What is the Circle K Franchisee's obligation to pay the Royalty Fee as part of the agreement?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
able 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.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the franchisee's obligation to pay royalty fees is absolute and unconditional. Franchisees are required to pay royalty fees, promotional fees, and any other fees or payments due to Circle K under the Franchise Agreement or any other agreement without withholding payment for any reason. Franchisees do not have the right to offset any amounts allegedly due to them from Circle K against these required payments. Franchisees must make timely and full payments of all fees, regardless of any claims they may have against Circle K. Except for specific conditions related to the Initial Franchise Fee, no fees paid by the franchisee are refundable under any circumstances.
If a franchisee fails to remit fees when due, including situations where there are insufficient funds in the franchisee's account, the payment will be considered late, and the franchisee will be in default. Unpaid and past due fees will bear interest at a rate of 1.5% per month, or the legal rate allowed by applicable law, whichever is lower. This underscores the importance of maintaining sufficient funds and adhering to the payment schedule to avoid penalties and default status.
Upon expiration or termination of the Franchise Agreement for any reason, the franchisee is obligated to pay all outstanding royalty fees, promotional fees, and any other amounts owed to Circle K, its suppliers, or vendors within five days. This includes the outstanding principal amounts and accrued interest on any notes or evidences of indebtedness. Furthermore, all amounts owing will be accelerated on all debt obligations, even if payments were being made promptly according to an agreed schedule. To secure these payment obligations, the franchisee grants Circle K a lien and security interest against any personal property, equipment, and fixtures owned by the franchisee and used in connection with the store.