,215.54 $748,139.02 $870,466.22 
Median$678,367.79 $661,325.72 $770,125.69
Number/Percent above Avg230/48.5%230/50.3%246/52%
Third QuartileLow$772,620.06 $748,323.75 $873,062.12 
Avg$894,218.38474$864,353.79457$1,006,711.47473
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 Avg221/46.6%219/47.9%228/48.2%
Fourth QuartileLow$1,055,166.04 $1,007,734.02 $1,166,018.65 
Avg$1,394,190.25 $1,298,669.20457$1,546,159.56473
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 Avg175/36.9%174/38.1%182/38.5%
SystemLow$172,761.20 $167,582.17 $218,596.24 
Avg$859,205.071,897$822,225.961,828$961,675.301,892
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 Avg763/40.2%748/40.9%770/40.7%

 

2020 Jiffy Lube Median Franchise Sales: $480,279

Initial investment (midpoint)%Profit margin of average franchise salesEstimated ProfitsTime to recoup investment
$337,3255%$24,01315.5 years
$337,32510%$48,0278.5 years
$337,32515%$72,0416 years

 

2021 Jiffy Lube Median Franchise Sales: $542,589

Initial investment (midpoint)%Profit margin of average franchise salesEstimated ProfitsTime to recoup investment
$337,3255%$27,12914 years
$337,32510%$54,2588 years
$337,32515%$81,3875.5 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

 20222021
Revenue  
Sales and other operating revenue:$18,408$14,520
Income from equity method investments365103
Net gain (loss) on sale of assets150(74)
Interest income1119
Other income3748
Total revenue18,97114,616
Costs and expenses  
Purchased raw materials and products13,71010,248
Operating expenses1,1231,934
Selling, general and administrative expenses723644
Exploration39141
Research and Development1920
Depreciation, depletion and amortization1,3521,622
Asset impairments and write-offs845
Interest expense875
Total costs and expenses16,98214,729
Income / (loss) before income tax1,989(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.

 

Oil Change Near Me | Jiffy Lube

 

How many Jiffy Lube units have opened and closed?

System-wide Outlet Summary

Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised2019191719225
202019221920-2
20211920195131
Company-Owned201901010
2020103323
2021335522
Total Outlets20191917193215
20201932195321
20211953200653

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.

 

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