What Are the Startup Costs For a Big O Franchise?
How much does it cost to start my own Big O tire franchise?
Because Big O operates in 19 different states and market conditions can vary, and because some franchisees choose to purchase their land and building rather than lease their space, the investment range for a Big O Tires franchise can vary substantially. The table on the next page, from Item 7 of our Franchise Disclosure Document, outlines the various costs that go into launching your first Big O Tires franchise.
There are several options for financing a Big O Tires franchise.
Big O is part of the SBA Franchise Registry, created in 1998 to streamline the process banks use to determine franchisees’ eligibility for SBA loans. When the agency approves a franchise system for inclusion, it agrees to guarantee 75 to 85 percent of any loan to franchise candidates, reducing the risk to banks and increasing the likelihood of approval. Before approving franchisors for inclusion, the agency must sign off on their disclosure documents to ensure they meet SBA standards for size and franchise owner independence. The review allows banks to skip several steps in the approval process, saving them time and energy.
SBA loans are just one of many financing options that franchisees have used to buy their businesses. To learn more, give us a call at 1-800-622-2446 or click “request franchise information” to connect with our franchise development team.
Your Estimated Initial Investment
Method of Payment
To Whom Payment Made
|TOTAL ESTIMATED INITIAL INVESTMENT (See Note 10)||$259,200||$1,181,628|
|Initial Franchise Fee (See Note 1)||$0||$30,000||See Item 5 of the FDD||See Item 5 of the FDD||See Item 5 of the FDD||Big O|
Fees, Travel & Lodging Expenses (See Note 2)
|$1,000||$7,800||As Incurred||As Agreed||Nonrefundable||Third Parties|
|Real Estate Leases (One to Three Months' Rent Plus Security Deposit) (See Note 3)||$4,000||$72,800||As Specified in Lease||As Agreed||Some or all of the security deposit may be refundable at the end of the lease term||Big O or Third
|Equipment, fixtures and other fixed assets (See Note 4)||$100,000||$283,000||See Note 4||As Agreed||Nonrefundable||Big O and Third
|Construction, Remodeling, Leasehold Improvements and Decorating Costs (See Note 5)||$5,000||$350,000||As Incurred||As Agreed||Nonrefundable||Big O and Third
|Signs||$10,000||$47,000||As Incurred||As Agreed||Nonrefundable||Big O or Third
|Grand Opening Advertising||$10,000||$50,000||As Incurred||As Agreed||Nonrefundable||Third Parties|
|Initial Inventory||$55,000||$125,000||As Incurred||As Agreed||Nonrefundable||Big O and Third
Other Security (3 months) (See Note 6)
|$3,000||$5,000||As Incurred||As Agreed||Nonrefundable||Third Parties|
|Software (See Note 7)||$16,200||$25,528||As Agreed||As Agreed||Nonrefundable||Big O or Third
|Non-recurring Pre-opening Costs (See Note 8)||$5,000||$35,000||As Agreed||Cash||Nonrefundable||Third Parties|
|Additional Funds (up to 12 months) (See Note 9)||$50,000||$150,000||As Incurred||As Agreed||Nonrefundable||Third Parties|
Note 1: Initial Franchise Fee. The initial franchise fee may vary as described in Item 5. You must reimburse us for any taxes (other than income taxes) we pay on your initial franchise fee so that the net amount received by us is as set forth in the Franchise Agreement.
Note 2: Initial Training – Fees, Travel and Lodging Expenses. We may charge you training fees, except that the initial Online Training, Facilitated Training, and on-location training program for one person are included in the initial franchise fee. In addition, you will have to bear expenses arising in connection with your training, such as travel, lodging and other living expenses. More details may be found in Item 11 of our FDD.
Note 3: Real Estate Leases. If you do not own adequate space, you will need to lease the land and building for your Store. Typically locations for a Store are prime retail sites. You will generally need a facility of 5,000 to 7,536 square feet to operate your store with a prototypical store sized at 6,240 square feet. The base monthly rent is estimated to range from $4,000 to $16,000 per month, depending on geographic location, size of the premises and other economic factors. Typically, these leases are triple net leases, under which the tenant must pay all taxes, insurance and maintenance expenses over and above the base rent amount. The estimate provided assumes that you will rent the facility and that you must provide a security deposit of one month’s base rent to the landlord. In a build-to-suit lease, the landlord may include some or all of the improvements, fixtures, equipment and signs in the cost to build the building and factor these costs into your lease payments. We provide a number of Store lease programs for which you may be eligible. These programs are described in Item 10 of our FDD. You may elect to purchase the land and building rather than renting. If you purchase the land and build your store, your estimated combined costs for the land and building construction may range from $900,000 to $2,000,000 depending upon market conditions. If you purchase an existing building and remodel it, your costs may be less. You will not incur the premises rent costs listed above, but will have to factor in additional costs for acquisition and construction of the building.
