What is the Circle K Franchisee's obligation to pay the Royalty Fee?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
insufficient funds are available in Franchisee's account at the time payment is due hereunder, Franchisor may charge Franchisee Franchisor's then-current insufficient funds fee, or the maximum rate allowed by law, for each insufficient funds payment.
- 5.6 Interest on Unpaid Fees. If Franchisee fails to remit the fees required to be paid under this Agreement when due (including if insufficient funds are available in Franchisee's account to fully pay the amount owed when due), the applicable payment will be considered late, Franchisee will be in default hereunder and any unpaid and past due fees will bear interest at the rate of one and one-half percent (1½%) per month or the legal rate allowed by applicable law, whichever is lower.
- 5.7 Franchisee's Absolute Obligation to Pay. Franchisee's obligation to pay Franchisor the fees required hereunder will be absolute and unconditional. Franchisee will not, for any reason, withhold payment of any Royalty Fees, Promotional Fees or any other fees or payments due Franchisor under this Agreement or any other agreement. Franchisee will not have the right to "offset" any liquidated or unliquidated amounts allegedly due to Franchisee from Franchisor against the Royalty Fees, Promotional Fees or any other payments due to Franchisor under this Agreement or any other agreement. Franchisee must pay timely and in full all fees due under this Agreement regardless of any claims that Franchisee may allege against Franchisor. Except as noted above with respect to the Initial Franchise Fee, no fees paid by Franchisee hereunder are refundable under any circumstances.
- 5.8 Franchisor's Set-Off Right. Franchisor, in its sole discretion, may withhold, setoff or recoup any amount it owes to Franchisee under this Agreement (including without limitation any discounts, rebates and allowances under 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.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, a franchisee's obligation to pay royalty fees is absolute and unconditional. Franchisees are required to make timely and full payments of all fees due, including Royalty Fees and Promotional Fees, as outlined in the Franchise Agreement. They cannot withhold payments for any reason or offset any alleged debts from Circle K against these required payments. This obligation remains regardless of any claims the franchisee may have against Circle K.
If a franchisee fails to remit fees when due, the payment is considered late, and the franchisee will be in default. Unpaid and past due fees will accrue interest at a rate of 1.5% per month, or the legal rate allowed by applicable law, whichever is lower. However, Circle K, at its discretion, may withhold or set off any amount it owes the franchisee against any amount owed by the franchisee to Circle K.
Upon expiration or termination of the Franchise Agreement, the franchisee is obligated to pay all outstanding Royalty Fees and other amounts owed to Circle K within five days. This includes any outstanding principal and accrued interest on debts. Furthermore, all debt obligations are accelerated, requiring immediate payment of all amounts owing, even if payments were previously being made according to an agreed schedule. Franchisees also grant Circle K a lien and security interest against personal property, equipment, and fixtures used in connection with the store to secure the payment of these obligations.