How does the Circle K Incentive Amounts Schedule relate to the Competitive Allowance?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
thereof, whether at law or in equity.
| TMC: TMC FRANCHISE CORPORATION | PURCHASER: | ||
|---|---|---|---|
| By: | By: | ||
| Title: | Title: |
Exhibit 2 to Motor Fuel Agreement
CREDIT NETWORK AGREEMENT
[Attached as Exhibit 6 to the Convenience Store Franchise Agreement]
Exhibit 3 to Motor Fuel Agreement
INCENTIVE AND AMORTIZATION AGREEMENT
| 5.2 | Royalty Fees. | As set | forth in | Section | 7.6, | Franchisor may | offer |
|---|
- (i) By their initials in the space provided above for application of this paragraph 1(a) and their execution of this Agreement, Seller and Purchaser agree as follows. Seller agrees to pay unto Purchaser the competitive allowance specified in the Incentive Amounts Schedule, attached hereto and made a part hereof, for each gallon of product purchased from Seller under the Motor Fuel Agreement (said competitive allowance referred to herein as the "Competitive Allowance").
- (ii) Seller agrees to pay unto Purchaser the amount equal to the Competitive Allowance set forth in the Incentive Amounts Schedule, provided that, as of the time each such payment is due from Seller to Purchaser as set forth in the Incentive Amounts Schedule, Purchaser has satisfied those conditions contained in paragraph 1(c) and in the Incentive Amounts Schedule.
- (iii) Seller may, at any time, in its sole discretion and upon thirty (30) days' prior written notice, modify the Competitive Allowance amount payable hereunder or terminate the obligation to make any further Competitive Allowance payment to Purchaser without any liability to Purchaser. If the Motor Fuel Agreement or this Agreement is terminated or not renewed, Seller's obligation to pay, and Purchaser's entitlement to receive, the Competitive Allowance shall immediately terminate or expire, without notice, concurrently therewith.
- (iv) Purchaser shall not be obligated to reimburse to Seller the Competitive Allowance, or any portion thereof, received from Seller.
- (b) Conversion/Improvement Amount. The terms of this paragraph 1(b) shall apply only if the following blanks are initialed by both Seller and Purchaser:
| Seller's Initials | Purchaser's Initials |
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- (i) By their initials in the space provided above for application of this paragraph 1(b) and their execution of this Agreement, Seller and Purchaser agree as follows. Seller agrees to loan Purchaser the "Conversion Amount" and/or the "Improvement Amount" (collectively, the "Conversion/Improvement Amount"), as defined in subparagraph (ii) below. Purchaser desires to make certain improvements at the Premises as set forth more fully in the Conversion/Improvements Schedule attached hereto and made a part hereof (the "Improvements") and/or desires to convert the Premises to Seller's requirements for marketing motor fuel under the Proprietary Marks, including Seller's Image Standards (such conversion hereinafter referred to as the "Conversion"). The "Conversion" shall include, without limitation, the implementation, installation, and performance of the items set forth in the Conversion/Improvements Schedule attached hereto and incorporated herein.
- (ii) Seller agrees to loan Purchaser: (A) an improvement amount equal to the Improvement Amount set forth in the Incentive Amounts Schedule (said amount is the "Improvement Amount") for the sole purposes of constructing, installing and implementing the Improvements, provided that the Improvements conform with Seller's Image Standards; and/or (B) a conversion amount equal to the Conversion Amount set forth in the Incentive Amounts Schedule (said amount is the "Conversion Amount") to assist Purchaser in implementing the Conversion. Seller's obligation to disburse unto Purchaser the Conversion/Improvement Amount is conditioned upon Purchaser's satisfaction, at the time such disbursement is due by Seller to Purchaser as set
forth in the Incentive Amounts Schedule, of all of the following conditions and the conditions contained in paragraph 1(c) below: (A) Purchaser shall have obtained, and provided to Seller written verification reasonably satisfactory to Seller that Purchaser has obtained, all approvals, permits, licenses, entitlements, and consents required to make the Improvements and/or Conversion.
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Incentive Amounts Schedule specifies the details of the Competitive Allowance that Circle K may pay to the franchisee. The Competitive Allowance is a payment per gallon of motor fuel purchased from Circle K under the Motor Fuel Agreement. The Incentive Amounts Schedule, which is part of the Incentive and Amortization Agreement, outlines the specific amounts a franchisee can receive based on the volume of gasoline or diesel purchased during a given 'Allowance Period.'
The Gasoline Competitive Allowance is paid if the minimum volume of gasoline product purchased under the Motor Fuel Agreement for the applicable Allowance Period exceeds a certain amount. The franchisee will receive a specific amount in cents per gallon (CPG) based on volume tiers (e.g., a certain CPG for volume between X and Y gallons). Similarly, the Diesel Competitive Allowance operates under the same structure, providing different CPG amounts based on diesel volume tiers purchased during the Allowance Period.
Several conditions apply to receiving the Competitive Allowance. The franchisee must meet the conditions outlined in paragraph 1(c) of the agreement and in the Incentive Amounts Schedule itself. Circle K retains the right to modify the Competitive Allowance amount or terminate the allowance payments altogether with 30 days' prior written notice, without incurring any liability. The obligation to pay the Competitive Allowance ends immediately if the Motor Fuel Agreement or the Incentive and Amortization Agreement is terminated or not renewed. The 'Allowance Period' is defined as any calendar month during the term of the agreement, starting the first full month after the effective date.
In practical terms, this means a Circle K franchisee's potential earnings from fuel sales are directly tied to their ability to meet volume targets. Failure to meet minimum volume requirements results in not receiving the Competitive Allowance for that period. The franchisor's ability to unilaterally change or terminate the Competitive Allowance adds a layer of risk for the franchisee, as it can impact their revenue projections. Prospective franchisees should carefully consider these factors and negotiate favorable terms where possible, understanding that the Competitive Allowance is not guaranteed and can be altered by Circle K.