Big O Tires franchise Cost, Profit & Failure Rate 2024

As the name suggests, Big O Tires LLC is a tire retail company. It is also a franchise and one of the best in the country.

It’s a great opportunity for anyone who is interested in launching a new business in this sector.

With almost any American owning a car, and with every car needing tire change and repair services, there is always high market demand for this type of service, and this is one of the secrets of the success of this franchise.

Big O Tires franchise
Big O Tires franchise

If you are interested in this franchise, you’ll need to know more about that because, as you may know, franchises are great opportunities, but they require some extra costs compared to self-owned businesses.

In this article, you’ll find all the information you need before purchasing a Big O Tires Franchise.


About Big O Tire Franchise

Big O Tires was born out of the decision of a group of tire dealers who wanted to band together and launch a company.

The idea behind their move was that, by merging their single activities and, therefore, their clients, they could make bulk tire purchases and get access to volume pricing.

As you know, volume pricing is lower than standard pricing: with this move, Big O Tires could afford to lower their prices and become very competitive in the market.

Today, they are still founding innovative ways to provide the most competitive and far-priced services to their clients.


History of Big O Tires Franchise

The Big O Tires company was founded in 1962. In 1996 it was acquired by TBC corporation, and in 2006, TBC Corporation was acquired by Sumitomo Corporation.

In 2018, Sumitomo signed a deal with Michelin North America INC and announced a definitive agreement. To these days, Big O Tires remains a subsidiary of TBC Corporation.

With its franchise program, Big O Tires was able to grow a lot: over the years, they opened many franchise units, and today, they can count 450 of them.


Big O Tires Franchise: Business Model

Big O Tires offers many services related to car and vehicle tires: sales, servicing, alignments, tire changes, filter changes, oil changes, battery replacements, lamp replacements, brake services, and more.

The company is also a franchise, and they are currently open to new franchise applications.

Company nameBig O Tires
Business ModelFranchise Automobile Service provider
Initial Investment$311,000 and $1,138,300
FranchiseYES
Franchise Fee$35,000
Royalty fee5%
Ad royalty fee5%
Number of units465

How Much Does Opening A New Big O Tires Franchise Center cost?

How Much Does Opening A New Big O Tires Franchise Center cost

The total initial investment to launch a new Big O Tires franchise is relatively high.

Other than the franchise fee, which amounts to $35,000, you need to cover the expenses for the location, supply, equipment, hiring employees (an average of 10 employees is needed), marketing and advertising, insurance, and more. Keeping count of all these aspects, the total initial investment can be between $311,000 and $1,138,300.

Other than the initial fees, there are also ongoing fees that are due to the franchisor. These are a 5% royalty fee and a 5% advertising fee. These are both calculated on your gross sales.


Big O Tires Franchise: Requirements

Before opening a Big O Tires franchise, it is essential to carefully consider your experience, skills, and financial situation.

In order to apply for Big O Tires, you must have and demonstrate a net worth of $300,000 and a liquidity of at least $100,000.


Big O Tires Franchise: Training and Support

Training and Support are provided by the company, but it’s not included in the franchise fee; you’ll need to pay an additional training cost of $7,800.

Training includes two weeks of classroom training and two weeks of in-store training.

The company also provides recruiting assistance to help you hire your collaborators.


Profit And Revenue Of Big O Tires

On an avergae, a Big O Tires franchise generates $2,419,000 in revenue per year. Company’s lowest revenue was recorded in 2021, which was $380,000.

According to the data, a Big O Tire franchise owner makes $217,710 in profit per year.

Financial OverviewPercentage of RevenueAmount ($)
Individual Franchise Annual Revenue100%2419000.00
Rent11.38%(275161.25)
Insurance5.69%(137580.63)
Salaries22.75%(550322.50)
Franchise Royalty Fees5.69%(137580.63)
Utilities2.27%(55032.25)
Cost of Goods Sold (COGS)28.44%(687903.13)
Labor (Variable)14.79%(357709.63)
Total (Expenses)91.00%(2201290.00)
Net Profit9.00%217710.00

Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.


