FDD Talk 2013: Average Cost of Goods Sold for Big O Tires Stores (2013 FDD)

Highlights of Big O Tires’ Item 19 Financial Performance Representations (2013 FDD) – Part 3

• Set forth in this Schedule 2 are the average Sales and average Cost of Goods Sold percentage per franchised Store information for the fiscal years ending between August 31, 2012 and December 31, 2012 for franchised Stores that i) provided financial statements for the full fiscal year ending during that period, ii) were open for the full fiscal year, and iii) operated as a BFF Store for all of the fiscal year 2012.

• PDF Stores and Stores that converted from PDF to BFF during their fiscal year are not included, and company-owned Stores are not included.

• Of the 427 Stores in existence as of December 31, 2012, 124 or 29% met the criteria above (“Qualified Stores”).

• The franchisor has not audited or verified the accuracy of the financial statements submitted by franchisees. Additionally, the format of the financial statements submitted by franchisees varies.

• When possible, the franchisor has adjusted data in certain of these financial statements in order to maintain consistency in the calculations, and has excluded certain of these financial statements where the calculations were not consistent and did not contain enough information to make the adjustments referred to above.

• Of the 124 Qualified Stores, 1 store has been excluded for the above reason and 123 are included in the analysis below.

• The Sales and Cost of Goods Sold percentages do not reflect the actual potential net income of a Big O Tires Store and should not be relied upon in calculating profitability.

• Cost of Goods Sold generally includes the cost of products sold which may include the cost of tires, wheels, automotive fluids, filters, batteries, brake parts, front end parts, shock absorbers and struts, and other goods purchased for resale from Big O or others, but does not include labor costs.

• There are a number of fixed and variable costs that are not reflected in the table below and that vary among individual Big O Tires Stores. These costs, which are significant, include but are not limited to:

• 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
• pre-opening organization costs
• employee benefits
• repairs and maintenance

Sales <$1.0 million