This is a guest blog post by Dan Hieb, a veteran journalist and business writer who writes about the franchise industry. To read Part 1, please click here.
How much does a Big O franchise cost, and how do they perform?
Here’s a look at the Item 7 information from Big O’s franchising site, outlining startup costs.
- Initial Franchise Fee: $0 to $30,000
- Initial Training: $1,000 to $7,800
- Fees, Travel, and Lodging Expenses: not specified
- Real Estate Leases (1 to 3 months’ rent, plus security deposit): $4,000 to $64,000
- Equipment, Fixtures, and Other Fixed Assets: $100,000 to $250,000
- Construction, Remodeling, Leasehold Improvements, and Decorating Costs: $5,000 to $300,000
- Signs: $10,00 to $35,000
- Grand Opening Advertising: $10,000 to $25,000
- Initial Inventory: $35,000 to $75,000
- Insurance and Other Security (3 months): $3,000 to $5,000
- Computer Hardware and Software: $19,500 to $21,500
- Non-Recurring Pre-Opening Costs: $5,000 to $35,000
- Additional Funds (up to 12 months): $50,000 to $100,000
The bottom line: Startup costs for a Big O franchise range from $242,500 to $1,023,300, with much of that price range determined by the cost of construction, remodeling, improvements and decorating; as well as the cost of equipment for your store.
How much business do they generate?
Here’s the Item 19 chart from Big O’s franchising site, which covers 412 stores that reported sales for each month in 2012:
Over $2 Million in Sales
- Number of Stores: 102
- Average Sales: $2,686,682
$1.5 to $2 Million in Sales
- Number of Stores: 104
- Average Sales: $1,721,938
$1.0 to $1.5 Million in Sales
- Number of Stores: 133
- Average Sales: $1,244,103
Under $1 Million in Sales
- Number of Stores: 73
- Average Sales: $811,478
- Number of Stores: 412
- Average Sales: $1,645,210
As you can see, the FDD reports that in 2012, the average Big O Tires location that was open all year enjoyed revenue of $1,645,210. If Big O was a restaurant brand, that would put its revenue per store among the Top 10 in the nation, according to QSR Magazine. And the top 102 stores for Big O generated average revenue of $2,686,682 — a number that’s comparable to McDonald’s average unit sales, and it generates those numbers with a much shorter work day. Most Big O locations are open from 7 a.m. to 6 p.m. Monday through Friday and for part of the day on Saturday.
“Tires franchises have some big advantages compared to other franchise opportunities,” says Big O Tires Chief Operating Officer Kevin Kormondy. “First, tires aren’t an optional purchase for Americans. Everybody needs them, the only question is where they will go to buy them. Second, they can generate a lot of revenue without needing to be a 24/7 business. Third, you really get to know your customers. They become friends, and you become a vital part of the community. It makes for a great business to own.”