Big O Tires
Date of Incorporation: December 30,1982
Franchising Since: 1982
Address: Colorado
Description: Big O Tires offers franchises for the operation of retail stores selling and servicing tires and related automotive products and services ("Big O Stores" or "Stores"). Big O also sells tires and automotive accessories to franchisees, and Big O and its affiliates also sell or lease other items to franchisees such as real estate, equipment, signs and services. Also, Big O conducts wholesale operations under which it sells non-Big O brand tires and other automotive accessories to Big O franchisees and to other purchasers.
Franchise Offer: Big O Tires offers franchises under two franchise models: Product Distribution Franchises and Business Format Franchises.
The Business Format Franchise and the Product Distribution Franchise are both licenses to operate Big O Tire retail tire and automotive repair stores. From a retail perspective, consumers should not see any substantive difference in the experience that they are provided. Business Format Franchisees will pay a higher royalty (up to 6.0% of gross sales) as compared to 2.0% of gross sales paid by Product Distribution Franchisees.
Business Format Franchisees will receive pricing for "Big O Program Products" on a cost plus basis as opposed to the prices that Big O charges to Product Distribution Franchisees. However, Business Format Franchisees are not eligible to participate in any promotional programs offered to Product Distribution Franchisees.
Business Format Franchisees will receive additional products, licenses, and services that are not available to Product Distribution Franchisees or which may be available to Product Distribution Franchisees at an additional charge or at prices higher than those charged to Business Format Franchisees.
Business Format Franchisees must adhere to certain standards or incur certain costs that would not be required of Product Distribution Franchisees.
Product Distribution Franchisees will be allowed the option to convert Product Distribution Franchise Stores to Business Format Franchise Stores at times and under conditions prescribed, but it is not anticipate that Business Format Franchisees will be allowed to convert Business Format Franchise Stores to Product Distribution Franchise Stores.
Financial Assistance: The financing programs listed below generally are available to Business Format Franchisees or Product Distribution Franchisees, subject to the discretion, varying rates and subject to the particular eligibility requirements of that program.
o Real Estate Lease Financing
o Conversion Franchisee Financing
o Knock Out (Existing Franchisee Incentive) Program
o Kick Start (Existing Franchisee Incentive) Program
o Manager Incentive Program I
o Manager Incentive Program II
o Remodelling Financing
o Loan Guarantees
o Financing of Delinquent Payments
o Sales Acceleration Inventory Loan Program
o SBA Registry
Training and Assistance: Big O will provide an initial training program for one person consisting of training conducted at the corporate company training facility in Centennial, Colorado and field training and certification conducted at a Big O Store. The number of weeks of this initial training will be the number specified by the franchisor; currently the initial training is four weeks of headquarters training and two weeks of field training. The four week portion of initial training program consists of both classroom instruction and "hands-on" training. The two week portion of initial training program is conducted at a Big O Store by an existing franchisee of Big O and consists of "hands-on" training in front office skills.
The tuition or training fee covering the six weeks of the initial training program for one person is built into the franchise fee.
Territory: The Franchise Agreement grants the right to operate one Big O store at a single location. The franchisor does not establish other franchises or company-owned outlets selling or leasing similar products or services under a different name or trademark within the proximity of the franchised Big O Store, although the franchisor reserve the right to do so. The franchisor agrees not to operate for themselves or grant to any other person the right to operate any more than one Big O Store for every 50,000 persons residing in the Trade Area.
Term of Agreement and Renewal: The term of the franchise agreement is for 10 years. Renewal or extension of the term is for an additional 10 years.
Obligations and Restrictions: The Big 0 Store will only be operated by the Operator or a Manager employed by the franchisee who is subject to approval by the franchisor. All initial and later Operators and Managers are also subject to approval.
