How is the liquidated damages amount calculated for a Circle K agreement termination?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
and materials containing the Proprietary Marks. If Licensee fails to remove all Proprietary Marks from the Premises within 10 days following any termination of this Agreement, then TMC or its designee may immediately enter and remove same at the sole cost and expense of Licensee and Licensee hereby agrees to reimburse TMC for any such cost or expense within 10 days after TMC makes demand for reimbursement.
- (e) Licensee understands and agrees that TMC is relying upon Licensee to pay to TMC the amounts set forth herein, and that the early termination of this Agreement will result in serious losses to TMC. Licensee and TMC acknowledge that the amount of such losses is, and will be, difficult to determine. Therefore, Licensee agrees that in the event of a termination of this Agreement, Licensee shall pay to TMC, as liquidated damages, and not as a penalty: the average monthly Licensing Fee payments (calculated in accordance with paragraph 6) payable by Licensee hereunder for the 12 months preceding the termination (during which time Licensee was in good standing under this Agreement), or for a shorter period commencing with the Effective Date of this Agreement if this Agreement is terminated in the first 12 months of the Term, multiplied by the lesser of (i) 48 or (ii) the remaining number of months under the Term of this Agreement, as measured from the time of termination to the date the Term would have ended but for the earlier termination. If Circle K-branded motor fuel was never offered for sale at the Premises and therefore there is no history of Licensing Fee payments, the liquidated damages will be calculated based on an average monthly payment figure of $500. The provisions of this paragraph 9(f) shall not affect any other rights and remedies TMC may have under this Agreement and under applicable law, including, but not limited to, the Petroleum Marketing Practices Act, 15 U.S.C. Section 2801 et seq. and the Uniform Commercial Code.
10. Confidentiality.
- (a) Licensee acknowledges that TMC may be disclosing and transmitting to it certain confidential and proprietary information of TMC, including without limitation guidelines, manuals, methods, policies, procedures, programs, software, firmware, specifications, standards, strategies, and other related information ("Confidential Information") in connection with Licensee's performance of this Agreement. Except where otherwise required by law, Licensee shall: (i) treat and maintain Confidential Information as confidential; (ii) use Confidential Information only for the operation of the Premises under this Agreement; and (iii) restrict disclosure of Confidential Information only to Licensee and its officers, directors employees, contractors or agents who are directly connected with the performance of work and require knowledge of the Confidential Information for Licensee's performance of its obligations hereunder.
- (b) Licensee may not use, or cause or permit to be used by, or disclose to, or cause or permit to be disclosed to, third parties any Confidential Information for purposes other than operating the Premises under this Agreement.
- (c) Licensee acknowledges that any failure to comply with the requirements of this paragraph 10 will cause TMC irreparable injury.
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to the 2025 Circle K Franchise Disclosure Document, the calculation of liquidated damages depends on the specific agreement in place. For a License Agreement, if terminated early, the licensee must pay Circle K's licensor, TMC, liquidated damages, not as a penalty. This is calculated by multiplying the average monthly Licensing Fee payments from the 12 months preceding termination (while in good standing) or, if terminated within the first year, the average from the period since the agreement's start, by the lesser of 48 or the remaining months in the agreement's term. If Circle K-branded motor fuel was never sold at the location, the liquidated damages will be based on an average monthly payment of $500.
For a Purchaser Agreement, if terminated early, the purchaser pays the seller liquidated damages, not as a penalty. This is calculated as the greater of two amounts: (i) three and one-half cents ($0.035) per gallon multiplied by the minimum monthly volume in gasoline and diesel gallons as specified in the agreement, multiplied by the lesser of 48 months or the remaining months in the agreement term, or (ii) three and one-half cents ($0.035) per gallon multiplied by the average monthly volume in gasoline and diesel gallons actually purchased by the Purchaser from the start of the term until termination, multiplied by the lesser of 48 months or the remaining months in the agreement term.
It's important to note that these liquidated damages provisions may not be applicable under certain conditions, such as the death or incapacity of the purchaser, condemnation of the location, destruction of the location without fault of the purchaser, or Circle K's decision to withdraw from marketing in the area. If a court deems the liquidated damages payment unenforceable, Circle K may pursue other remedies, including consequential damages.