What was the warranty allowance at the beginning of 2024 for Big O Tires franchisees?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
. The expenses related to providing warranties on Big O tires have been estimated by Big O for each of the Big O I Tires lines based on tire adjustment data accumulated from Big O's warranty database, expressed as a percentage to be added to the Acquisition Cost of tires. At the beginning of each fiscal year, Big O will analyze the warranty data, calculate new warranty percentages, review the new percentages with a franchisee group designated by the Franchise Advisory Council, explain the reasons for any increases or decreases in the percentages from one year to the next, and then use the new percentages in the determination of the Big O Program Products Price. Once set at the beginning of the year, the Big O I Tires warranty percentages will be used for the entire year.
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- The other expenses associated with warranty will be allocated to all units sold based on a fixed rate per unit ($.00 per unit for 2025) that is calculated by dividing the total costs in this category by the total budgeted units for the year. This factor will not change throughout the yea
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
The 2025 Big O Tires Franchise Disclosure Document explains how warranty costs are handled. For Big O I Tires, Big O Tires estimates warranty expenses for each tire line based on historical tire adjustment data from their warranty database. These expenses are expressed as a percentage that is added to the acquisition cost of the tires. At the beginning of each fiscal year, Big O Tires analyzes the warranty data, calculates new warranty percentages, reviews these percentages with a franchisee group designated by the Franchise Advisory Council, and explains any increases or decreases from the previous year. These new percentages are then used to determine the Big O Program Products Price and remain fixed for the entire year.
In addition to the percentage-based warranty expense for Big O I Tires, other warranty-related expenses are allocated to all units sold based on a fixed rate per unit. For 2025, this fixed rate is stated as $0.00 per unit. This rate is calculated by dividing the total costs in this category by the total budgeted units for the year and does not change throughout the year.
The FDD does not specify the exact warranty allowance for the beginning of 2024. However, it does outline the process by which Big O Tires determines the warranty percentages and fixed rates at the beginning of each fiscal year. A prospective franchisee would need to ask Big O Tires directly about the specific warranty percentages and fixed rates that were in effect at the beginning of 2024 to fully understand the warranty cost structure at that time.