MIDAS ITEM 19

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

 

The following information is provided for the purpose of helping you evaluate the potential earnings capability of a Midas Shop.  Please carefully read all information in this Item 19, including the statements following the tables, which explain the information provided in the tables below and the limitations on this and the other information contained in this Item 19.

 

  1. Annual Gross Revenues

 

Part A of this financial performance representation includes the historical average annual Gross Revenues for U.S. Midas Shops that operated from January 1, 2019 through December 31, 2020 and met the following criteria: (i) the Shop had operated for at least 24 consecutive months as of December 31, 2020, and (ii) the Shop reported Gross Revenues data to us for each month of the 2019 and 2020 years. There were 1,038 total operating Shops in the U.S. as of December 31, 2020, however only 911 met the criteria (the “Part A Reporting Shops”), representing approximately 87.8% of the total franchised U.S. Shops. The 61 Shops operating as Midas/SpeeDee Co-Branding Shops as of December 31, 2020 are excluded from this Part A.  There were 71 Shops that closed for various reasons during 2019 and 2020, 2 of which had been open less than 12 months.  “Gross Revenues” means all revenue from a franchised outlet as reported by royalty sales.

 

We separated the Part A Reporting Shops into 4 quartiles based on average Gross Revenues, with the Top Quartile reflecting the results of those with the highest average Gross Revenues for the 2020 Year and the 4th Quartile reflecting those with the lowest average. The 2nd and 3rd Quartiles reflect results of those Midas Shops with the second highest and second lowest average, respectively.  The results of the Top 10% and Bottom 10% of Part A Reporting Shops, in terms of Gross Revenues, are also shown.

 

Of the Part A Reporting Shops included, 42.7% exceeded the overall average annual Gross Revenues of all Part A Reporting Shops of $841,084.

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B. Gross Revenues and Cost Analysis

 

Part B of this financial performance representation includes the average Total Income, Gross Profit, and Net Income, in addition to certain expense and margin information for U.S. Midas Shops that operated from January 1, 2020 through December 31, 2020 and met the following criteria: (i) the Shop had operated for at least 12 consecutive months as of December 31, 2020, and (ii) the Shop furnished financial data to us for year 2020 with information regarding expenses that we believe to be reliable. There were 1,038 total operating Shops in the U.S. as of December 31, 2020 and 239 met the criteria (the “Part B Reporting Shops”), representing approximately 23% of the total franchised U.S. Shops.  The 61 Shops operating as Midas/SpeeDee Co-Branding Shops as of December 31, 2020 are excluded from this Part B.  There were 71 Shops that closed for various reasons during 2020, 2 of which had been open less than 12 months. 

 

We separated the Part B Reporting Shops into 4 quartiles based on average Total Incomes, with the Top Quartile reflecting the results of those with the highest average Total Incomes for the 2020 Year and the 4th Quartile reflecting those with the lowest average.

 

The average Total Income of all of the Part B Reporting Shops was $1,001,320 and the following averages represent a percentage of income of these Part B Reporting Shops: Cost of Goods Sold, 30.5%; Gross Profit, 69.5%, Total Labor, 29.0%; Total Operating Expense, 60.5%; Net Income From Operations, 10.8%.

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The accompanying footnotes are an integral part of these charts and should be read in their entirety for a full understanding of the information contained in them.

FOOTNOTES:

 

1. Both of the tables show historic financial performance representations.  Part A is an historic financial performance representation reflecting the average franchisee Annual Gross Revenues for the Part A Reporting Shops on an annual basis for the most recent two calendar years of January 1, 2019 through December 31, 2020.  Part B is an historic financial performance representation reflecting the average franchisee Total Income, Gross Profit, and Net Income for the Part B Reporting Shops for the year from January 1, 2020 through December 31, 2020.  For purposes of this Item 19, “Gross Revenues” or “Total Income” means the total revenue of a Midas Shop, less taxes, discounts, rebates, and returns.  In Part B, “Gross Profit” means the Total Income less the Cost of Goods Sold, and “Net Income From Operations” means the Gross Profit less those “Operating Expenses” identified in the table (total labor, the royalty paid to us, advertising expenses, total occupancy expenses, utilities, and other expenses).  See footnote 4 below regarding these expenses.  In Part B, we have also disclosed the percentage of the Total Income represented by each of the line items of expenses, Gross Profit, and Net Income From Operations.  Additionally, the tables each disclose the maximum (highest) and the minimum (lowest) figures achieved by a Shop in each grouping.  