Total Number of Units: 543 franchised stores at the end of the year 2007
Investment Table:
Initial Investment:
Business Format Franchises:
| Name of fee |
Low |
Low |
|---|---|---|
| Initial Franchise Fee |
$0 |
$30,000 |
| Real Estate Leases (First Three Months' Rent Plus Security Deposit) |
$16,000 |
$64,000 |
| Equipment and fixtures |
$100,000 |
$220,000 |
| Signs |
$10,000 |
$30,000 |
| Grand Opening Advertising |
$10,000 |
$15,000 |
| Initial Inventory |
$35,000 |
$70,000 |
| Insurance and Other Security (3 months) |
$3,000 |
$5,000 |
| Initial Training-Fees, Travel & Lodging Expenses |
$3,800 |
$7,800 |
| Computer Hardware and Software |
$13,000 |
$16,500 |
| Non-recurring Pre-opening Costs |
$10,000 |
$35,000 |
| Additional Funds (up to 12 months) |
$25,000 |
$50,000 |
| Total |
$225,800 |
$543,300 |
Product Distribution Franchises:
| Name of fee | Low | Low |
|---|---|---|
| Initial Franchise Fee | $0 |
$30,000 |
| Real Estate Leases (First Three Months' Rent Plus Security Deposit) | $16,000 |
$64,000 |
| Equipment and fixtures | $100,000 |
$220,000 |
| Signs | $10,000 |
$30,000 |
| Grand Opening Advertising | $10,000 |
$15,000 |
| Initial Inventory | $45,000 |
$75,000 |
| Insurance and Other Security (3 months) | $3,000 |
$5,000 |
| Initial Training-Fees, Travel & Lodging Expenses | $3,800 |
$7,800 |
| Computer Hardware and Software | $0 |
$20,000 |
| Non-recurring Pre-opening Costs | $10,000 |
$35,000 |
| Additional Funds (up to 12 months) | $25,000 |
$50,000 |
| Total | $222,800 |
$551,800 |
Ongoing Costs:
| Name of Fee |
Amount |
|---|---|
| Royalty (Business Format Franchises) |
2% of Gross Sales to National Account Customers, 2% of Gross Sales of Farm Class Tires and, based on the Royalty Matrix, between 4.9% and 6.0% of Adjusted Gross Sales |
| Royalty (Product Distribution Franchises) |
2% of each month's Gross Sales, subject to reduction in some circumstances |
| "Local Fund" for advertising and related expenditures |
4% of each month's Gross Sales, subject to increases or, in the case of Business Format Franchises, reductions in certain cases |
| National Marketing Fee |
Up to 1% (but currently set at 0.15%) of each month's Gross Sales plus $28 per month |
| Specialty Items, Wearable and Display Materials |
Will vary by circumstances |
| Point of Purchase Packages | Not more than $1,500 per year, as adjusted each year in accordance with Big O policies. |
| Newspaper Mats and Broadcast Commercial Tapes |
Will vary by circumstances |
| Market Reservation Fee |
Will vary by circumstances, but generally will be in the range of $2,500 to $6,000 |
| Retail Accounting Centres ("RAC") |
Varies based on services provided, but not less than $200 per month |
| National Fleet Accounts Administrative Fees |
Presently 4% of Gross Sales to certain National Fleet Account customers |
| Transfer Fees |
$1,500 upon a transfer involving an assignment of the Franchise Agreement or a change in control. If the transfer does not involve an assignment of the Franchise Agreement or a change in control, the transfer fee is equal to Big O's expenses relating to the transfer up to $1,500. |
| Insurance Administrative Surcharge |
10% of cost of insurance |
| Interest on Late Payments |
Lesser of 18% per annum or maximum rate of interest allowed by law |
| Hiring of Big O employees |
If hiring a Big O employee within 3 months after termination of employment with Big O or an affiliate, franchisee must, in Big O's discretion, reimburse Big O for training and relocation costs of such employee. |
| Real Estate Development Fee |
$25,000 to $60,000 |
| Real Estate Consulting Charges |
May vary between $200 and $15,000 (estimate) |
| Leasehold Guaranty Fee |
Will vary based on risk and market conditions. |
| Loan Guaranty Fee |
Up to 2% to 5% of amount guaranteed |
| Loan Origination Fee |
Up to 2% of loan from Big O |
| Training Fees |
Will vary |
| National Convention Registration Fees |
Varies depending on location and cost of the national convention. Historically these fees have ranged from $300 to $400 per adult. |
| Resale fee | $5,000 |
| DST End User Software License Agreement Fees |
Amount per Store: 1. One-time fees: a. License Fee: $4,500 b. Installation fee: $450 c. Conversion fee: $450 d. On-Site Training and Go-Live Support Fee: $1,500-$3,500 ($1,500 for 3 days plus $650 per each additional day of training, plus travel, lodging and meals expenses) 2. Monthly Maintenance and support: $179 per month |
| Indemnification |
Will vary under circumstances |
| Costs and Attorneys' Fees |
Will vary under circumstances |
| Audit fees |
Will vary under circumstances |
| Bond |
Minimum amount of $10,000. Actual amount determined by Local Group |
| Rebill Cost Percentage |
A percentage {currently 4%) of the purchase price of any tires purchased directly from the manufacturer or distributor and for which Big O acts as rebilling agent. This 4% charge may be increased or decreased. |
| Interest |
Interest on various loans or other advances. |
The above information has been taken from the UFOC/FDD of Big O Tires.
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