For a Big O Tires franchise, what index is used to determine the Base Rent adjustment?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
form attached hereto as Exhibit "E". Tenant's shareholders, members, partners, officers, directors, as the case may be, and their spouses, as required by Landlord, shall execute the guaranty attached hereto as Exhibit "F".
2.2. Base Rent Adjustment. Beginning on the first day of the first month of the fourth (4th) Lease year of the term of this Lease, and for each three (3) year period of the Term thereafter including any Extended Terms if exercised, the Base Rent shall be subject to an annual increase by the greater of nine percent (9%) or the amount of the increase in the Consumer Price Index ("Index") during the preceding three year period's Base Rent. The Index which is published most immediately preceding the date of the adjustment period in question commences (the "Extension Index") shall be compared with the Index published most immediately preceding the date the previous three-year period commenced (the "Beginning Index"). If the Extension Index has increased over the Beginning Index, the Base Rent shall be set by multiplying the then-current Base Rent by a fraction, the numerator of which is the Extension Index and the denominator of which is the Beginning Index. This adjustment process shall be continued for each three (3) year period of the Term, including any Extended Terms if exercised;
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, the Consumer Price Index, referred to as "Index", is used to determine the base rent adjustment. Starting on the first day of the first month of the fourth lease year, and every three years thereafter, the base rent will be subject to an annual increase. This increase will be the greater of nine percent (9%) or the increase in the Consumer Price Index during the preceding three-year period's base rent.
The Extension Index, which is the index published most immediately preceding the date the adjustment period commences, will be compared with the Beginning Index, which is the index published most immediately preceding the date the previous three-year period commenced. If the Extension Index has increased over the Beginning Index, the base rent will be set by multiplying the then-current base rent by a fraction. The numerator of this fraction is the Extension Index, and the denominator is the Beginning Index.
However, the increase in base rent will not be less than nine percent (9%) nor more than eighteen percent (18%) calculated over the prior three-year adjustment period. This means that even if the Consumer Price Index increases significantly, the base rent increase is capped at 18%. Conversely, if the Consumer Price Index does not increase by at least 9%, the base rent will still increase by 9%. This provision provides some predictability for the franchisee regarding rent increases over the term of the lease.