When is the fuel security deposit due for a Circle K franchise, and to whom is it paid?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Expenditure | Amount | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|
| Fuel Security Deposit | $20,000 - | Lump Sum | Upon signing Motor | TMC |
| (Note 10) | $50,000 | Fuel Agreement |
Note 10 You must pay us the Security Deposit when you sign the Security Deposit Agreement. The Security Deposit you will be required to pay will depend on a number of factors, including the size of the storage tanks on your premises, expected through-put and your credit score. At our option, the Security Deposit may be paid by our debiting your account in the amount of $0.010 per gallon of motor fuel purchased until the full amount of the Security Deposit is paid. The Security Deposit is paid to secure your payment of all sums of money due under, and performance and observance of all the terms, covenants and conditions contained in the Motor Fuel Agreement. If you fail to timely pay any amount due and owing under the Motor Fuel Agreement, we may draw upon the Security Deposit and apply the funds toward the payment of an amount due and owing to us. If we draw upon the Security Deposit, you must immediately pay us an amount sufficient to restore the Security Deposit to its prior level. Upon termination, expiration or non-renewal of the Motor Fuel Agreement, we may also draw upon the Security Deposit to satisfy on any past due amounts, loss, damage, injury or liability caused by your failure to perform any condition, covenant or term of or make any payment under the Motor Fuel Agreement. The remaining balance of the Security Deposit Account will then be refunded to you. If the premises where your motor Fuel Business is located are owned by us or our affiliate, we may reduce or waive the amount of the Security Deposit.
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 36–45)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the fuel security deposit, ranging from $20,000 to $50,000, is due upon signing the Motor Fuel Agreement. This lump sum payment is made to TMC. The specific amount of the security deposit depends on factors such as the size of the storage tanks, expected throughput, and the franchisee's credit score.
The security deposit serves to secure the franchisee's payment of all sums due under, and performance of all terms within, the Motor Fuel Agreement. Circle K has the right to draw upon this deposit if the franchisee fails to make timely payments. If Circle K uses any portion of the deposit, the franchisee must immediately replenish the deposit to its original level.
Upon termination, expiration, or non-renewal of the Motor Fuel Agreement, Circle K can use the security deposit to cover any outstanding amounts, losses, damages, injuries, or liabilities resulting from the franchisee's failure to meet the agreement's conditions. Any remaining balance from the security deposit will then be refunded to the franchisee. However, Circle K may reduce or waive the security deposit if they or their affiliate owns the premises where the motor fuel business is located.
This security deposit is a standard practice in the franchise industry, particularly for businesses involving fuel sales, to protect the franchisor against potential financial losses. Prospective Circle K franchisees should factor this deposit into their initial investment calculations and understand the conditions under which Circle K can draw upon the deposit.