Where can I find the Royalty Matrix that determines the royalty rate for Big O Tires franchisees?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
Qualified Multi-Store Royalty Groups that elect to be treated as a group will have a lower per Store annual Gross Sales requirement to qualify for lower royalty rates than single Store franchisees that are not part of a Multi-Store Royalty Group.
Multi-Store Royalty Groups have a maximum royalty rate of 5.0%, but the royalty rate is subject to reduction on their Adjusted Gross Sales (defined exactly the same as for a single Store for this purpose).
- iii. We have adopted royalty payment and true-up rules that are included in Schedule 9, Annex 2 of Exhibit B-1. These govern the application of the Royalty Matrix and various transition situations.
Source: Item 6 — OTHER FEES (FDD pages 21–35)
What This Means (2025 FDD)
According to Big O Tires's 2025 Franchise Disclosure Document, the Royalty Matrix, which determines the royalty rate for franchisees, can be found in Schedule 9 to Exhibit B-1, the Business Format Franchise Agreement. The royalty rate is determined 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%. Big O Tires will update and distribute the Royalty Matrix annually.
The FDD also specifies that Big O Tires may 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.
For franchisees who own multiple stores, there is an option to apply to be part of a Multi-Store Royalty Group. To qualify, the stores in such a group must have at least 50% common ownership by one owner, or 2 to 5 common owners with each having at least 20% ownership in each store. Qualified Multi-Store Royalty Groups that elect to be treated as a group will have a lower per Store annual Gross Sales requirement to qualify for lower royalty rates than single Store franchisees that are not part of a Multi-Store Royalty Group. Multi-Store Royalty Groups have a maximum royalty rate of 5.0%, but the royalty rate is subject to reduction on their Adjusted Gross Sales.