How are liquidated damages calculated for early termination of the Circle K agreement, assuming Circle K-branded motor fuel was offered for sale?
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 me
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to the 2025 Circle K Franchise Disclosure Document, if the Licensee terminates the agreement early, they must pay liquidated damages to TMC (presumably, the franchisor or a related entity). These damages are not considered a penalty but rather a compensation for losses TMC will incur due to the early termination.
The calculation is based on the average monthly Licensing Fee payments. This average is calculated from the 12 months preceding the termination, assuming the Licensee was in good standing during that time. If the agreement is terminated within the first 12 months, the average is calculated over the shorter period from the agreement's effective date to the termination date.
The resulting average monthly Licensing Fee is then multiplied by the lesser of either 48 or the remaining number of months left in the agreement's term, counting from the termination date to the original end date. This means the liquidated damages will not exceed 48 months' worth of licensing fees, even if the remaining term is longer. This calculation applies specifically when Circle K-branded motor fuel has been offered for sale at the premises, establishing a history of Licensing Fee payments. If Circle K-branded motor fuel was never offered for sale, a different calculation applies using a fixed monthly payment figure.