How often will Big O Tires update the Royalty Matrix?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
. The Royalty Matrix will be updated for each calendar year by Big O and distributed by Big O to Franchisee. Each Royalty Matrix will be for the specified calendar year. Big O will make such updates in accordance with methodologies established by Big O in accordance with the recommendations of the franchisee audit committee of the Franchise Advisory Council. The final determination of the Royalty Matrix for any calendar year shall be made by Big O. The methodology used by Big O is as follows until modified and included in the Manual:
- a. The Store-level retail sales will be accumulated by Big O for each Store for the 12-month period ending October 31. This information should be available by the end of November, as many Stores do not report their retail sales to Big O until the end of the following month.
- b. All Stores that were open for less than the full 12 months (as of October 31st) will be eliminated from the data.
- c. Of the remaining Stores, the top 10% based on retail sales and the bottom 10% based on retail sales will be dropped. The middle 80% will be used to calculate an average retail sales amount per Store.
- d. By December 20, the new Royalty Matrix will be completed for the following calendar year, with the first single-Store royalty breakpoint being equal to the greater of: (a) $1.47 million, or (b) the average retail sales figure calculated above, plus $190,000, rounded down to the nearest $10,000. Each subsequent breakpoint will be at $200,000 intervals, until the lowest royalty level is achieved. Currently, the lowest royalty level is 3.5%, but this is subject to change by Big O in its discretion in the future.
- e. The Multi-Store Royalty Group portions of the Royalty Matrix will be calculated using the same percentages that drive the matrix attached to this Schedule 9.
- f.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, the Royalty Matrix, which determines a franchisee's royalty rate based on gross sales, will be updated for each calendar year. Big O Tires will distribute the updated Royalty Matrix to franchisees annually. These updates are made following methodologies established by Big O Tires, considering recommendations from the franchisee audit committee of the Franchise Advisory Council. Each Royalty Matrix is specifically designed for the calendar year it covers.
Big O Tires uses a specific methodology to determine the new Royalty Matrix. Store-level retail sales data is collected for each store over a 12-month period ending on October 31st. Stores open for less than the full 12 months are excluded from the data. The top and bottom 10% of the remaining stores, based on retail sales, are also removed, and the middle 80% is used to calculate an average retail sales amount per store. By December 20th, the new Royalty Matrix is completed for the following calendar year. The first single-store royalty breakpoint is set to the greater of $1.47 million or the average retail sales figure plus $190,000, rounded down to the nearest $10,000. Subsequent breakpoints are at $200,000 intervals until the lowest royalty level is achieved, which is currently 3.5%, but subject to change.
Furthermore, Big O Tires retains the discretion to update the Royalty Matrix during a calendar year. This can be based on store-level retail sales for the 12-month period ending the most recent October 31st or any other more recently ended full or partial 12-month period selected by Big O Tires. This means that while the Royalty Matrix is typically updated annually, there is a possibility for more frequent changes at Big O Tires's discretion. The Matrix Royalty Rate for a franchisee in any particular calendar year depends on the Gross Sales of the franchisee's single Store in that calendar year or, if the franchisee's Stores are members of a Multi-Store Royalty Group, the Gross Sales of all the Stores in the Multi-Store Royalty Group for that calendar year.
For a prospective franchisee, it is important to understand how these updates to the Royalty Matrix can impact their royalty payments. Since the royalty rate is tied to gross sales, any changes to the matrix could affect the percentage of sales paid to Big O Tires. Franchisees should pay close attention to the criteria and methodologies Big O Tires uses to update the matrix, as well as any potential changes that could occur during the calendar year. Understanding these factors can help franchisees better forecast their expenses and manage their business finances effectively.