Snap-on Franchise Pays for Itself in 5 Years (2024)
This article is based on the video featured above, originally recorded for Vetted Biz Youtube Channel.
Snap-on Tools is an American company that specializes in designing, manufacturing, and distributing high-end tools and equipment used by professionals in the automotive, aviation, and other industries. The company has a long and rich history dating back to 1920 when it was founded by Joseph Johnson and William Seidemann in Milwaukee, Wisconsin.
Initially, the company was known as Snap-on Wrench Company and was focused on producing a unique type of wrench that could “snap on” to a bolt without the need for a separate attachment. This innovative product proved to be a huge success, and soon the company was expanding its product line to include sockets, pliers, and other hand tools.
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Over the years, Snap On franchise has continued to innovate and grow, expanding its offerings to include power tools, diagnostic equipment, and tool storage solutions. The company has also expanded globally, with operations in over 130 countries and a workforce of more than 12,000 employees.
Snap-on’s commitment to quality and innovation has earned the company a loyal customer base among professionals in a variety of industries. In fact, according to a 2020 survey by Frost & Sullivan, Snap-on is the top brand in the Professional Tools market, with a market share of 19.4%.
The company’s financial performance has also been impressive, with annual revenues of over $3.5 billion and a net income of over $500 million. In addition, Snap On franchise has consistently delivered strong shareholder returns, with a 10-year total return of over 300%.
In recent years, Snap On franchise has continued to invest in new technology and expand its offerings to meet the evolving needs of its customers. For example, the company has developed diagnostic tools that use artificial intelligence to quickly and accurately identify issues with vehicles, making it easier for technicians to diagnose and repair complex problems.
Overall, Snap-on’s long history, commitment to quality, and innovative spirit have made it a leading brand in the professional tool market, and the company shows no signs of slowing down.
How Is Snap On Franchise Positioned in the Tools and Equipment Industry?
Snap On Tools operates in the Professional Tools and Equipment industry, which serves a variety of markets, including Automotive, Aviation, Marine, and Industrial Maintenance. The industry is highly competitive, with a large number of players ranging from small regional manufacturers to global corporations.
The industry is driven by the demand for high-quality and durable tools and equipment that can withstand heavy usage and perform under demanding conditions. This demand is fueled by the growth in the Automotive and Industrial sectors, which are major users of professional tools and equipment.
The Professional Tools and Equipment market in the United States was valued at $13.4 billion in 2019 and is expected to grow at a CAGR of 3.3% from 2020 to 2027, according to a report by Fortune Business Insights. The report cites factors such as increasing demand for power tools, the growth of the Construction industry, and the increasing number of do-it-yourself (DIY) enthusiasts as drivers of the market.
The Automotive Industry
The Automotive industry is a major user of professional tools and equipment, and the United States is one of the largest automotive markets in the world. According to the National Automobile Dealers Association (NADA), the U.S. Automotive Retail industry had total revenues of $1.2 trillion in 2019, with 17.1 million new vehicles sold. This represents a significant market opportunity for companies like Snap On franchise, which provides specialized tools and equipment for automotive professionals.
In the industrial sector, the United States is a major user of professional tools and equipment, particularly in the Construction, Manufacturing, and Maintenance industries. According to the National Association of Manufacturers (NAM), the U.S. Manufacturing sector had a total output of $2.33 trillion in 2018, and the Construction industry had a total output of $1.4 trillion in 2019. These industries rely on high-quality, durable tools and equipment to meet their needs.
In terms of employment, the Professional Tools and Equipment industry provides jobs for a significant number of workers in the United States. According to the Bureau of Labor Statistics, there were 60,600 people employed in the Hand Tool Manufacturing industry in the United States in 2020, with an average annual wage of $46,630. In addition, there were 317,900 people employed as automotive service technicians and mechanics in the United States in 2020, with an average annual wage of $46,710.
How Much Is a Snap On Franchise?
The initial Snap On Franchise Fee is $8,000 – $16,000. You have to pay this upfront fee when opening a Snap On franchise.
Snap On Franchise Cost
The estimated total investment necessary to begin the operation of a Snap-on Franchise ranges from $201,433 – $465,436. The following costs are part of the upfront costs included in the initial investment for a Snap-on. 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 Snap On franchise in 2023.
