What conditions must be met for a Circle K franchisee to be considered in 'Good Standing'?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
Further, at Franchisor's election, any default by Franchisee in any other agreement between Franchisee and Franchisor may simultaneously constitute a default by Franchisee under this Agreement notwithstanding that at such time Franchisee may be fully and promptly performing its obligations hereunder.
- 14.7 Rights and Obligations upon Expiration or Termination.
Upon expiration or termination of this Agreement for any reason, Franchisee will:
- (A) within five (5) days, pay all Royalty Fees, Promotional Fees, and any other amounts owed to Franchisor, suppliers, or vendors, including the outstanding principal amounts and accrued interest on any notes or evidences of indebtedness of Franchisee payable to Franchisor or any Affiliates.
The payment to Franchisor of all amounts owing will be accelerated on all debt obligations which had been the subject of payment schedules even if payment was then being made promptly according to the agreed schedule.
Franchisee hereby grants to Franchisor a lien and security interest against any and all personal property, equipment, and fixtures owned by Franchisee and used in connection with the Store as security for the payment of such obligations;
- (B) immediately pay, as fair and reasonable liquidated damages ("Liquidated Damages"), an amount equal to (i) the lesser of (x) 48 or (y) the remaining number of months under the Term, multiplied by (ii) the average monthly Royalty Fee payments (calculated in accordance with Section 5.2) payable by Franchisee hereunder for the 12 months preceding the termination (during which time the Franchisee was in Good Standing under this Agreement), or for a shorter period commencing with the Effective Date of this Agreement if this Agreement is terminated in the first 12 months of the Term.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
I am unable to provide the specific conditions that define 'Good Standing' for a Circle K franchisee, according to the 2025 Franchise Disclosure Document excerpts provided. While the excerpts discuss various obligations and potential defaults, they do not explicitly define the criteria for being considered in 'Good Standing'.
However, the excerpts do reference circumstances where 'Good Standing' is relevant. For example, the calculation of liquidated damages upon termination of the franchise agreement depends on the franchisee's average monthly Royalty Fee payments during the 12 months preceding termination, but only if the franchisee was in 'Good Standing' during that time. This implies that 'Good Standing' affects financial obligations upon exiting the franchise system.
To fully understand the requirements for maintaining 'Good Standing' as a Circle K franchisee, a prospective franchisee should ask the franchisor for a clear and comprehensive definition. This definition should outline all the specific criteria and conditions that must be met, including financial performance, compliance with operational standards, adherence to brand guidelines, and any other relevant factors. Understanding these requirements is crucial for assessing the ongoing obligations and potential risks associated with the franchise.