What happens to the security interest Circle K retains in equipment purchased with Equipment/Construction Funding when the Convenience Store Franchise Agreement expires?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
We offer an Equipment/Construction Funding program to qualified franchisees for our Convenience Store offering. If you accept funding for your Store, we will use these funds to off-set the cost of equipment and construction at your Store and pay invoices on your behalf. The amount of funding offered to you will depend on whether your Circle K Store is a newly constructed store or conversion Circle K Store; however, the funding offered will not exceed the actual costs incurred. We will retain a security interest in each item of equipment purchased with Equipment/Construction Funding until the Convenience Store Franchise Agreement expires. Upon any such expiration, we will release our security interest. If the Convenience Store Franchise Agreement is terminated, you will (a) pay us the remaining net value of the equipment, which amount will reflect the unamortized portion of the Equipment/Construction Funding you receive, or, at our option, (b) grant us access to the Store so we can remove the equipment. Upon receipt of such payment, we will release our security interest in the equipment.
Source: Item 10 — FINANCING (FDD pages 55–60)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, if a franchisee accepts Equipment/Construction Funding from Circle K to offset equipment and construction costs, Circle K will retain a security interest in the equipment purchased with these funds. This security interest remains in place until the Convenience Store Franchise Agreement expires. Upon the expiration of the agreement, Circle K will release its security interest in the equipment.
However, if the Convenience Store Franchise Agreement is terminated before its natural expiration, different conditions apply. In the event of termination, the franchisee is required to either pay Circle K the remaining net value of the equipment, reflecting the unamortized portion of the Equipment/Construction Funding received, or grant Circle K access to the store to remove the equipment, at Circle K's option. Upon receipt of payment for the equipment's remaining value, Circle K will then release its security interest.
This arrangement provides clarity for franchisees regarding the status of equipment purchased with Circle K's funding. Upon the natural expiration of the franchise agreement, the franchisee gains clear title to the equipment. However, franchisees should be aware that early termination of the agreement triggers a financial obligation to Circle K for the equipment's remaining value or allows Circle K to repossess the equipment.