This article is based on its most recent FDD. Keep reading or watch the video originally recorded on Vetted Biz Youtube Channel
Snap-On Tools Company offers a license to operate a franchised mobile store selling high-quality repair and diagnostic tools and equipment. The company focuses on manufacturing and distributing tools and equipment to professional mechanics and other tool users around the United States.
Snap-On was founded in 1920 in Wisconsin, the company has evolved over the years through various names and entities to become Snap-On Incorporated. The CEO of the company is Timothy L. Chambers, who has been the CEO since 2009.
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The company is known for offering the highest quality tools around the country, and it has 3,500 franchises.
Competitors include other shops in the tools industry like BorgWarner, Husqvarna, Stanley Black & Decker, and ITT Corporation as well as other Snap-On shops nearby.
We will analyze if the initial cost is worth the potential returns.
How much is a Snap-On Franchise?
The initial license fee to open a franchise is $16,000. This fee includes initial training, a technology package, and a turnkey office supply package. For every additional franchise, a fee of $8,000 is due.
Snap-On Franchise cost
The estimated initial investment for beginning operations of a Snap-On franchise is between $169,223 and $382,235.
Estimated Range of Initial Investment
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 | $109,000 – $119,000 | Snap-On or predecessor franchisee if transfer |
| Technology Package | $0 – $3,000 | $0 – $3,000 | Snap-On |
| Electronic Signature Pad | $0 – $200 | $0 – $200 | Third parties |
| Supplies | $0 – $400 | $0 – $400 | Snap-On |
Estimated Range of Initial Investment
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 | |
|---|---|---|---|
| Van | $2,856 – $3,060 | $45,000 – $140,000 | Van Leasing Company, or predecessor franchisee if transfer |
| Van Insurance (3 months) | $625 – $1,875 | $625 – $1,875 | Third parties, Snap-On Secure Corp. |
| Van Delivery Charge | $180 – $4,100 | $180 – $4,100 | Third parties |
| License | $200 – $2,400 | $200 – $2,400 | Third parties |
| Acquisition / Development of Revolving Accounts | $0 | $0 – $75,000 | Third Parties |
| Other Equipment, Fixtures and Expenses | $150 – $170 | $150 – $170 | Suppliers; Snap-On; predecessor franchisee if transfers |
| Computer Software License Fee | $0 | $1,500 | Snap-On |
| Documentation Fee with Snap-On Franchise Finance Loan | $100 – $250 | Not applicable | Snap-On Credit |
| Minimum Down Payment with Franchise Finance Program | $21,500 | Not applicable | Snap-On Credit |
| Additional Funds – 3 Months | $11,972 – $18,590 | $4,568 – $18,590 | Third parties |
| Estimated Total Initial Franchise Expense | $37,583 – $55,545 | $169,223 – $382,235 |
Additional fees:
Monthly License Fee: $130
Computer Software Maintenance and Development Fee: $65 (Monthly)
These fees are comparable with other franchisees in the same industry.
What do you need to open a Snap-On Franchise?
The tools company is continuously looking for passionate individuals that are looking to invest in new opportunities. To qualify for a Snap-On franchise, you must have a net worth of at least 37,000 dollars. On top of that, Snap-On prefers candidates that are multilingual and can work independently.
The application process is very similar to most franchises. You fill out an application, if you are eligible you will have an interview and then you can start building your business.
How much do Snap-On Franchise Owners make?
| REPORTED PAID SALES FOR 2020 | Number of Franchisees Reporting | Porcentage |
|---|---|---|
| Less than $150,000 | 20 | 0.68% |
| $150,000 to $199,999 | 25 | 0.85% |
| $200,000 to $249,999 | 34 | 1.15% |
| $250,000 to $299,999 | 54 | 1.83% |
| $300,000 to $349,999 | 108 | 3.66% |
| $350,000 to $399,999 | 132 | 4.47% |
| $400,000 to $449,999 | 188 | 6.37% |
| $450,000 to $499,999 | 204 | 6.91% |
| $500,000 to $549,999 | 239 | 8.10% |
| $550,000 to $599,999 | 252 | 8.54% |
| $600,000 to $649,999 | 226 | 7.66% |
| $650,000 to $699,999 | 227 | 7.69% |
| $700,000 to $749,999 | 209 | 7.08% |
| $750,000 to $799,999 | 209 | 7.08% |
| $800,000 to $849,999 | 163 | 5.52% |
| $850,000 to $899,999 | 126 | 4.27% |
| $900,000 to $949,999 | 106 | 3.59% |
| $950,000 to $999,999 | 65 | 2.20% |
| $1,000,000 to $1,049,999 | 81 | 2.74% |
| $1,050,000 to $1,99,999 | 65 | 2.20% |
| $1,100,000 to $1,149,999 | 45 | 1.52% |
| $1,150,000 to $1,199,999 | 41 | 1.39% |
| $1,200,000 to $1,249,999 | 30 | 1.02% |
| $1,250,000 to $1,299,999 | 21 | 0.71% |
| $1,300,000 to $1,349,999 | 18 | 0.61% |
| $1,350,000 to $1,399,999 | 11 | 0.37% |
| $1,400,000 to $1,449,999 | 12 | 0.41% |
| $1,450,000 to $1,499,999 | 5 | 0.17% |
| $1,500,000 to $1,549,999 | 9 | 0.30% |
| $1,550,000 to $1,599,999 | 4 | 0.14% |
| $1,600,000 to $1,649,999 | 3 | 0.10% |
| $1,650,000 to $1,699,999 | 2 | 0.07% |
| $1,700,000 to $1,749,999 | 1 | 0.03% |
| $1,750,000 to $1,799,999 | 4 | 0.14% |
| $1,400,000 to $1,499,999 | 5 | 0.17% |
| $1,850,000 to $1,899,000 | 2 | 0.07% |
| $1,900,000 to $1,949,999 | 1 | 0.03% |
| $1,950,000 to $1,999,999 | 1 | 0.03% |
| Over $2,000,000 | 3 | 0.10% |
| Total | 2951 | 100.00% |
2019 Snap-On Median Franchise Sales: $550,000
The highest-earning franchise made over $2 million in revenue whereas the lowest-earning franchise made less than $150,000. These numbers indicate that potential earnings can vary significantly and it depends on factors.
