BIG O TIRES ITEM 19
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.
The following information is provided for the purpose of helping you evaluate the potential earnings capability of a Big O Store. Please carefully read all information in this Item 19, including the statements following the tables, which explain the information provided in the tables below and the limitations on this and the other information contained in this Item 19.
Below is a chart showing the total revenue of U.S. Big O Stores during calendar year 2018.
AVERAGE AND MEDIAN REVENUES (1) - (6)
The accompanying footnotes are an integral part of these charts and should be read in their entirety for a full understanding of the information contained in them.
(1) The chart is an historic financial performance representation reflecting the average and median of franchisee revenues on an annual basis for the most recent calendar year of January 1, 2018 through December 31, 2018. For purposes of this Item 19, total revenues means the total revenue of a Big O Store, less taxes, refunds and allowances, returns, proceeds from sales of equipment used in a Big O Store not acquired for resale in the ordinary course of business, proceeds from sales to other Big O Stores, amounts received in settlement of claims for loss or damage other than business interruption insurance, sums received for reimbursement of reasonable towing and freight charges, and certain amounts collected for products replaced under warranty. In computing these figures, we took the average and median of the total revenues of those outlets that fell into the top 1/3, the middle 1/3, and the lower 1/3 in total revenues of the Included Stores (as defined below), as well as the combined average and median. Additionally, the chart discloses the high and the low total revenue figure for every category of Included Stores.
(2) Only U.S. Big O Store outlets that were open for business for at least 12 months as of December 31, 2018, that were open for the full period of January 1, 2018 through December 31, 2018, and who reported sales for each month from January 1, 2018 through December 31, 2018, have their total revenues included in the computations used in the chart (the “Included Stores”). There were 11 outlets that closed for various reasons during 2018, of which one had been open less than 12 months. Of the 434 Included Stores, as of December 31, 2018: (a) 34 (about 7.8%) were franchised PDF Stores, and 400 (about 92.2%) were franchised BFF Stores; and (b) the 34 franchised PDF Stores constituted 100% of all the franchised PDF Stores, and the 400 franchised BFF Stores constituted about 96.9% of all the franchised BFF Stores. As of December 31, 2018, the 434 Included Stores were about 97.1% of the 447 franchised Stores of any category of Store (that is, franchised PDF Stores and franchised BFF Stores). One of the Included Stores began the relevant period as a PDF Store and converted to a BFF Store during the year 2018. Your Store will differ from some of the Included Stores since your Store will fall only into one category (Product Distribution or Business Format) of Store. The average total revenues for the PDF Stores that are Included Stores are less than those of the BFF Stores that are Included Stores. There is no assurance that the average sales in the chart in any of these categories will reflect or indicate the sales that you or any other franchisee may achieve or will achieve.
(3) The sales numbers in the chart do not reflect the actual potential net income of a Big O Store and should not be relied upon in calculating profitability. There are a number of fixed and variable costs associated with a Big O Store that are not reflected in the table above and that vary among individual Big O Stores. These costs, which are significant,
include costs described in Items 6 and 7 of this Disclosure Document, inventory costs, labor costs, rent and other occupancy costs, taxes, utilities, insurance, royalty fees, advertising, supplies, bad debt, warranty expenses, charge card expenses, equipment rental, taxes, debt service, depreciation on equipment and property, legal and accounting fees, regulatory compliance, management costs, general administrative expenses, preopening organization costs, employee benefits and repairs and maintenance. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchise business. Franchisees or former franchisees, listed in the disclosure document, may be one source of this information.
(4) For the Included Stores in the chart, there are 144 outlets included in the top 1/3, of which 54 (or 38 percent) exceed the average total revenues of that group, 145 outlets in the middle 1/3, of which 70 (or 48 percent) exceed the average total revenues of that group, and 145 outlets in the lower 1/3, of which 82 (or 57 percent) exceed the average total revenues of that group. Out of the 434 total Included Stores included in this chart, 188 outlets (or 43 percent) exceed the combined average of total revenues stated.
(5) The information in the chart was compiled based on actual reported sales by our existing U.S. Big O Store outlets during the year 2018 based on monthly sales reports submitted to us by Big O franchisees for the purpose of computing royalty fees. We do not know if the figures reported to us by franchisees were audited. We have not independently audited or verified the accuracy of these numbers, and we do not know if these numbers have been verified or audited on behalf of the franchisees. (6) A particular Big O Store’s financial performance may be affected by numerous factors that may vary due to the individual characteristics of the Big O Store. These factors include: competition from car dealers and other tire and automotive service centers, appreciation and acceptance of the services and products the Big O Store offers in its community, a franchisee’s experience, business development and managerial skills, advertising programs, personnel and cost controls, geographic and socioeconomic conditions in the Big O Store’s area, business cycles and performance of the economy locally, nationally and world-wide.
The information provided should not be considered as the actual or potential results that will be realized by a new or any other franchisee. Actual results vary from Store to Store. Big O cannot estimate the results of any particular franchise, nor does Big O project any future financial performance or represent that any franchisee can or is likely to achieve the financial results reflected in any information
set forth or described in this Item 19. A new franchisee’s or any other franchisee’s individual financial results are likely to differ from the results reflected in any information set forth or described in this Item 19.
Written substantiation of the data used in preparing the information set forth in this Item 19 will be made available to you on reasonable request.
We encourage you to consult with your financial advisors in reviewing the information in this Item 19, in particular, in estimating the categories and amount of expenses that may be incurred in establishing and operating a Big O Store.
Some outlets have earned these amounts. Your individual results may differ. There is no assurance you will earn as much.
Other than the preceding financial performance representation, Big O does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance
information or projections of your future income, you should report it to the franchisor’s management by contacting The Franchise Marketing and Sales Support Coordinator, at 4280 Professional Center Drive, Suite 400, Palm Beach Gardens, Florida 33410, and 1-800-321-2446, the Federal Trade Commission, and the appropriate state regulatory agencies.