If a Circle K franchisee accepts Equipment/Construction Funding from the franchisor, where in the Franchise Agreement can details about this funding be found?
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, details regarding Equipment/Construction Funding can be found in Section 7.6 of the Franchise Agreement and within the Equipment/Construction Funding Agreement itself, which is attached as Exhibit 4. If a franchisee accepts this funding, they must sign the Equipment/Construction Funding Agreement and a Personal Guaranty (Exhibit 5). The amount of funding approved, if any, will be noted on the Data Sheet.
The Equipment/Construction Funding Agreement outlines the terms and conditions of the funding, including how the funds will be used to offset the acquisition cost of store equipment and construction costs. The funding will be amortized over the term of the agreement. Schedule A to the Equipment/Construction Funding Agreement details the options available to the franchisee regarding this funding.
It's important to note that Circle K reserves the right to reduce the Equipment/Construction Funding amount if merchandise sales levels drop below the levels used to set the funding amount before the store is officially opened as a Circle K. This condition highlights a potential risk for franchisees, as changes in projected sales could impact the amount of financial support received.