Does the Circle K franchisee have to pay network fees?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
nder Section 6.6) from or against any amount owed by Franchisee to Franchisor (including without limitation pursuant to any indemnification obligation of Franchisee) or held by Franchisor on Franchisee's behalf.
ARTICLE 6 ADVERTISING AND PROMOTIONS
- 6.1 Promotional Fees. In addition to the fees payable under Article 5, Franchisee will pay to Franchisor a monthly promotional fee (the "Promotional Fee") consisting of the following components:
- (A) General Promotional Fee. Franchisee must pay Franchisor 0.25% of Franchisee's monthly Gross Sales (on Gross Sales of up to $125,000) to cover general costs associated with promoting Circle K Stores, including, but not limited to, the cost of
image/customer service inspections, incentive programs for franchisees, administrative costs associated with the Promotional Fund, and work done by outside advertising agencies.
- (B) Local and Regional Promotional Fee. In addition, Franchisee must pay Franchisor up to 1.25% of Franchisee's monthly Gross Sales (on Gross Sales of up to $125,000) ("Local and Regional Promotional Fee") to cover the costs associated with local and regional promotions of, and equipment upgrades for, Circle K Stores located in a particular area (the "Designated Marketing Area" or "DMA"). The exact rate of the Local and Regional Promotional Fee may vary based on the particular DMA in which the Store is located. All franchisees in a given DMA may not pay the same Local and Regional Promotional Fee rate. At Franchisor's option, if there are surplus Local and Regional Promotional Fees in any given year, Franchisor may elect to direct such surplus to be used to fund local store marketing programs ("LSM"), which will give Franchisee the ability to use a portion of such funds to implement Franchisor-approved Store-level marketing and promotional programs. Franchisee acknowledges that LSM funds may not be available to Franchisee in every (or any) year during the Term.
- (C) National Promotional Fee. The parties acknowledge that no national promotional fee is in effect as of the Effective Date; however, during the Term, Franchisor may require payment of such a fee. In such an event, Franchisor will provide Franchisee at least 60 days' advance written notice, at which time Franchisee will be required to pay Franchisor up to 0.25% of Franchisee's monthly Gross Sales (on Gross Sales of up to $125,000) to cover national promotional costs associated with promoting Circle K Stores.
Franchisor has the final decision-making authority over all matters relating to the Promotional Fees collected. The Promotional Fees will be used by Franchisor for payment of costs of category development and to establish and develop marketing, sales promotions, image, customer service, franchisee incentive and advertising programs designed to promote and enhance the Marks and the Business System and to increase sales, to cover Franchisor's costs incurred in the administration of the Promotional Fees, and for any taxes incurred on the Promotional Fees. Franchisor's or Franchisor's Affiliate's marketing department is responsible for category development, as well as the development of the promotional programs, which includes the production, research, and administration of advertising, marketing calendars, production of television, radio, newspaper, direct mail, and point of purchase advertising, grand opening activities for new Circle K Store openings and all collateral materials. Upon written request, Franchisor will provide Franchisee with an annual unaudited statement showing the financial status of any fund created by Franchisor with respect to the Promotional Fees, and the manner in which the Promotional Fees were spent by Franchisor during Franchisor's previous fiscal year; provided, however, that Franchisor will not be required to provide any such annual statement to Franchisee earlier than ninety (90) days after the end of Franchisor's fiscal year. Franchisor is not obligated to spend Promotional Fees in any particular market or geographic area or in proportion to the payments made by franchisees in a market.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, franchisees are required to pay promotional fees, which can be considered a type of network fee. These fees are used for various advertising and promotional activities to benefit the Circle K brand. The promotional fee consists of three potential components: a general promotional fee, a local and regional promotional fee, and a national promotional fee.
The general promotional fee is 0.25% of the franchisee's monthly Gross Sales (on Gross Sales of up to $125,000). This fee covers general costs associated with promoting Circle K stores, including customer service inspections, incentive programs, administrative costs for the Promotional Fund, and work by outside advertising agencies. The local and regional promotional fee can be up to 1.25% of the franchisee's monthly Gross Sales (on Gross Sales of up to $125,000), and the exact rate may vary based on the Designated Marketing Area (DMA) in which the store is located. These fees cover local and regional promotions and equipment upgrades for Circle K stores in a particular area. Surplus funds may be used for local store marketing programs.
While there is no national promotional fee in effect as of the FDD's effective date, Circle K may implement one in the future. If implemented, franchisees will receive at least 60 days' advance written notice and will be required to pay up to 0.25% of their monthly Gross Sales (on Gross Sales of up to $125,000) to cover national promotional costs. Circle K has final decision-making authority over all matters relating to the Promotional Fees collected and is not obligated to spend Promotional Fees in any particular market or geographic area or in proportion to the payments made by franchisees in a market.
These promotional fees are in addition to any other fees payable under the franchise agreement. Franchisees are also required to conduct a grand opening advertising and promotional campaign, with Circle K providing assistance and materials. While franchisees bear the full cost of the grand opening, Circle K may reimburse pre-approved expenditures up to $4,000 from the Local and Regional Promotional Fees, at a rate of $.50 for each $1.00 spent by the franchisee.