What is the Circle K Franchisee's obligation regarding post-termination compliance?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
nchisor may simultaneously constitute a default by Franchisee under this Agreement notwithstanding that at such time Franchisee may be fully and promptly performing its obligations hereunder.
- 14.7 Rights and Obligations upon Expiration or Termination. Upon expiration or termination of this Agreement for any reason, Franchisee will:
- (A) within five (5) days, pay all Royalty Fees, Promotional Fees, and any other amounts owed to Franchisor, suppliers, or vendors, including the outstanding principal amounts and accrued interest on any notes or evidences of indebtedness of Franchisee payable to Franchisor or any Affiliates. The payment to Franchisor of all amounts owing will be accelerated on all debt obligations which had been the subject of payment schedules even if payment was then being made promptly according to the agreed schedule. Franchisee hereby grants to Franchisor a lien and security interest against any and all personal property, equipment, and fixtures owned by Franchisee and used in connection with the Store as security for the payment of such obligations;
- (B) immediately pay, as fair and reasonable liquidated damages ("Liquidated Damages"), an amount equal to (i) the lesser of (x) 48 or (y) the remaining number of months under the Term, multiplied by (ii) the average monthly Royalty Fee payments (calculated in accordance with Section 5.2) payable by Franchisee hereunder for the 12 months preceding the termination (during which time the Franchisee was in Good Standing under this Agreement), or for a shorter period commencing with the Effective Date of this Agreement if this Agreement is terminated in the first 12 months of the Term. If the Store has never been opened and therefore has no history of Royalty Fee payments, the Liquidated Damages will be calculated based on the average monthly Gross Sales of all Circle K franchisees located in the state where the Franchised
Location is located for the 12-month period immediately preceding the termination. If there are no Circle K franchisees located in such state, the calculation will be based on the average monthly Gross Sales of all Circle K franchisees located in the United States. Notwithstanding the foregoing, in any and all cases, the average monthly Royalty Fee payment amount used in the Liquidated Damages calculation shall be no less than $1,000 since that is the minimum required monthly Royalty Fee. Franchisor and Franchisee acknowledge and agree that the termination of this Agreement will result in Franchisor incurring damages based on lost revenues from Royalty Fees and other amounts payable by Franchisee if the Franchised Location is no longer a Circle K Store, and that it will be difficult to calculate with certainty the amount of damages Franchisor will incur. The provisions of this Section 14.7(B) do not apply if the Agreement expires at the end of its initial Term or is terminated due to (i) Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) death; (ii) Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) incapacity for at least 90 consecutive days, in either case which event results in Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) inability to personally operate the Store;
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, upon the expiration or termination of the Franchise Agreement, the franchisee has several obligations. Within five days, the franchisee must pay all Royalty Fees, Promotional Fees, and any other amounts owed to Circle K, its suppliers, or vendors, including any outstanding principal and accrued interest on debts. All debt obligations to Circle K will become immediately due, even if payment schedules were previously in place. Circle K is granted a lien and security interest against the franchisee's personal property, equipment, and fixtures at the store to secure these payments.
Additionally, the franchisee must immediately pay liquidated damages. This amount is equal to the lesser of 48 months or the remaining number of months under the franchise term, multiplied by the average monthly Royalty Fee payments for the 12 months preceding termination (assuming the franchisee was in good standing). If the store has not yet opened and has no royalty fee payment history, the liquidated damages will be calculated based on the average monthly Gross Sales of all Circle K franchisees in the same state.
For twelve months after the agreement's expiration or termination, the franchisee is subject to the provisions of Article 16 of the agreement. If Circle K exercises its purchase right or is the lessor under the lease, the franchisee must surrender possession of the franchised location. If Circle K does not take possession, the franchisee must make modifications to prevent confusion with a Circle K business and comply with obligations under Section 14.7(C). Furthermore, if the franchisee continues to operate a convenience store after termination, they must prominently display a notice for at least six months indicating they are no longer a Circle K franchisee.