In this review, we have exposed all important info regarding the Snap-on Tools franchise initial starting costs and the profit potential of this business, that is, the salary that the franchise owner can expect to make per year.
- Starting a new Snap-on Tools mobile franchise demand startup capital between $175,146 and $411,941.
- This brand doesn’t charge a royalty fee to its franchisees from their gross store revenue; these tool stores are based around the dealership’s way of doing business.
- An average earning Snap-on Tools mobile store delivers approximately $650,000 in gross revenue per year with a 25% profit margin.
- To make a 25% profit margin from all sales owner will need to be and only employee; if you hire a store operator/seller, the margin will be much lower.
- The franchise owner of the average gross selling Snap-on Tools mobile store can expect to make approximately $170,000 of salary/profit per year.
- To be approved as a new franchisee, franchise applicants must have at least $40,000 available in liquid assets.
What is Snap-on Tools
Snap-on Tools is a Wisconsin brand founded in 1920 by Joseph Johnson and William Seidemann. This company’s core business is related to manufacturing and distributing all kinds of hand and power tools and equipment for professional mechanics and hobby users throughout the United States.
This company offers a license to operate a franchised mobile store selling high-quality repair and diagnostic tools and equipment. Currently, more than 4,700 of these mobile stores are presented in the U.S.
The product line of Snap-on Tools includes:
- A wide range of hand and power tools
- Tool storage cabinets, boxes, etc
- Saws and cutting tools
- Pruning tools
- Vehicle service diagnostics equipment and software
- Vehicle service equipment and service information
- Safety-testing and collision repair equipment
- Business management systems
- Equipment repair services
- Other tool and equipment solutions
Clients of these mobile stores are auto-moto technicians, vehicle service centers, and other industrial tool and equipment users.
Although the regular buyers of these stores are usually full-time professional mechanics, that doesn’t mean that hobby mechanics and handymen do not visit these tool shops. So investors in this kind of franchised business can expect a wide pool of potential customers!
How Much Does The Snap-on Tools Franchise Cost
The launch of the new Snap-on Tools mobile franchise demand investment funds between $175,146 and $411,941. This estimation includes the Initial Fee and all other pre-opening costs that the franchisee will need to pay.
The highest cost associated with starting this franchise is one related to buying a truck that is used as a store premise. Buying a working truck will cost investors between $143,000 and $155,000; this exspense includes all operational equipment (tool shelves, cabinets, boxes, etc.) necessary to start the operation.
Also, the new franchise owner will need to purchase initial selling inventory, which usually costs between $114,500 to $125,000. By paying this sum, the new franchise owner can expect to have in the mobile store all products that are necessary to commence the opening day.
The most significant advantage of starting this brand franchise is that you do not have to purchase or lease real estate, which reduces operating costs to a minimum!
Also, investors can buy a used truck to lower the initial investment cost. There is a lot of these truck available on the market, and the franchisor can assist you in finding a franchisee who is going to retire and is willing to sell you his mobile store.
Table of initial costs:
- Initial License Fee: $8,000 – $16,000
- Initial Inventory: $114,500 – $125,000
- Other Equipment, Fixtures, and Expenses: $150 – $170
- Computer Software License Fee: $1,800
- Working Van/Truck: $45,000 – $155,000
- Van/Truck Insurance: $688 – $2,063 (3 months)
- Van/Truck Delivery Charge: $180 – $4,100
- License: $200 – $2,400
- Acquisition / Development of Revolving Accounts: $0 – $85,000
- Minimum Down Payment with Franchise Finance Program: $21,500
- Additional Funds: $12,419 – $19,808 – working capital for the first three months
- ESTIMATED TOTAL INVESTMENT COST: $175,146 – $411,941
Options To Fund Snap-on Tools Franchise Initial Investment Cost
Snap-on Tools as a company offers direct financing programs options under which new franchise owners can cover the investment cost necessary to start this brand new mobile store.
However, if you choose to use this franchisor’s credit/loan program, you will need to make a minimum down payment of $21,500!
