Who is responsible for paying for utilities during the Preliminary Term for a Big O Tires franchise?

According to Big O Tires' 2025 Franchise Disclosure Document, the lessor is responsible for paying for utilities during the Preliminary Term. Specifically, the lessor must maintain and pay for water, gas, electricity, telephone, and other utility services for the premises during this period. This arrangement shifts to the franchisee (Lessee) during the Primary Term, when the franchisee becomes responsible for these utility costs.

This distinction between the Preliminary Term and the Primary Term is important for prospective Big O Tires franchisees. During the initial setup phase (Preliminary Term), the financial burden of utilities is borne by the lessor, which can alleviate some of the initial costs for the franchisee. However, once the Primary Term begins, the franchisee must budget for and manage these expenses.

This is a fairly common arrangement in commercial leases, where the landlord covers initial expenses to make the property ready for occupancy. However, franchisees should carefully note when the Preliminary Term ends and the Primary Term begins to avoid unexpected utility bills. Franchisees should also confirm the definition and duration of the Preliminary Term in their specific lease agreement, as it may vary.

Understanding this division of responsibility is crucial for financial planning. Franchisees need to factor in utility costs when projecting their operating expenses for the Primary Term. This includes budgeting for potential fluctuations in utility rates and seasonal variations in usage. Proper budgeting will ensure that the franchisee can meet these obligations without straining their cash flow.