What constitutes an 'Event of Default' under the Circle K Security Agreement?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
ing under or in respect of the Circle K Franchise Agreement entered into between TMC FRANCHISE CORPORATION and DEBTOR (the "Franchise Agreement"), Motor Fuel Agreement entered into between TMC FRANCHISE CORPORATION and DEBTOR], any agreement or agreements by which TMC FRANCHISE CORPORATION extends any funding or credit to DEBTOR, no matter how such agreement is denominated (the "Credit Agreement"), any promissory notes or other instruments or agreements executed and delivered pursuant thereto or in connection therewith or this Agreement.
- (d) The term "Event of Default," as used herein, means the failure of DEBTOR to pay or perform any of the Obligations as and when due to be paid or performed under the terms of the Franchise Agreement Motor Fuel Agreement or Credit Agreement. "Event of Default" also includes, but is not limited to, the following: (i) TMC FRANCHISE CORPORATION does not have a first priority purchase money security interest in the Collateral or a first priority security interest in the Collateral, as the case may be; (ii) DEBTOR fails to obtain and/or maintain any governmental permits or licenses for DEBTOR to operate a business or to sell personal property or such permits are withdrawn, canceled or terminated by the issuing authority; (iii) DEBTOR makes any representation or warranty, or provides information, to TMC FRANCHISE CORPO
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, an 'Event of Default' under the Security Agreement is defined as the failure of the franchisee (referred to as 'DEBTOR') to pay or perform any obligations when due, as outlined in the Franchise Agreement, Motor Fuel Agreement, or Credit Agreement. This means that if a Circle K franchisee fails to meet their financial or contractual responsibilities, it can trigger an Event of Default.
In addition to failure to pay or perform, other events that constitute an 'Event of Default' include situations where TMC FRANCHISE CORPORATION (a wholly owned subsidiary of Circle K Stores, Inc.) does not have a first priority purchase money security interest in the collateral, or a first priority security interest in the collateral. It also includes the franchisee's failure to obtain or maintain necessary governmental permits or licenses to operate the business or sell personal property, or if those permits are withdrawn or terminated.
Further, an 'Event of Default' can occur if the franchisee provides materially false or misleading information to TMC FRANCHISE CORPORATION, if a significant portion of the collateral is lost, damaged, or destroyed, or if there is a material adverse change in the franchisee's business condition that impairs their ability to meet their obligations. Finally, it includes the franchisee terminating their business or the commencement of insolvency, receivership, reorganization, or liquidation proceedings by or against the franchisee.
These 'Event of Default' conditions are significant for a prospective Circle K franchisee because they outline the circumstances under which the franchisor can take action to protect its interests, potentially leading to termination of the franchise agreement and loss of the business. Franchisees should carefully review these conditions to understand their obligations and the potential consequences of non-compliance.