2. Part A also sets forth the median of annual Gross Revenues for each grouping of Shops, and Part B also sets forth the median of Total Income, Gross Profit, and Net Income for each quartile of Shops.  The “median” for purposes of these tables means the results of the Shops falling in the middle of each group in terms of each relevant category of data, or, where there is an even number of Shops, the average of the results of the two Shops falling in the middle of the group.

 

3. Each of the tables also indicates the number and percentage of the applicable Shops within each group that meet or exceed the averages stated.

 

4. Part B contemplates the Cost of Goods Sold and the expenses identified in the “Total Operating Expenses” portion of the table.  The Costs of Goods Sold generally includes the cost of products sold which may include the cost of exhaust systems, brake components, suspension parts, heating and cooling system parts, tires and batteries and other motor vehicle parts, and other goods purchased for resale from Midas or others, but does not include labor costs.  The Total Operating Expenses includes total labor expenses such as wages paid to technicians only.  It does not include wages paid to managers or other employees, payroll taxes, fringe benefits, and worker’s compensation insurance expenses.  The “Other Expenses” portion of the Total Operating Expenses generally includes other expenses incurred toward generating income, but excluding the labor, royalty, advertising, occupancy and utility expenses otherwise noted.  Expenses vary substantially and are based on particular factors relevant to each Shop.  Your additional expenses may include wages and reimbursements for yourself, personal expenses, and other fees and expenses.  You may incur operating expenses different from those stated above as well as other isolated or recurring expenses.  See Items 5, 6, and 7 for fees and other expenses you may incur.  Further, the tables do not show any taxes paid by the Shops, including any sales taxes, payroll taxes, and income taxes that may be applicable.  Taxes vary widely between geographic areas and from Shop to Shop.  You should conduct an independent investigation of the costs and expenses you will incur in operating your Midas Shop.  Franchisees or former franchisees listed in Exhibits A-1 and A-2 to this disclosure document may be one source of this information. 

 

5. We offered substantially the same services to all of the Shops included in each chart, which offered substantially the same products and services to the public.  There is no assurance that the average sales in the charts in any of these categories will reflect or indicate the sales that you or any other franchisee may achieve or will achieve.

 

6. The foregoing tables cover only standard Midas Shop franchises and not any Co-Branding Shop franchises.  If you acquire a Co-Branding Shop, your results may differ.  In particular, you will be offering additional service and products but will have additional expenses and fees as described in Items 6 and 7.  We do not provide any financial performance representation related to the performance of Co-Branding Shop franchises.

7. The revenue and income information in the tables was compiled based on actual reported sales by our existing U.S. Midas Shop outlets during the applicable periods based on monthly sales reports submitted to us by Midas franchisees for the purpose of computing royalty fees.  The expense and Net Income data in Part B was compiled based on the financial data of the Part B Reporting Shops that were submitted to us.  We do not know if the figures reported to us by franchisees were audited.  We have not independently audited or verified the accuracy of these numbers, and we do not know if these numbers have been verified or audited on behalf of the franchisees. 

8. A particular Midas Shop’s financial performance may be affected by numerous factors    that may vary due to the individual characteristics of the Midas Shop.  These factors     include: competition from car dealers and other auto service centers, appreciation and acceptance of the services and products the Midas Shop offers in its community, a       franchisee’s experience, business development and managerial skills, advertising             programs, personnel and cost controls, geographic and socioeconomic conditions in the   Midas Shop’s area, business cycles and performance of the economy locally, nationally            and world-wide.

 

9. There were no company-owned Midas Shops as of December 31, 2020, and no company-owned Midas Shops are reflected in these tables.

 

 Written substantiation of the data used in preparing the information set forth in this Item 19 will be made available to you on reasonable request.

 

 We encourage you to consult with your financial advisors in reviewing the information in this Item 19, in particular, in estimating the categories and amount of expenses that may be incurred in establishing and operating a Midas Shop.

 

 Some outlets have earned these amounts. Your individual results may differ. There is no assurance you will earn as much.

           

 Other than the preceding financial performance representation, we do not make any financial performance representations.  We also do not authorize our employees or representatives to make any such representations either orally or in writing.  If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet.  If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting our General Counsel, Brian Maciak, either at 4300 TBC Way, Palm Beach Gardens, Florida 33410 or (561) 383-3000, the Federal Trade Commission, and the appropriate state regulatory agencies.