Estimated Range of Initial Investment
| Out-Of-Pocket Expenses with Franchise Finance Program Financing | Estimated Total Initial Investment Range | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Real Estate | $0 | $0 | |
| Initial License Fee | $0 | $8,000 – $16,000 | Snap-On |
| Initial Inventory | $0 | $130,000 – $140,000 | Snap-On or predecessor franchisee if transfer |
| Electronic Signature Pad | $0 – $200 | $0 – $200 | Third parties |
| Supplies | $0 – $400 | $0 – $400 | Snap-On |
| Van | $4,219 – $4,269 | $55,000 – $190,000 | Van Leasing Company, or predecessor franchisee if transfer |
| Van Insurance (3 months) | $723 – $2,166 | $723 – $2,166 | Third parties, Snap-On Secure Corp. |
| Van Delivery Charge | $200 – $4,900 | $200 – $4,900 | Third parties |
| License | $200 – $2,400 | $200 – $2,400 | Third parties |
| Acquisition / Development of Revolving Accounts | $0 | $0 – $85,000 | Third Parties |
| Other Equipment, Fixtures and Expenses | $150 – $170 | $150 – $170 | Suppliers; Snap-On; predecessor franchisee if transfers |
| Computer Software License Fee | $0 | $2,400 | Snap-On |
| Documentation Fee with Snap-On Franchise Finance Loan | $100 – $250 | Not applicable | Snap-On Credit |
| Minimum Down Payment with Franchise Finance Program | $25,000 | Not applicable | Snap-On Credit |
| Additional Funds – 3 Months | $13,529 – $24,881 | $4,760 – $21,800 | Third parties |
| Estimated Total Initial Franchise Expense | $44,121 – $64,636 | $201,433 – $465,436 |
Ongoing Fees
| Weekly remmitance fro Products and Services purchased from Snap-on | The minimum amount is 100% of miscellaneous charges less miscellaneous credits, plus any amount neccesary to be $1 under your credit limit |
| Monthly License Fee | $145 |
| Computer Software Maintenance and Development Fee | $85 |
How Much Do Snap On Franchise Owners Make?
| REPORTED PAID SALES FOR 2022 | Number of Franchisees Reporting | Percentage |
|---|---|---|
| Less than $200,000 | 21 | 0.73% |
| $200,000 to $299,999 | 53 | 1.85% |
| $300,000 to $399,999 | 102 | 3.55% |
| $400,000 to $499,999 | 250 | 8.71% |
| $500,000 to $599,999 | 330 | 11.49% |
| $600,000 to $699,999 | 423 | 14.73% |
| $700,000 to $799,999 | 400 | 13.93% |
| $800,000 to $899,999 | 344 | 11.98% |
| $900,000 to $999,999 | 254 | 8.85% |
| $1,000,000 to $1,099,999 | 251 | 8.74% |
| $1,100,000 to $1,199,999 | 169 | 5.89% |
| $1,200,000 to $1,299,999 | 84 | 2.93% |
| $1,300,000 to $1,399,999 | 54 | 1.88% |
| $1,400,000 to $1,499,999 | 51 | 1,78% |
| $1,500,000 to $1,599,999 | 37 | 1.29% |
| $1,600,000 to $1,699,999 | 24 | 0.84% |
| $1,700,000 to $1,799,999 | 11 | 0.38% |
| $1,800,000 to $1,899,999 | 3 | 0.10% |
| $1,900,000 to $1,999,999 | 2 | 0.07% |
| Over $2,000,000 | 8 | 0.28% |
| TOTAL | 2871 | 100.00% |
2022 Snap-on Median Franchise Sales: $750,000
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $333,434 | 10% | $75,000 | 7 years |
| 15% | $112,500 | 4.5 years | |
| 20% | $150,000 | 3.75 years |
Based on the median sales provided by Snap-on’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 Tools and Equipment stores; and the extent of market penetration and brand awareness that Snap-on stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Snap-on Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Snap On franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We review 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 * 0.5
When you go to sell a Snap On franchise based on the median multiple of .5 and net sales of $750,000, it would sell for $375,000. This is more than the midpoint investment of $333,434.
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.
