If a Circle K franchisee accepts Equipment/Construction Funding, what agreements must they sign?
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 qualifies for and accepts Equipment/Construction Funding from Circle K, they must sign two agreements. These are the Equipment/Construction Funding Agreement (Exhibit 4) and the Personal Guaranty (Exhibit 5). The Equipment/Construction Funding Agreement outlines the terms and conditions of the funding, while the Personal Guaranty ensures that the franchisee is personally liable for the repayment of the funding.
The Equipment/Construction Funding is used by Circle K on behalf of the franchisee to offset the acquisition cost of store equipment and construction costs, paying related invoices. The funding is amortized over the term of the franchise agreement, and Schedule A to the Equipment/Construction Funding Agreement details the available funding options. The specific amount of funding approved for a franchisee will be noted on the Data Sheet.
It's important to note that Circle K reserves the right to reduce the Equipment/Construction Funding amount if, after the agreement is signed but before the store opens, the merchandise sales levels drop below the levels used to determine the initial funding amount. This condition introduces a risk for franchisees, as a decrease in projected sales could lead to a reduction in the financial support provided by Circle K. Prospective franchisees should carefully consider this possibility and its potential impact on their ability to complete the store's construction and equipment acquisition.
For newly constructed Circle K stores and raze-and-rebuild projects, the funding is available at two levels: Level 2 and Level 3. Level 2 provides up to $50 per square foot of selling space, while Level 3 offers up to $70 per square foot. For bay conversions, store re-openings, store expansion projects, or conversions where existing sales levels cannot be verified, Level 2 provides up to $40 per square foot (capped at $90,000), and Level 3 provides up to $60 per square foot (capped at $135,000). The franchisor determines the store's square footage to establish the maximum funding amount.