What is the maximum number of months used in the liquidated damages calculation for Circle K?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the liquidated damages calculation considers a maximum of 48 months. Specifically, in the event of termination, the franchisee may have to pay Circle K the average monthly licensing fee payments multiplied by the lesser of 48 months or the remaining number of months under the term of the agreement.
This means that even if the remaining term of the agreement is longer than 48 months, the calculation will only use 48 months. This provision sets a cap on the amount of liquidated damages Circle K can seek from a franchisee upon termination, providing some predictability for the franchisee's potential liability.
For prospective Circle K franchisees, it's crucial to understand the implications of this liquidated damages clause. While the 48-month cap offers some protection, early termination can still result in significant financial obligations. Franchisees should carefully evaluate their ability to meet the terms of the franchise agreement to avoid potential termination and associated costs.