What is the definition of 'Adjusted Gross Sales' for Big O Tires?

According to Big O Tires' 2025 Franchise Disclosure Document, Adjusted Gross Sales is defined as Gross Sales excluding specific categories. These exclusions include Gross Sales (a) to National Account Customers and Key Account Customers, (b) of Farm Class Tires, (c) on Excess Service Department Sales, and (d) on which no royalty is due and not otherwise excluded from the definition of Gross Sales. This definition is important because the royalty fees that Big O Tires franchisees pay are based on a percentage of Adjusted Gross Sales.

In simpler terms, Big O Tires franchisees do not pay royalties on all of their sales. Certain types of sales, such as those to national accounts, for farm tires, or exceeding service department sales, are removed from the calculation of gross sales before the royalty percentage is applied. This can reduce the overall royalty burden for franchisees, as they are not paying royalties on these specific revenue streams.

The Adjusted Gross Sales Royalty Rate is the percentage applied to the Adjusted Gross Sales to determine the Adjusted Gross Sales royalty fee. This percentage is referred to as the Matrix Royalty Rate. The FDD also provides abbreviations for these terms, with AGS representing Adjusted Gross Sales and AGS Royalty Rate representing Adjusted Gross Sales Royalty Rate. Franchisees should pay close attention to these definitions and how they are applied, as they directly impact the profitability of their Big O Tires business.