By paying this sum, you will get the right to use franchisor lending assistance to cover the initial investment costs of buying a store truck and initial inventory of your franchise.
New franchise owners are not required to make any loan payments during the first 90 days; after that, franchisees are obligated to repay the borrowed funds in monthly installments over the next ten years.
Snap-on Tools Franchise Fees
One-Time Franchise Fees
Initial License Fee
- $8,000 – $16,000
The initial license fee of $16,000 includes initial franchisee training, a technology package, and a turnkey office supply package.
Initial Fee Discount Program
This franchisor doesn’t offer classic initial fee discount programs for the new franchise owners. However, specific discounts are available regarding initial inventory costs, and we will mention below which group of investors can benefit from it.
The initial inventory discounts can use:
- U.S. Army forces Veterans who have the right to $20,000 off the cost of startup inventory
- Snap-on employees starting their first franchise have specific discounts on the initial inventory.
- Entrepreneurs who are currently in the business of selling and servicing tools and want to put their mobile store under trademarks of this brand get a portion of initial inventory at no cost.
Ongoing Franchise Fees
Snap-On Tool Royalty Fee
- $135.00 per month
Usually, franchising systems charge their royalties according to the gross sales earned per month. However, Snap-on Tools has taken a different approach, and they charge their franchisees a royalty fee of only $135.00 per month.
This franchisor profits from distribution and selling its branded products to its franchises, so owning this mobile store is more of a dealership way of doing business!
Franchisee owners are obligated to buy product inventory directly from the franchisor, which gives them big discounts on it. It is a win-win situation for both parties, and this way of charging a royalty fee can be considered an advantage of owning this tool store.
Van Lease and Maintenance Fee
- $2,322-$2,722/month van lease payment, plus $325/month maintenance fee
Investors who select to lease a van(store truck) directly from a franchisor (Snap-on Credit) need to repay its total cost within the 72-month term; the one-month truck lease fee will be between $2,322 and $2,722.
Usually, this type of truck costs approximately $155,000, and by using a franchisor loan assistance, this expense can be split so that it doesn’t make too much financial burden immediately after opening.
The franchisor charges a lease rate of 10.10% for a 72-month term, so the cost of the truck will be a little higher in the long term. Nevertheless, this is a good option, especially if you lack startup capital!
Snap-on Franchisee Insurance Program Fee
- $5,924 to $11,253 per year
Under its franchising offer, this franchisor also has its own insurance program, which costs the franchise owners between $5,924 to $11,253 per year.
Franchisees can pay this sum in a yearly lump sum, or investors can choose to split this expense by paying monthly a certain portion of it.
New franchisees must be aware that these insurance fees will be ongoing costs that will be presented throughout the franchise agreement!
How Much Is Snap-on Tools Franchise Profit
To reveal how much Snap-on Tools franchises can deliver profit to their owners, we must first uncover the average gross revenue and profit margin that these mobile tool stores can deliver.
Average Gross Revenue Per Year
An average earning Snap-on Tools franchise delivers approximately $650,000 in gross revenue per year to its owners.
However, this is just an average if we look at all gross revenue and then split that amount with a total number of franchise units.
The sales amount level will be primarily determined by the effort that the franchise owner puts into his business, that is, his sales ability to acquire a high number of regular customers!
Snap-on Tools Franchise Profit Margin
The Snap-on Tools franchise owners can expect their mobile tool store to deliver at least 25% of the profit margin from all sales generated per year.
However, 25% of the profit margin is achievable only if the franchisee is also and store seller!
If franchisees opt for hiring, there will be a lot of costs associated with payroll exspense, which be reflected in the much lower profit at the end of the year.
These mobile franchises operate as a dealership business concept; the franchisor sells its branded goods/tools at a discounted price to a franchisee who distributes them to the end customers.
In practice, there is no Royalty Fee or Ad Fee that the franchisor charges according to the week/month gross revenue, which is a big advantage of owning this franchised business!
