How does the Equipment/Construction Funding program offered by Circle K (Item 10) relate to the restrictions on sources of products and services (Item 8)?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
anding Agreement | Items 14 & 15 |
ITEM 10 FINANCING
SUMMARY OF FINANCING OFFERED
Circle K Store
We offer an Equipment/Construction Funding program to qualified franchisees for our Convenience Store offering. If you accept funding for your Store, we will use these funds to off-set the cost of equipment and construction at your Store and pay invoices on your behalf. The amount of funding offered to you will depend on whether your Circle K Store is a newly constructed store or conversion Circle K Store; however, the funding offered will not exceed the actual costs incurred. We will retain a security interest in each item of equipment purchased with Equipment/Construction Funding until the Convenience Store Franchise Agreement expires. Upon any such expiration, we will release our security interest. If the Convenience Store Franchise Agreement is terminated, you will (a) pay us the remaining net value of the equipment, which amount will reflect the unamortized portion of the Equipment/Construction Funding you receive, or, at our option, (b) grant us access to the Store so we can remove the equipment. Upon receipt of such payment, we will release our security interest in the equipment.
For a newly constructed Circle K Store, or the raze and rebuild of a Circle K Store, two levels of funding are available, which, for purposes of the calculation of Royalty Fees are referred to as "Level 2" funding amount and "Level 3" funding amount. The Level 2 funding amount of the Equipment/Construction Funding is up to $50 for each square foot of selling space your Store contains. The Level 3 funding amount of the Equipment/Construction Funding is up to $70 for each square foot of selling space your Store contains. TMC has the right to determine the square footage to establish the maximum amount of the funding.
For bay-conversions, store re-openings, store expansion projects, or conversions where TMC cannot adequately verify existing sales levels, two levels of funding are available, which for purposes of the calculation of Royalty Fees are referred to as "Level 2" funding amount and "Level 3" funding amount. The Level 2 funding amount of the Equipment/Construction Funding is up to $40 for each square foot of selling space your Store contains, capped at $90,000. The Level 3 funding amount of the Equipment/Construction Funding is up to $60 for each square foot of selling space your Store contains, capped at $135,000. TMC has the right to determine the square footage to establish the maximum amount of the funding.
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Equipment/Construction Funding program is directly related to the restrictions on sources of products and services. Circle K offers this funding to qualified franchisees to offset the costs of equipment and construction, paying invoices on their behalf. However, franchisees must adhere to Circle K's standards and specifications for furnishings, fixtures, equipment, and other products, as detailed in the Business Systems Manuals. This means that the funding is tied to using approved sources for these items.
Circle K retains a security interest in the equipment purchased with the funding until the franchise agreement expires. If the agreement is terminated, the franchisee must either pay the remaining net value of the equipment or allow Circle K to remove it. This ensures that the funding is used for equipment that meets Circle K's standards and remains under their control. The amount of funding offered depends on whether the store is newly constructed or a conversion, with funding levels of up to $50 or $70 per square foot of selling space, referred to as Level 2 and Level 3 funding, respectively.
Furthermore, franchisees may qualify for an additional $10,000 in funding for incorporating a pre-approved proprietary or third-party food service offering. However, this additional funding is contingent on maintaining the food service offering in the store. If the offering is removed, the franchisee must repay the unamortized portion of the $10,000. This demonstrates how Circle K uses funding to ensure franchisees adhere to specific operational and branding requirements, reinforcing the restrictions on what franchisees can sell and where they can source products and services.