What is the principal amount for the Alternative Financing Note (Exhibit G) for a Big O Tires franchise?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
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Alternative Financing Note (Exhibit G)
Principal Amount: One Hundred Fifty Thousand Dollars ($150,000) and all subsequent advances made by Holder.
Interest Rate: An annual rate equal to the "prime rate" as published in The Wall Street Journal adjusted on the first day of the following month, plus 3% (the "Note Interest Rate").
Payment Terms:
Additional Store Development Program or Multi-Store Conversion Program: The principal balance of the Note shall be paid in full within 90 days of ________________________ (such date being the "Payment Date"). A credit of $.05 per dollar of Gross Sales (as defined in Maker's Franchise Agreement) made by the Big O Tires Store through the Payment Date will be applied against the principal balance due. By way of example, if the Big O Tires Store has $1,500,000 dollars of Gross Sales by the Payment Date, the principal balance due shall be reduced by $75,000, and the remaining balance of the principal ($75,000) shall be paid within 90 days after the Payment Date. If the Big O Tires Store has $3,000,000 of Gross Sales by the Payment Date, the principal balance due shall be eliminated.
Existing Franchisee Growth Program Note (Exhibit G)
Principal Amount: Five Hundred Thousand Dollars (U.S. $500,000.00) and all subsequent advances made by Holder.
Interest Rate: Interest shall accrue from the date of each Principal Advance until paid in full at an annual rate equal to the "prime rate" as published in The Wall Street Journal adjusted on the first day of the following month, plus 0.5% on the entire unpaid balance until paid in full (the "Note Interest Rate").
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, the principal amount for the Alternative Financing Note (Exhibit G) is $150,000, in addition to any subsequent advances made by the holder. This note is specifically designed for the Additional Store Development Program or Multi-Store Conversion Program.
The interest rate on this note is variable, calculated as the prime rate published in The Wall Street Journal, adjusted monthly, plus an additional 3%. This means the actual interest paid can fluctuate over the life of the note based on prevailing market conditions.
The repayment terms stipulate that the principal balance must be paid in full within 90 days of a specified date. However, Big O Tires offers a unique credit system where $0.05 per dollar of gross sales from the Big O Tires store is applied against the principal balance. For example, if a store achieves $1,500,000 in gross sales by the payment date, the principal balance is reduced by $75,000. If the store reaches $3,000,000 in gross sales, the entire principal balance is eliminated. This provides a significant incentive for franchisees to drive sales, as higher revenues directly reduce their debt burden.
In contrast, the Existing Franchisee Growth Program Note has a principal amount of $500,000 with an interest rate of prime plus 0.5%.