Under what circumstances can Big O Tires increase the Local Fund contribution rate?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) The Local Group may vote that its members must contribute to the Local Fund additional amounts above our minimum requirements. The members of the Local Groups that have these Local Funds may agree to increase or decrease the current fees, except that 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 Big O Tires' 2025 Franchise Disclosure Document, the Local Group, comprised of franchisees in a specific marketing area, has the authority to increase the Local Fund contribution rate. This can be done through a vote by the members, allowing them to contribute additional amounts above the minimum requirements set by Big O Tires. This provides a mechanism for franchisees to collectively decide on increasing advertising and marketing efforts within their local area.
Big O Tires retains some control over these local funds. While the Local Group can vote to increase the contribution rate, Big O Tires' approval is required to decrease advertising contributions below the minimum amount. Big O Tires may also set the Local Fund contribution rate at 2% on sales to National Account Customers, Key Account Customers, and/or on sales of Farm Class Tires. Additionally, Big O Tires can cap contributions to the Local Fund by one store at 4% (or the current Local Fund contribution rate, if lower) of either $2.7 million or twice the system-wide average store sales for the previous calendar year. For franchisees operating under older agreements, the $2.7 million minimum cap may be slightly lower, at $2.5 million.
Prospective franchisees should be aware that while the Local Group can vote to increase the Local Fund contribution, Big O Tires has the power to influence or limit these contributions through various mechanisms. It is important for franchisees to actively participate in Local Group decisions and understand the potential impact of these decisions on their advertising expenses. Franchisees should also inquire about the specific rules and guidelines governing their Local Group and how the Local Fund is administered to ensure transparency and accountability.