Note 4: Equipment, Fixtures and Other Fixed Assets. The high estimate is based on the purchase of new equipment and fixtures and the low estimate is based on the purchase through Big O, or others, of used or refurbished equipment and fixtures. Generally, you must pay 25% of the equipment order at the time you place the order or, in the alternative, you must provide an irrevocable letter of credit to secure payment of the equipment order. The entire balance you owe for equipment and fixtures and the amount due for your initial inventory order must be paid in full before your initial inventory order is shipped to you. Another alternative is to lease equipment, in which case you must provide proof of the equipment lease agreement. This estimate also includes any investment related to the TBC Retail Group Service Central Program, in which you are required to participate. This program is further described in Items 8 and 11 of our FDD.
Note 5: Construction, Remodeling, Leasehold Improvements and Decorating Costs. These estimates do not include new construction; the cost of new construction is discussed in Note 3 above. The cost of remodeling, leasehold improvements and decorating costs will vary based on a variety of factors, such as the location of the Store and the type and condition of the building to be remodeled, improved or decorated. This estimate includes the amount of any real estate development fee if we develop the site for your Store and use a third party developer to develop the site and your Store. This estimate also includes the amount of any real estate consulting charges if you utilize the services of members of the Big O real estate department for consultation in regard to the development, construction, remodeling or conversion of your Big O Store. See Item 5 of our FDD.
Note 6: Insurance and Other Security. You must maintain insurance described in Article 21 of the Franchise Agreement and in our Manual and as required by the terms of your lease or sublease, as may be applicable. We may change these insurance requirements periodically. Currently, the types of insurance and the minimum dollar amount of coverage you must maintain are: (a) Workers’ Compensation; (b) Comprehensive or Commercial General Liability (including among other things, product liability) with limits not less than $1 million per occurrence and $2 million general aggregate; (c) Vehicular/Automobile Liability of not less than $1 million per occurrence combined single limit; (d) “All Risk” Property for repair/replacement coverage and valuation of all assets and Business Income/Extra Expense insurance; (e) Garage liability of not less than $1 million per occurrence and $2 million general aggregate and Garagekeepers Legal Liability of not less than $100,000 combined single limit per location; and (f) Commercial Umbrella Liability of not less than $1 million per occurrence combined single limit. Other insurance coverage is recommended by Big O and you must maintain these other coverages if required by law where the franchised business operates. These may include Inland Marine, Boiler and Machinery, Employment Practices Liability and Comprehensive Fidelity/Crime. The investment amounts set forth in the table represent three months of initial commitment costs with additional premiums at or just before opening. Premiums for these coverages will vary greatly because of location, amounts of coverage, values being insured, annual sales, number of employees, experience ratings, and other factors. A transferee of a Franchised Business or a franchisee under the CPR Plan must, at our discretion, obtain a surety bond or letter of credit of not less than $10,000 (or such other amount as we may periodically designate) to secure payment of contributions to the National Marketing Program, the Local Fund, or both. Fees for these bonds or letters of credit will vary based on a variety of factors, including the transferee’s or other franchisee’s creditworthiness.
Note 7: Computer Hardware and Software. You must acquire, install and use the BOT POS System. You must pay (i) the Navex software license fee to Big O, (ii) all fees for installation, conversion, training and onsite support to Big O, and (iii) monthly fees for maintenance and support to Big O, or as otherwise directed by Navex and Big O. Franchisees acquiring the BOT POS System are also responsible for all hardware and management costs. The estimated approximate average initial cost to purchase and install the BOT POS System (including the license fee, installation fee, conversion fee and store training and on-site go live support fees described in Item 6) is $19,500 to $21,500 (See Item 11 for more details).
Note 8: Non-recurring Pre-opening Costs. This estimated amount includes deposits for utilities, fees for city, state and local business licenses, any loan origination fees, any bank fees, and other non-recurring expenses.
Note 9: Additional Funds. This amount includes estimated pre-operational expenses not listed above, as well as estimated additional funds necessary to pay on-going expenses not covered by sales revenues for the first twelve months of operations, including payroll costs. You may have additional expenses starting or converting your business. Your costs depend on several factors, including how much you follow our methods and procedures, your management skill, experience and business acumen, local economic conditions, the local market for our products and services, the prevailing wage rate, competition, your competitive advertising and promotion, and the sales level reached during the initial period. Also, if you wish to become a franchisee of a new Store with an anticipated “high” cost real estate project, you must, at our discretion, meet certain higher net worth and liquidity requirements before we approve you as a franchisee. The current standards for high real estate costs are $2 million or more for purchased real estate or lease payments of $16,000 per month or more for leased real estate. The current net worth and liquidity requirements are a net worth of $300,000 or more and liquid assets (that is, cash and cash equivalents) of $100,000 or more when you are leasing an existing store or a new store and a net worth of $500,000 or more, and liquid assets (that is, cash and cash equivalents) of $150,000 or more when you are leasing an existing store or a new store and a net worth of $1,000,000 or more, and liquid assets of $300,000 or more for a high cost real estate project.
Note 10: Total Estimated Initial Investment. We have relied on our experience since 1962 in the retail tire store and automotive service business in compiling these estimates. You should review these figures carefully with a business advisor before making any decision to purchase a franchise. Other than the limited situations discussed in Item 10 of this Disclosure Document, we do not offer financing directly or indirectly for any part of the initial investment.