What is the Franchisee's obligation regarding the use of Fundings received from Circle K?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.6 Equipment/Construction and Other Funding. Franchisor may offer to Franchisee funding for acquisition of certain Store equipment and/or construction of the Store ("Equipment/Construction Funding") if Franchisee qualifies for same. If Franchisee accepts the Equipment/Construction Funding, Franchisee must sign the Equipment/Construction Funding Agreement attached hereto as Exhibit 4 (the "Equipment/Construction Funding Agreement") and the Personal Guaranty (attached hereto as Exhibit 5). Franchisor will use the Equipment/Construction Funding funds, on Franchisee's behalf, to off-set the acquisition cost of Store equipment and the construction cost of the Store, and pay related invoices on Franchisee's behalf. The Equipment/Construction Funding will be amortized over the Term. Schedule A to the Equipment/Construction Funding Agreement sets forth the options available to Franchisee with respect to Equipment/Construction Funding. The amount of Equipment/Construction Funding, if any, that Franchisee is approved to receive will be noted on the Data Sheet. If, subsequent to the parties' execution of the Equipment/Construction Funding Agreement but before the store is deemed open as a Circle K Store hereunder, the merchandise sales levels at the store drop below the levels that Franchisor used to set the Equipment/Construction Funding amount, Franchisor reserves the right to reduce the Equipment/Construction Funding amount accordingly.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, if a franchisee accepts Equipment/Construction Funding from Circle K, they are obligated to use these funds specifically for the acquisition of store equipment and/or construction of the store. This is formalized through the Equipment/Construction Funding Agreement, which the franchisee must sign along with a Personal Guaranty.
The funds provided by Circle K under this agreement are to be used to offset the costs associated with acquiring store equipment and the construction of the store itself. Circle K will directly handle the payment of related invoices on behalf of the franchisee. The amount of funding approved, if any, will be specified on the Data Sheet.
It is important to note that Circle K retains the right to reduce the funding amount if, after the agreement is signed but before the store opens, the merchandise sales levels drop below what was initially used to determine the funding amount. This condition protects Circle K's investment based on the store's projected performance. The Equipment/Construction Funding will be amortized over the Term.