Can the fees in the Big O Tires Franchise Agreement change over time?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 1: Fees are imposed by and payable to us, except as otherwise noted. All fees are nonrefundable, unless otherwise determined at Big O's sole discretion. You must reimburse us for any taxes (other than income taxes) we pay on your royalty fees so that the net amount received by us is as set forth in the Franchise Agreement. Certain fees in our current Franchise Agreement have changed from the amounts charged in the past and may change in the future. Franchisees are only responsible for those fees contained in the Franchise Agreements that they execute. Therefore, existing and future franchisees may have fees imposed on them that are different from those represented in this table. We may elect to waive or credit, reduce or defer payment of any and all fees and charges of any kind that are payable to us in connection with a franchise on a case-by-case basis.
Note 2: The following royalty provisions control the administration of the royalty for Business Format Franchisees –
- a. The royalty rate that you pay for the period from the date your Store begins operations until the end of that calendar year will generally be 5.0%. However, you may be able to receive reductions or rebates of a portion of these royalty payments based on the Royalty Matrix as described below. The royalty rate applies to your Adjusted Gross Sales.
- i. Your royalty rate will be calculated in accordance with the Royalty Matrix, which is included in Schedule 9 to Exhibit B-1 (the BF Franchise
Agreement). The Royalty Matrix provides for a royalty rate for a given year based on your Adjusted Gross Sales for that year. This Royalty Matrix will change each year based on the prior year average retail store sales. For new Stores, under the current Royalty Matrix, generally the maximum Royalty Rate will not exceed 5.0% and the lowest royalty rate will not be less than 3.5%. The minimum royalty rate under the Royalty Matrix is subject to change by Big O. Big O will update and distribute the Royalty Matrix annually. For instance, if you sign the Franchise Agreement (Exhibit B-1) in 2025, the initial Royalty Matrix will be the 2025 Royalty Matrix, it will be updated annually. Big O may also adjust the Royalty Matrix during the course of a year. The Royalty Matrix will establish the minimum amount at which a rebate may be earned by a single Store, which minimum amount is the greater of: (a) $1.47 million, or (b) the average Store Gross Sales of all Big O stores for the previous year, excluding the top 10% of Stores and bottom 10% of Stores and adding $190,000 and rounding down to the nearest $10,000.
ii. If you own more than one Store, you may apply to us to become part of a Multi-Store Royalty Group. We may require, among other things, that Stores in a Multi-Store Royalty Group have 50% or more common ownership by one owner or that the Stores have 2 to 5 common owners with each owner having a 20% or more ownership of each Store.
Source: Item 6 — OTHER FEES (FDD pages 21–35)
What This Means (2025 FDD)
According to Big O Tires's 2025 Franchise Disclosure Document, certain fees associated with the franchise may change over time. Specifically, the document states that certain fees in the current Franchise Agreement have changed from past amounts and may change in the future. This means that the fees outlined in the FDD are not necessarily fixed and could be subject to adjustments by Big O Tires.
One example of a fee that may change is related to the BOT POS System. Franchisees must acquire this system and pay various fees, including software license fees, installation, conversion, training, support, and monthly subscription fees. The FDD explicitly states that these fees may change periodically. Additionally, Navex and Tekmetric, the providers of the BOT POS System, may charge hourly rates and other charges for services not included in the contracted maintenance, support, and training services.
Another fee that may be subject to change is the royalty rate. The Royalty Matrix, which determines the royalty rate based on Adjusted Gross Sales, changes each year based on the prior year average retail store sales. Big O Tires will update and distribute the Royalty Matrix annually and may also adjust it during the course of a year. The minimum royalty rate under the Royalty Matrix is also subject to change by Big O. Furthermore, Big O may designate specific items and Gross Sales on which no royalty fee is due, and this designation may change from time to time. Big O Tires may also change the date for payment of the royalty fee upon notice to the franchisee.
Prospective Big O Tires franchisees should be aware that the fees outlined in the FDD are subject to change and should inquire about the potential for future fee adjustments. Franchisees are only responsible for the fees contained in the Franchise Agreements that they execute. Therefore, existing and future franchisees may have fees imposed on them that are different from those represented in the FDD. Big O Tires may elect to waive, credit, reduce, or defer payment of any and all fees and charges of any kind that are payable to them in connection with a franchise on a case-by-case basis.