Failure Rate Of Big O Tires

Franchised Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
2020457422-35
2021422425+3
2022425434+9

For the Franchised outlets:

  • In 2020, the failure rate was (35)/457×100≈7.65%
  • In 2021, the growth rate was (3)/422×100≈0.71%
  • In 2022, the growth rate was (9)/425×100≈2.11%

Company-Owned Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
2020141+40
20214140-1
20224032-8

For the Company-Owned outlets:

  • In 2020, the growth rate was (40)/1×100≈4000%
  • In 2021, the failure rate was (1)/41×100≈2.43%
  • In 2022, the failure rate was (8)/40×100≈20%

Total Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
2020458463+5
2021463465+2
2022465466+1

For Total outlets:

  • In 2020, the growth rate was (5)/458×100≈1.09%
  • In 2021, the growth rate was (2)/463×100≈0.43%
  • In 2022, the growth rate was (1)/465×100≈0.21%

According to the above-mentioned data, we can see that the franchised outlets for Big O Tires grew from 2021 to 2022, showing a growth rate between 0.71% and 2.11%. However, the company also experienced failure in 2020, showing failure rate of 7.65%.

On the other hand, for company-owned outlets, it initially started with positive net change of 4000% growth rate. Later, it started declining, showing a failure rate between 2.43% and 20% from 2021-2022.

Overall, when we combine the data of franchise and company-owned outlets, we can see that the Big O Tires franchise has expanded in the years 2020-2022, showing a total growth rate between 1.09% and 0.21%.


PaybackPeriod Of Big O Tires Franchise

With a midpoint investment of $888,000 and an estimated 9% profit on the average net revenue, which is $2,419,000, the yearly profit would be $217,710.

So, to find out how long it will take to earn back the initial investment:

Payback Period = Midpoint Investment / Yearly Profit = $888,000 / $217,710 = 4.07 years

Based on these figures, it will take approximately 4 years to pay back the initial investment for Big O Tires. This time period could be longer or shorter depending on your sales, revenue, and profit figures.


Big O Tires Franchise: Terms of Agreements and Renewal

Big O Tires Franchise Terms of Agreements and Renewal

The franchise contract with Big O Tires has a length of 10 years. After that, if the requirements are still met, you can renew the contract for an additional 10 years.

The details about the amount of the renewal fee aren’t public, so we don’t know how much you’ll need to pay to renew your contract.

However, this is an important detail, so make sure to ask for it before you sign your contract (or read the contract carefully because information like this must be written on it).


Big O Tires Franchise: Obligations and Restrictions

Possible Obligations and Restrictions will be indicated in the franchise contract. However, we already know that the recommended number of employees is 10.

Make sure to read the contract carefully to know about possible obligations.

For example, check if you, as a franchisee, are required to operate directly in the Big O Tires store or if you can hire a manager.


Big O Tires: Financial Assistance

Big O Tires provides in-house financial assistance: they can provide the most suitable loan for you to be able to cover your start-up costs.

They also provide financial assistance through third parties; in this case, they provide lease negotiation support.

Big O Tires provides financial Support for veterans. For them, there is a 50% discount on the initial franchise fee, which brings it down to $17,500.


Big O Tires VS MAACO Collision Repair & Auto Painting

Company NameMAACOBig O Tires
Founded in 19721962
Franchise fee$40,000 +$35,000
Royalty fee9%5%
Initial Investment$250,000 -$350,000$311,000 and $1,138,300

Conclusion

The Big O Tires franchise is a huge opportunity for franchisees.

The initial cost of this investment might be high, but it would include important advantages, like the training you can receive from the main company.

Not all franchises provide the same amount of training as Big O Tire, and not at this level.

The mentorship provided by this franchise is never-ending – the franchisee can always refer to the franchisor who provides ongoing Support.


Big O Tires Franchise: FAQs

Is Big O Tires a franchise or a chain?

Big O Tires is a franchise. The company is very focused on its franchise program, and with time, it optimized it to provide the best opportunities to the franchisees.

Who is the current owner of Big O Tires?

Big O Tires is a subsidiary of TBC Corporation, and Christopher Cavalier is the current CEO.

How many Big O Tires units are currently there?

There are 465 Big O Tires locations in the United States.

Is Big O Tires a good investment?

Big O Tires can be considered a good investment because the profit is almost guaranteed.

You are never left alone in the management of your business. Furthermore, the brand is so well-known that you won’t struggle to find clients.

Is the Big O Tires franchise worth it?

The Big O Tires franchise requires quite a big initial investment.

Yet, if it fits your budget or if you can find a wise funding plan, it is definitely worth it for the reasons mentioned above.

Where is Big O Tires headquartered?

Big O Tires is headquartered in Palm Beach Gardens, Florida, United States.

Who founded Big O Tires?

Big O Tires was founded in 1962 by Darwin Gunnell and several others.

Reference: Big O Tires Franchise Cost and Requirements for 2023 (ifpg.org)

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