What is the definition of 'Gross Sales' for Circle K franchise Royalty Fee calculations?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
Unless otherwise stated in this Disclosure Document, all fees are imposed by and payable to us or our affiliates and are nonrefundable. The fees outlined in this table are uniformly imposed throughout the Circle K convenience store system except as provided for herein.
1 The Royalty Fee is based upon a percentage of Gross Sales. "Gross Sales" means the total dollar income from the sale of all goods, wares, merchandise, and services sold (including car wash services provided using the Marks), whether sold for cash, for payment by check, on credit, on barter or otherwise, without reserve or deduction for the inability or failure to collect from customers, and all other items of value received by you as payment in the course of such operations (including, without limitation, handling and placement fees and fees for the operation of coin-operated and other machines), excluding the following:
- (i) motor fuel sales, car wash revenues (provided the car wash is not using the Marks), money orders, lottery, pay phones, ATMs, postage stamps, pre-paid phone card, gift cards, and gaming machines;
- (ii) sales from other approved royalty-based franchises that require separate point-of-sale equipment as part of their business system (excluding any approved Additional Business (as defined below in Note 5) which is subject to the separate Co-Branded Royalty Fee noted in the table above);
- (iii) authorized cash or credit refunds made upon transactions that were previously included in Gross Sales, not exceeding the selling price of merchandise returned by the purchaser and accepted, which refunds may be deducted from Gross Sales in the month made;
- (iv) the amount of any separated, collected, and stated city, county, state, or federal sales, luxury, or excise tax on such sales, which you pay directly to the taxing authorities rather than to suppliers; provided, however, that no franchise or capital-stock tax or any other similar tax based upon income, profits, or gross sales shall be deducted from Gross Sales; and
(v) other products or services we may from time to time approve in writing for calculation of gross sales on the basis of earnings as opposed to sales proceeds.
Source: Item 6 — OTHER FEES (FDD pages 22–35)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, Gross Sales are defined as the total dollar income from the sale of all goods, wares, merchandise, and services. This includes sales for cash, check, credit, barter, or other means, without any deduction for inability to collect payments. It also encompasses all other items of value received as payment, such as handling and placement fees, and fees from coin-operated machines. Car wash services are included in gross sales if they use Circle K's marks.
However, the definition of Gross Sales for Circle K excludes specific items. These exclusions include motor fuel sales, car wash revenues (if the car wash isn't using Circle K's marks), money orders, lottery, pay phones, ATMs, postage stamps, pre-paid phone cards, gift cards, and gaming machines. Also excluded are sales from other approved royalty-based franchises that require separate point-of-sale equipment. Authorized cash or credit refunds for transactions previously included in Gross Sales are also deducted, up to the selling price of the returned merchandise. Additionally, any separated, collected, and stated city, county, state, or federal sales, luxury, or excise taxes paid directly to taxing authorities are excluded, but franchise or capital-stock taxes are not.
For a prospective Circle K franchisee, understanding this definition is crucial because the monthly Royalty Fee is calculated as a percentage of Gross Sales, or a minimum of $1,000, whichever is greater. The Royalty Fee rate itself depends on factors such as the amount of Equipment/Construction Funding the franchisee accepts from Circle K, whether the store is in an area that restricts royalties on alcohol sales, and whether gaming machines are installed. The Royalty Fee rate can range from 3.0% to 5.5% of Gross Sales depending on the level of Equipment/Construction Funding received.
Circle K also reserves the right to approve other products or services for gross sales calculation based on earnings rather than sales proceeds. Furthermore, if a franchisee operates another business at the store with Circle K's consent, sales from that business may be included in Gross Sales for royalty and promotional fee calculations. It is important to note that underreporting Gross Sales can lead to penalties; if an audit reveals underpayment exceeding 2% of actual Gross Sales or is willful, the franchisee must cover the audit costs in addition to the underpaid amount and interest.