How Many Snap-on 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 | 2020 | 3302 | 3280 | -22 |
| 2021 | 3280 | 3287 | +7 | |
| 2022 | 3287 | 3270 | -17 | |
| Company-Owned | 2020 | 139 | 137 | -2 |
| 2021 | 137 | 141 | +4 | |
| 2022 | 141 | 139 | -2 | |
| Total Outlets (United States) | 2020 | 3441 | 3417 | -24 |
| 2021 | 3417 | 3428 | +11 | |
| 2022 | 3428 | 3409 | -19 |
Over the last three years, the company has been in decline. Both franchising units and company-operated stores are on the decline. Over the last three years, franchises have closed at a rate of around 11 units a year. This decline in outlets can be an indicator that franchisees are not doing very well and are not seeing a significant profit. Relative to the total number of units, the Snap-on failure rate is not so high.
However, what is more worrying is that Snap-on reacquires around 5-6% of its franchisees every year, which means if your business struggles, you could just be bought out.
Snap-on (Franchisor) Income Statement Key Insights
Statement of Income
| (amount in millions, except per share data) | Fiscal Years Ended | ||
|---|---|---|---|
| 2022 | 2021 | 2020 | |
| Net sales | $4,492.8 | $4,252 | $3,592.5 |
| Cost of goods sold | (2,311.7) | (2,141.2) | (1,844) |
| Gross profit | 2,181.1 | 2,110.8 | 1,748.5 |
| Opreating expenses | (1,239.9) | (1,259.3) | (1,116.6) |
| Operating earnings before financial services | 941.2 | 851.3 | 631.9 |
| Financiall services revenue | 349.7 | 349.7 | 349.7 |
| Financial services expenses | (83.7) | (77.7) | (101.1) |
| Operating earnings from financial services | 266 | 272 | 248.6 |
| Operating earnings | 1,207.2 | 1,123.5 | 880.5 |
| Interest expense | (47.1) | (53.1) | (54) |
| Other income (expense) – net | 42.5 | 16.5 | 8.7 |
| Earnings before income taxes and equity earnings | 1,202.6 | 1,086.9 | 835.2 |
| Income tax expense | (268.7) | (247) | (189.1) |
| Earnings before equity earnings | 933.9 | 839.9 | 646.1 |
| Equity earnings, net of tax | – | 1.5 | 0.3 |
| Net earnings | 933.9 | 841.4 | 646.4 |
| Net earnings attributable to noncontrolling interests | (22.2) | (20.9) | (19.4) |
| Net earnings attributable to Snap-on Incorporated | 911.7 | 820.5 | 627 |
- Net sales increased by 5.7% from $4.25 billion in 2021 to $4.49 billion in 2022, and increased by 18.1% from $3.59 billion in 2020 to $4.49 billion in 2022.
- Gross profit increased by 3.3% from $2.11 billion in 2021 to $2.18 billion in 2022, and increased by 24.8% from $1.75 billion in 2020 to $2.18 billion in 2022.
- Operating earnings increased by 7.2% from $1.12 billion in 2021 to $1.21 billion in 2022, and increased by 37.1% from $880.5 million in 2020 to $1.21 billion in 2022.
- Net earnings attributable to Snap-on Incorporated increased by 11.1% from $820.5 million in 2021 to $911.7 million in 2022, and increased by 45.5% from $627.0 million in 2020 to $911.7 million in 2022.
Summary
Snap-on Tools is an American company that specializes in designing, manufacturing, and distributing high-end tools and equipment used by professionals in the Automotive, Aviation, and other industries. Snap-on operates in the Professional Tools and Equipment industry, which serves a variety of markets, including Automotive, Aviation, Marine, and Industrial Maintenance. The industry is highly competitive, with a large number of players ranging from small regional manufacturers to global corporations.
Snap-on’s commitment to quality and innovation has earned the company a loyal customer base among professionals in a variety of industries. The company’s financial performance has also been impressive, with annual revenues of over $3.5 billion and a net income of over $500 million. Based on the median sales provided by Snap-on’s franchise locations, at an average of a 15% profit margin, it will take around 4.5 years to recoup the investment.
The initial Snap On Franchise Fee is $8,000 to $16,000, and the estimated total investment necessary to begin the operation of a Snap On Franchise ranges from $201,433 – $465,436. Snap-on offers people the opportunity to be a part of a business that has a long history, commitment to quality, and innovative spirit. However, over the last three years, the company has been in decline, with both franchising units and company-operated stores on the decline. Franchises have closed at a rate of around 11 units a year, indicating that these stores may not be performing well, or their franchise term is up and they are not renewing it.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Professional Tools and Equipment industry.
