Does the amount of Equipment/Construction Funding affect the Circle K Royalty Fee rate?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
Your monthly Royalty Fee rate will depend on: (i) the amount of Equipment/Construction Funding you choose to accept from us, (ii) whether your Store is located in an area that prohibits or restricts the collection of royalties on the sale of alcoholic beverages, and (iii) whether we allow you to install gaming machines in the Store. Based on the level of Equipment/Construction Funding you accept from us, your Royalty Fee rate will be determined as follows: (a) If you are a single site operator and you choose not to accept any Equipment/Construction Funding from us, your Royalty Fee rate will be 3.0% of Gross Sales; (b) if you accept Level 1 Equipment/Construction Funding we offer to you, your Royalty Fee rate will be 3.75% of Gross Sales; (c) if you accept the Level 2 Equipment/Construction Funding we offer to you, your Royalty Fee rate will be 4.5% of Gross Sales; or (d) if you accept Level 3 Equipment/Construction Funding we offer to you, your Royalty Fee rate will be 5.5%.
See ITEM 10 for the definitions of the various levels of funding. In addition, if your Store is located in an area that prohibits or restricts the collection of royalties on the sale of alcoholic beverages, your Royalty Fee rate will be increased by 0.5%; provided the definition of Gross Sales (as outlined above) will not include any income from the sale of alcoholic beverages. Finally, if we allow you to install gaming machines in your Store, your Royalty Fee rate will be further increased by up to 1%.
Source: Item 6 — OTHER FEES (FDD pages 22–35)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the amount of Equipment/Construction Funding a franchisee accepts directly impacts their Royalty Fee rate. The Royalty Fee is a percentage of Gross Sales, and the specific percentage varies based on the level of funding received from Circle K.
For a single-site operator, if no Equipment/Construction Funding is accepted, the Royalty Fee is 3.0% of Gross Sales. Accepting Level 1 Equipment/Construction Funding increases the Royalty Fee to 3.75% of Gross Sales. Choosing Level 2 Equipment/Construction Funding results in a 4.5% Royalty Fee, and opting for Level 3 Equipment/Construction Funding leads to the highest Royalty Fee of 5.5% of Gross Sales.
This tiered structure means franchisees need to carefully consider their funding needs against the ongoing cost of higher royalty payments. Accepting more funding upfront reduces the franchisee's initial capital outlay but commits them to a larger percentage of their revenue going to Circle K over the life of the franchise agreement. Franchisees should evaluate their projected sales and profitability under each funding scenario to determine the most financially advantageous option.
In addition to Equipment/Construction Funding, the Royalty Fee rate can also be affected by other factors. If the store is located in an area that prohibits or restricts royalties on alcohol sales, the Royalty Fee rate will increase by 0.5%, although Gross Sales will not include income from alcohol sales. Furthermore, if Circle K allows the franchisee to install gaming machines, the Royalty Fee rate can be increased by up to 1%.