How often does Big O Tires update the Royalty Matrix?

According to Big O Tires' 2025 Franchise Disclosure Document, the Royalty Matrix, which determines a franchisee's royalty rate based on gross sales, is updated annually. Big O Tires distributes the updated Royalty Matrix to franchisees each calendar year. These updates are made using methodologies established by Big O Tires, considering recommendations from the franchisee audit committee of the Franchise Advisory Council. Each Royalty Matrix applies to the specified calendar year.

Big O Tires calculates the new Royalty Matrix based on store-level retail sales data accumulated for the 12-month period ending October 31. Stores open for less than the full 12 months are excluded from the data. Of the remaining stores, the top and bottom 10% based on retail sales are dropped, and the middle 80% is used to calculate an average retail sales amount per store. By December 20, 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.

Additionally, Big O Tires retains the discretion to update the Royalty Matrix during the year based on store-level retail sales for the 12-month period ending the most recent October 31 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, Big O Tires has the flexibility to make additional adjustments within the calendar year if deemed necessary. For a prospective franchisee, this implies that royalty rates could potentially change more than once a year, depending on Big O Tires' decisions.

For a franchisee, understanding the Royalty Matrix and its potential changes is crucial for financial planning. 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. The Matrix Royalty Rate on Adjusted Gross Sales for that calendar year will then be determined from the Royalty Matrix based on such Gross Sales for a Single Store or, for a Multi-Store Royalty Group, on such Gross Sales and the number of Stores in that Multi-Store Royalty Group.