What document must Principal Equity Holders of a Circle K franchise execute to guarantee the franchisee's obligations?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a corporation, a limited partnership whose general partner is a corporation, or a limited liability company or other entity, each Principal Equity Holder of such corporation, limited partnership, limited liability company or other entity will: (i) approve this Agreement in writing; (ii) furnish any personal financial information reasonably requested by Franchisor; and (iii) execute Personal Guaranty attached to this Agreement as Exhibit 5 (the "Guaranty"), pursuant to which each shall personally guarantee Franchisee's payments and performance obligations under this Agreement, any related agreement entered into between Franchisee and Franchisor, or any Affiliate, and any agreement executed upon renewal.
Persons or entities that subsequently become Principal Equity Holders will execute the Guaranty within thirty (30) days after becoming a Principal Equity Holder.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, if the franchisee is a corporation, limited partnership with a corporate general partner, limited liability company, or other entity, each Principal Equity Holder must execute a Personal Guaranty. A Principal Equity Holder is defined as someone who owns 10% or more of the equity interests in the franchise entity. This requirement ensures that individuals with significant ownership in the franchise are personally liable for the franchise's financial and performance obligations.
The Personal Guaranty, attached as Exhibit 5 to the Franchise Agreement, legally binds the Principal Equity Holders to guarantee the franchisee's payments and performance. This guarantee extends to obligations under the Franchise Agreement, any related agreements between the franchisee and Circle K or its affiliates, and any agreements executed upon renewal. Furthermore, individuals who later become Principal Equity Holders are required to execute the Guaranty within 30 days of attaining that status.
This requirement protects Circle K by ensuring that there are individuals with personal assets at stake, which can motivate better management and financial responsibility on the part of the franchisee. It is a common practice in franchising to require personal guarantees, especially from owners of business entities, to mitigate the risk of franchisee default. The Personal Guaranty also requires Principal Equity Holders to furnish any personal financial information reasonably requested by Circle K.