Why does Big O Tires require franchisee transfers to be approved?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Big O has granted the Franchise in reliance on Franchisee's personal background, business skills, experience, and financial capacity. It is important to Big O that Franchisee be known to Big O and always meet Big O's standards and requirements. Accordingly, neither Franchisee nor any Owner shall be permitted or have the power, without the prior written consent of Big O, to make any Transfer. To assure compliance by Franchisee with the transfer restrictions contained in this Section 18, all share or stock certificates of Franchisee, or other evidence of ownership in a Franchisee which is an Entity, shall at all times contain a legend sufficient under applicable law to constitute notice of the restrictions on such stock, or other said evidence of ownership, contained in this Agreement and to allow such restrictions to be enforceable. Such legend shall appear in substantially the following form:
The sale, transfer, pledge, or hypothecation of this [stock] is restricted pursuant to the terms of Section 18 of a Franchise Agreement dated between Big O Tires, LLC, and the issuer of these [shares].
Any Transfer that does not comply with the terms of this Section 18 shall be null and void.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, the company requires franchisee transfers to be approved because the rights and duties set forth in the agreement are personal to the franchisee. Big O Tires grants the franchise in reliance on the franchisee's personal background, business skills, experience, and financial capacity. The company wants to ensure that the franchisee is known to Big O Tires and always meets their standards and requirements. Therefore, neither the franchisee nor any owner is permitted to make any transfer without prior written consent from Big O Tires. To ensure compliance, all share or stock certificates of the franchisee, or other evidence of ownership in a franchisee which is an entity, must contain a legend sufficient under applicable law to constitute notice of the restrictions on such stock. Any transfer that does not comply with these terms will be considered null and void.
Big O Tires' approval will be granted only if the prospective transferee, its owners, and/or operator meet the company's then-current standards for new franchisees. These standards may vary based on circumstances such as past or anticipated sales volume or the real estate value of a particular store. The transferee must also demonstrate that they meet Big O Tires' managerial, business, and technical standards, possess a good moral character, business reputation, and satisfactory credit rating, and have the aptitude, ability, and financial capacity to operate the franchised business.
Big O Tires also reserves the right to disapprove a transfer if it would result in any material increased risk, burden, chance of not obtaining performance of all the provisions of the agreement, or chance of not obtaining financial performance as good as that achieved by the franchised business prior to the prospective transfer. Additionally, Big O Tires reserves the right to disallow a transfer of the premises (without a transfer of the franchised business) to a person who would operate a business from the premises which sells or offers for sale products or services which are the same as or similar to those offered for sale through the franchised business. The company may also seek to negotiate a general release of Big O Tires as part of its approval of the proposed transfer.
Big O Tires' approval is also conditional upon the proposed transferee or its operator completing the training program then currently required of Big O Tires franchisees or operators. In some circumstances, such as high past sales volume, additional training may be required by Big O Tires from time to time. If any proposed assignment of rights under the agreement would result in a change of control, the transferee must apply for a Big O Tires franchise and meet all of Big O Tires' then-current standards and requirements for becoming a franchisee. The transferee or franchisee may also be required to execute the then-current form of franchise agreement, which may include different fee structures, increased fees, different terms and conditions, a modified trade area, and different purchase requirements.