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Valvoline Oil Change Buys 56 Franchises

Wrong ticker symbol for Valvoline. It's VVV, not WV

Don Sniegowski's picture

Honorable mention: Valvoline Discloses Its Store Earnings

Kudos to Valvoline Instant Oil Change Franchising Inc for providing a degree of transparency in its franchise earnings disclosures to potential franchise buyers. As a matter of routine, I glance at a company's Franchise Disclosure Document when I write news stories on franchise systems. I do it because I want a quick rough idea on whether a franchise system is healthy or in trouble.

Highly unusual for sellers of franchises, Valvoline reveals average gross profits, contribution and gross sales for its average 271 company-owned stores from 2013 to 2016. Contribution is $255,002 for an average company-owned store in 2015, according to its Franchise Disclosure Document's Item 19. Valvoline even breaks the company-owned stores by high, average and low.

The franchisor would truly stand out in its transparency if it did the same breakout for its franchised units. After all, it's not how much customers spend in a store that counts but rather how much more can stores make than spend. If a franchise is built to inefficiently spend more money than it can take in, it won't last. It will likely see owner after new owner take over its premise. The bottom line is what counts when one is considering operating a store and return on investment, particularly a measure of profit more akin to cash inflow and outflow called EBITDA or earnings before income tax, depreciation and amortization. There is no franchise-level profits of any kind disclosed, let alone EBITDA. There are franchisors in other segments that reveal such information. However, to Valvoline credit, it does reveal net sales and oil changes per day as a financial performance representation for its 607 franchises in 2016. Average net sales for a franchise center was $869,913. Its competitor Jiffy Lube, which has been shrinking in outlets in its system from 2014 to 2016, also reveals average net sales for its franchised stores.

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