How do 'Manufacturers Rebates' affect the 'Acquisition Costs' for Big O Tires?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Acquisition Costs – Big O's wholesale invoice price to acquire Big O Program Products from suppliers (including but not limited to an Affiliate of Big O such as TBC Corporation) less any per unit rebates from tire manufacturers that are fixed, do not fluctuate per unit as purchase volumes increase or decrease and are paid under a rebate program that is more than twelve months in length ("Manufacturers Rebates"). All volume bonuses, quarterly sales allowances, freight allowances, partner and/or supplier bonuses, advertising, marketing or coop payments received from manufacturers or other suppliers or any other payments from suppliers or manufacturers that do not meet the definition of Manufacturers Rebates received by Big O do not reduce Big O's Acquisition Costs.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, Manufacturer Rebates directly reduce the Acquisition Costs for Big O Program Products. Specifically, the Acquisition Costs are defined as Big O Tires' wholesale invoice price to acquire Big O Program Products from suppliers, less any per-unit rebates from tire manufacturers. These rebates must be fixed, not fluctuate with purchase volumes, and be paid under a rebate program lasting more than twelve months to qualify as Manufacturers Rebates that reduce Acquisition Costs.
However, not all payments or incentives from manufacturers reduce Big O Tires' Acquisition Costs. Volume bonuses, quarterly sales allowances, freight allowances, partner and/or supplier bonuses, and advertising, marketing, or co-op payments do not reduce Acquisition Costs unless they meet the specific definition of 'Manufacturers Rebates'. This distinction is important for franchisees to understand, as it affects the cost basis on which their pricing and profitability are calculated.
For a prospective Big O Tires franchisee, understanding how these rebates are treated is crucial for accurately assessing potential profit margins. Franchisees should pay close attention to the types of rebates and incentives offered by manufacturers and how Big O Tires accounts for them in determining the Acquisition Costs. This ensures transparency and helps in making informed business decisions regarding pricing and inventory management.