Matco Franchise Cost Recovered in 3 to 5 Years (2023)
This article is based on its 2022 FDD.
Matco franchise is a manufacturer and distributor of professional quality mechanics’ tools and service equipment. If you enter into a Distributorship Agreement with Matco, you will purchase, resell, and service the Products, which currently consist of at least 18,300 items, as a mobile distributor under the Matco System.
Matco began operation as the manufacturing arm of MAC Tools in 1946 and, since 1979, they have sold their automotive tools and products directly to professional mechanics and enthusiasts. The company was formally founded in 1979 by Jeffery A. Butterworth in Stow, Ohio. Butterworth started the company in his garage with just four employees and a small line of hand tools.
Contents
How Much Is a Matco Franchise?
The initial Matco Franchise Fee is $8,000. You have to pay this upfront fee when opening a Matco franchise.
Matco Franchise Cost
The estimated total investment necessary to begin the operation of a Matco franchise ranges from $76,819 to $309,133. The following costs are part of the upfront costs included in the initial investment for a Matco. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Matco franchise in 2022.
| Type of expediture | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial Franchise Fee | $8,000 | $8,000 | Matco |
| Initial Inventory | $50,000 | $84,000 | Matco or predecessor distributor |
| Acquisition and establishment of time payment reserve accounts | $22,000 | $22,000 | Matco and/or predecessor distributor |
| Time payment line of credit | $4,700 | $9,325 | Matco and/or predecessor distributor |
| Mobile sotre – 1 1/2 months’s lease payments | $2,784 | $160,000 | Dealer or leasing company |
| Computer hardware | $2,700 | $3,400 | Supplier |
| Computer software and internet service – three month’s payments | $2,050 | $2,825 | Matco and internet and credit card service providers |
| Insurance – three month’s premiums | $620 | $3,573 | Supplier |
| Travel, lodging and meal expenses | $170 | $2,515 | Airlines, hotels & restaurants |
| Professional services | $295 | $5,320 | Attorneys, accountants and other professionals |
| Fixtures, Supplies, Licenses | $500 | $4,000 | Suppliers |
| Additional funds – three months | $5,000 | $13,500 | Suppliers, as incurred |
| TOTAL | $76,819 | $309,133 | |
Owning a Matco Franchise Requires Ongoing Fees
Minimum Inventory Purchases: Maintain an inventory of products; and maintain a ratio of purchase average to total sales of at least 60%. Also, initially, you will be automatically enrolled in the NPP program.
Computer Maintenance and Support Charge: $645 or $1,045 annually
License Fee for Credit Card Processing Software: $225 annually
License Fee for Signature Pad Processing Software: $45 annually
Additional Training Fee (for Business Partner): $295, on or before training starts
Field Training for Additional or Replacement Employees and Operators: $1,500 per week for field training provided to the 2nd and subsequent employees/operators; on or before training starts
Web Page Maintenance Fee: $195 annually, on the anniversary date of Web Page Agreement
Insurance: $210 to $1,191 monthly
Inventory Returns, Restocking Fee: 15% restocking fee (35% in limited circumstances)
Repair Kits: $10 to $40 per kit (but, generally $10 per kit)
How Much Do Matco Franchise Owners Make?
All Reporting Distributorships
| Top 1/3 | Middle 1/3 | Bottom 1/3 |
|---|---|---|
| Average: $694,641 | Average: $449,242 | Average: $285,102 |
| No. of Distributors Above Average: 187 (36.7%) | No. of Distributors Above Average: 245 (48.1) | No. of Distributors Above Average: 296 (58.3%) |
| Median: $644,369 | Median: $447,053 | Median: $303,025 |
| Highest: $1,920,299 | Highest: $529,571 | Highest: $378,827 |
| Lowest: $529,677 | Lowest: $380,269 | Lowest: $0 |
2021 Matco Median Franchise Sales: $447,053
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $192,976 | 10% | $44,705 | 6 years |
| 15% | $67,058 | 4.5 years | |
| 20% | $89,411 | 3.75 years |
Based on the median sales provided by Matco’s franchise locations, at an average of a 15% profit margin it will take around 4.5 years to recoup your investment.
This is longer than other franchise opportunities. You may not get a 15% 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, menu mix, and competition in the marketplace; the presence of other Industrial Materials and Tools stores; and the extent of market penetration and brand awareness that Matco stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Matco Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Matco 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 $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.56
When you go to sell a Matco franchise based on the median multiple of .56 and net sales of $447,053, it would sell for $250,349. This would make you some profit on the midpoint investment of $192,976.
Here is an example of a MATCO franchise for sale:
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.
Matco (Franchisor) Income Statement Key Insights
Vontier Corporation and Subsidiaries Consolidated and Combined Statements of Earning and Comprehensive Income
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Sales of products | $2,712.7 | $2,459.9 | $2,484.0 |
| Sales of services | 278.0 | 244.7 | 288.1 |
| Total Sales | 2,990.7 | 2,704.6 | 2,772.1 |
| Cost of product sales | (1,445.9) | (1,326.8) | (1,349.3) |
| Cost of service sales | (211.7) | (189.7) | (232.0) |
| Total cost of sales | (1,657.6) | (1,516.5) | (1,581.3) |
| Gross profit | 1,333.1 | 1,188.1 | 1,190.8 |
| Operating costs: | |||
| Selling, general and administrative expenses | (621.6) | (508.4) | (491.3) |
| Research and development expenses | (129.3) | (126.2) | (136.4) |
| Impairment of goodwill | – | (85.3) | – |
| Operating profit | 582.2 | 468.2 | 563.1 |
| Non-operating income (expenses), net: | – | – | – |
| Interest (expense) income, net | (47.8) | (10.0) | 3.3 |
| Write-off deferred financing costs | (3.4) | – | – |
| Gain on settlement of investment | 3.3 | – | – |
| Other non-operating (expense) income, net | (0.3) | 2.1 | (0.6) |
| Earnings before income taxes | 534.0 | 460.3 | 565.8 |
| Provision for income taxes | (121.0) | (118.3) | (129.3) |
| Net earnings | $413.0 | $342.0 | $436.5 |
Matco is a very profitable business for the franchisor with retained earnings of $413 million in 2021. This is a good indication of the company’s ability to support you.
How Many Matco Units Have Opened and Closed?
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 1711 | 1771 | +60 |
| 2020 | 1771 | 1781 | +10 | |
| 2021 | 1781 | 1854 | +73 | |
| Company-Owned | 2019 | 1 | 1 | 0 |
| 2020 | 1 | 1 | 0 | |
| 2021 | 1 | 1 | 0 | |
| Total Outlets | 2019 | 1712 | 1772 | +60 |
| 2020 | 1772 | 1782 | +10 | |
| 2021 | 1782 | 1855 | +73 |
Over the last three years, the company has been expanding. Over the last three years, franchises have opened at a rate of 48 units a year.
Conclusion
Matco is competing with companies like Snap-on in the Tools market and has consistently strong profits.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Industrial Materials and Tools industry.