The franchise owner gets franchisor discounts on products, usually between 10% and 43.9% from suggested prices.; the average discount from suggested prices is 33.75 percent.
Since these franchises don’t have rent costs, and in most cases, the franchise owner is also the seller(no employees costs), it is the pretty real assumption that Snap-on Tools store can deliver at least 25% of profit margin.
How Much is Snap-on Tools Franchise Owner Salary
The average gross selling Snap-on Tools mobile franchise owner can expect to make approximately $170,000 of salary/profit per year.
However, it doesn’t mean that immediately after opening franchisee can expect to make the amount of salary/ profit that is stated above. It will be necessary to establish a wide network of regular customers!
But, if you made at least $200,000 in gross sales in the first year after opening, it is expected that you will earn the average salary of the franchise owner, which is currently in the U.S, approximately $50,000 per year.
How We Estimate Snap-on Tools Franchise Owner Salary Per Year
We estimate the expected Snap-on Tools franchise owner salary per year according to the gross revenue and profit stats this franchisor has revealed in its disclosure document, ITEM 19.
The franchisor has revealed in its disclosure document, according to the real data from existing mobile stores, how much their franchise units have, on average gross revenue per year.
On the amount of gross revenue, we implemented a 25% of profit margin. These franchises deliver really good margins to their owners primarily because operating costs are low.
The calculation of the Snap-on Tools franchise owner salary goes as follows:
- 25%(Profit Margin) of $696,421(average Gross Revenue)= $174,105(franchise owner profit/salary per year)
Is it Profitable to Own Snap-on Tools Franchise
With an expected profit of more than $150,000 per year, Snap-on Tools are one of the most profitable franchises that investors can find in the franchising industry.
The new franchise owners can expect that ROI (Return Of Investments) time will be only 2 to 3 years, so franchisees can expect their investment to pay off quickly.
However, this is not a franchise opportunity for everyone. This franchising opportunity is the best business solution for investors who are current or former mechanics.
The franchisee must have the passion and knowledge to understand their customer’s needs!
Also, at first, it is good practice that the investor is also an in-store seller. By doing this, there are no unnecessary employee payroll costs, and the franchise owner can keep more profit in his pocket.
Every professional or hobby handyman knows that tools are not cheap products. This franchisor gives excellent discounts on inventory, so owners make a high margin from the end price that customers pay for this brand’s products.
How Much Is Snap-on Tools Franchise Agreement Duration
The Snap-on Tools offers a franchise agreement of 10 years term; after that time passes, franchisees need to pay a renewal fee of $8,000 to get additional ten years license contract!
Are All Snap-on Tools Franchises
96% of all Snap-on Tools stores are franchisee owned, and only 4% of these stores in the United States are company owned.
The company-owned stores are used to pilot new sales and promotional ideas before introducing them to franchisees. This is an excellent practice because franchise owners get a final idea or product tested in real market conditions.
Who Owns Snap-on Tools
Snap-on Incorporated is a business entity under which Snap-on Tools do its market operation. This company is publicly traded, and there are a lot of shareholders who own a piece of this brand!
The Vanguard Group owns approximately 11% of Snap-on and is the biggest stakeholder. BlackRock Fund Advisors own 5.27%, and SSGA Funds Management owns 4.56% of this company; other shareholders are below 3% in owning structure.
This brand was formed in 1920 in Milwaukee, Wisconsin, as the Snap-on Wrench Company by Joseph Johnson and William Seidemann. Since then, they have established itself as one of the leading distributor and manufacturers of professional high-end equipment and tools.
Nicholas Pinchuk is chairman and Chief Executive Officer of Snap-on, so he is considered a key person of this company.
We have summarized all facts regarding Snap-on Tool’s initial investment cost and profit per year that the owner of this mobile store can expect to make per year. The conclusion is that this is a really good franchising offer, and owning this mobile store can be a lucrative business venture in the long run.
We suggest that new franchisees at first don’t hire employees. The advantage of this franchise is that it needs only one employee(seller of the tool), and the owner can be a one-man band till the business doesn’t start to roll out at full capacity!