1- Based on a midpoint investment of $275,729 with estimated profits of $55,000 at a 10% profit margin it would take about 7 years to recoup your investment.
2- Based on a midpoint investment of $275,729 with estimated profits of $82,500 at a 15% profit margin it would take about 5 years to recoup your investment.
3- Based on a midpoint investment of $275,729 with estimated profits of $110,000 at a 20% profit margin it would take about 4 years to recoup your investment.
-payback period includes time to ramp up the initial operations for a Snap-On franchise
Is Snap-On Franchise Profit Worth the Initial Cost?
After five years in the business, when you go to sell your franchise based on the median multiple of .5 and net sales of 2019 of $550,000 it would sell for about $275,000. This is almost as much as the midpoint initial investment. Not an amazing profit when it comes time to sell. However, if you have over $1 million in revenue, the multiple is higher and you can recoup your capital and more!
2019
| (Amounts in millions) | Commercial & Industrial Group | Snap-On Tools Group | Repai Stems & Information Group | Financial Services | Eliminations | Snap-On Incorporated |
|---|---|---|---|---|---|---|
| Net sales: | ||||||
| Vehicle service professionals | $85.5 | $1,612.9 | $1,078.9 | $- | $- | $2,777.3 |
| All other professionals | 952.7 | – | – | – | – | 952.7 |
| External net sales | 1,038.2 | 1,612.9 | 1,078.9 | – | – | 3,730.0 |
| Intersegment net sales | 307.5 | – | 255.6 | – | (563.1) | – |
| Total net sales | 1,345.7 | 1,612.9 | 1,334.5 | – | (563.1) | 3,730.0 |
| Financial services revenue | – | – | – | 337.7 | -337.7 | |
| Total revenue | $1,345.7 | $1,612.9 | $1,334.5 | $337.7 | $(563.1) | $,06.7 |
2020
| (Amounts in millions) | Comercial & Industrial Group | Snap-On Tools Group | Repair Systees & Information Group | Financial Services | Eliminations | Sp-On Incorporated |
|---|---|---|---|---|---|---|
| Net sales: | ||||||
| Vehicle service professionls | $87.2 | $1,643.9 | $997.2 | – | – | $2,728.3 |
| All otter professionals | 864.2 | – | – | – | – | 864.2 |
| External net sales | 951.4 | 1,643.9 | 997.2 | – | – | 3,592.5 |
| Intersegment et sales | 283.2 | – | 241.0 | – | (524.2) | – |
| Total net sales | 1,234.6 | 1,643.9 | 1,238.2 | – | (524.2) | 3,592.5 |
| Financial services revenue | – | – | – | 349.7 | – | 349.2 |
| Total revenue | $1,234.6 | $1,643.9 | $1,238.2 | $349.7 | $(524.2) | $3,942.2 |
Snap-On Incorporated is a highly profitable business, the numbers speak for themselves. Revenue has gone down in 2020 compared to 2019, but only by 4% which is an accomplishment considering that the Pandemic destroyed most businesses in 2020. You can rest assured that if you open a Snap-On franchise it will probably not be largely affected by future crises like the Covid-19 Pandemic.
Snap-On Franchise Failure Rate Breakdown
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018
2019 2020 |
3340
3327 3302 |
3327
3302 3280 |
-13
-25 -22 |
| Company-Owned | 2018
2019 2020 |
121
106 139 |
106
139 137 |
-15
+33 -2 |
| Total Outlets | 2018
2019 2020 |
3461
3433 3441 |
3433
3441 3417 |
-28
+8 -24 |
In the last three years, Snap-On has seen a decline in franchised-owned units. Company-owned units have also been in decline except in 2019 when the company opened 33 units in one 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.
Conclusion
Snap-On is one of the most prestigious tool franchises in the United States. People trust its high quality and it is a safe choice every time you need tools for any project.
If you open a Snap-On franchise you can recoup your investment in 4 to 7 years depending on profitability, which is not awesome but still comparable to most franchises. On top of that, when you go and sell your franchise you will make most of your investment back. If you develop more locations you can make an even healthier profit margin.
Another positive aspect of the company is that it has not seen a significant hit during the pandemic, it continues to function as well as before. This is important as it can give franchisees some assurance that their business will not be destroyed by future crises.
One thing to consider is that the number of Snap-On outlets has been in decline since 2018. This could be an indicator that things might be going too well for franchisees.
Our suggestion is to speak to at least five franchise owners before opening a Snap-On franchise.
If you think Snap-On is the right franchise for you, or you would like to explore other franchise opportunities, check out our listing page on the Vetted Biz website for thousands of franchises available for your investment.
