What is the purpose of the reduction in the Big O Tires Local Fund contribution rate?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
the amount of the advertising contributions may not be decreased below the minimum amount described above without our approval; however, we may provide that: (a) the Local Fund contribution rate on sales to National Account Customers and Key Account Customers approved by us and/or on sales of Farm Class Tires may be set at 2%, and (b) contributions to the Local Fund by one Store may be capped for each applicable calendar year at 4% (or such lower amount equal to the required Local Fund contribution then in effect) of the greater of $2.7 million or twice the system-wide average Store sales for the previous calendar year (See Item 6, Note 3). (For certain franchisees operating under older forms of our Franchise Agreement, the $2.7 million minimum cap measure is slightly lower, at $2.5 million.)
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEM AND TRAINING (FDD pages 55–73)
What This Means (2025 FDD)
According to the 2025 Big O Tires Franchise Disclosure Document, the Local Fund contribution rate may be reduced in specific instances. Big O Tires may set the Local Fund contribution rate at 2% on sales to National Account Customers and Key Account Customers approved by them, and/or on sales of Farm Class Tires.
Additionally, contributions to the Local Fund by one store may be capped for each calendar year at 4% (or such lower amount equal to the required Local Fund contribution then in effect) of the greater of $2.7 million or twice the system-wide average store sales for the previous calendar year. For franchisees operating under older franchise agreements, the $2.7 million minimum cap may be slightly lower, at $2.5 million.
These adjustments provide some financial relief or predictability for franchisees in specific circumstances, such as those with high sales volumes or those serving particular customer segments. It also gives Big O Tires some flexibility in managing the Local Funds and incentivizing certain types of sales. Prospective franchisees should inquire about the current system-wide average store sales to understand how the cap might affect them and clarify which version of the Franchise Agreement applies to them to confirm the exact cap measure.