What is the Circle K debtor's responsibility regarding contracts or agreements comprised in the collateral?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 11.1. Expenses Incurred by TMC FRANCHISE CORPORATION. In its discretion, TMC FRANCHISE CORPORATION may discharge taxes and other encumbrances at any time levied or placed on any of the Collateral, make repairs thereto and pay any necessary filing fees or, if the debtor fails to do so, insurance premiums. DEBTOR agrees to reimburse TMC FRANCHISE CORPORATION on demand for any and all expenditures so made. TMC FRANCHISE CORPORATION shall have no obligation to DEBTOR to make any such expenditures, nor shall the making thereof relieve DEBTOR of any default.
- 11.2. TMC FRANCHISE CORPORATION' Obligations and Duties. Anything herein to the contrary notwithstanding, DEBTOR shall remain liable under each contract or agreement comprised in the Collateral to be observed or performed by DEBTOR thereunder. TMC FRANCHISE CORPORATION shall not have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by TMC FRANCHISE CORPORATION of any payment relating to any of the Collateral, nor shall TMC FRANCHISE CORPORATION be obligated in any manner to perform any of the obligations of DEBTOR under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by TMC FRANCHISE CORPORATION in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the debtor, or franchisee, remains liable under each contract or agreement that is part of the collateral. This means that even though Circle K has a security interest in these contracts, the franchisee is still responsible for fulfilling all obligations outlined in those agreements. These obligations could include payments, services, or any other duties specified in the contracts.
Circle K, according to the FDD, assumes no obligation or liability under any contract or agreement simply by virtue of the security agreement or by receiving payments related to the collateral. Circle K is not required to perform any of the franchisee's obligations under these contracts, inquire into the sufficiency of payments, enforce performance, or collect payments assigned to them. This reinforces that the franchisee's responsibilities to third parties under these contracts remain unchanged.
This arrangement protects Circle K by ensuring they are not drawn into the day-to-day operational liabilities of the franchise. However, it places the onus on the franchisee to manage and fulfill all contractual obligations, even if those contracts are part of the collateral securing their debt to Circle K. Therefore, a prospective Circle K franchisee needs to carefully review and understand all contracts they enter into, as they will be held accountable for their performance.