What outstanding financial obligations must a Circle K franchisee satisfy before transferring the franchise?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
anchisor or any Affiliate for the Franchised Location, including, but not limited to any financing agreements, motor fuel agreement, branding agreement and the Software Agreement, regardless of whether such other agreements may in fact be properly and fully performed by Franchisee. Further, at Franchisor's election, any default by Franchisee in any other agreement between Franchisee and Franchisor may simultaneously constitute a default by Franchisee under this Agreement notwithstanding that at such time Franchisee may be fully and promptly performing its obligations hereunder.
- 14.7 Rights and Obligations upon Expiration or Termination. Upon expiration or termination of this Agreement for any reason, Franchisee will:
- (A) within five (5) days, pay all Royalty Fees, Promotional Fees, and any other amounts owed to Franchisor, suppliers, or vendors, including the outstanding principal amounts and accrued interest on any notes or evidences of indebtedness of Franchisee payable to Franchisor or any Affiliates. The payment to Franchisor of all amounts owing will be accelerated on all debt obligations which had been the subject of payment schedules even if payment was then being made promptly according to the agreed schedule. Franchisee hereby grants to Franchisor a lien and security interest against any and all personal property, equipment, and fixtures owned by Franchisee and used in connection with the Store as security for the payment of such obligations;
- (B) immediately pay, as fair and reasonable liquidated damages ("Liquidated Damages"), an amount equal to (i) the lesser of (x) 48 or (y) the remaining number of months under the Term, multiplied by (ii) the average monthly Royalty Fee payments (calculated in accordance with Section 5.2) payable by Franchisee hereunder for the 12 months preceding the termination (during which time the Franchisee 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. If the Store has never been opened and therefore has no history of Royalty Fee payments, the Liquidated Damages will be calculated based on the average monthly Gross Sales of all Circle K franchisees located in the state where the Franchised
Location is located for the 12-month period immediately preceding the termination. If there are no Circle K franchisees located in such state, the calculation will be based on the average monthly Gross Sales of all Circle K franchisees located in the United States. Notwithstanding the foregoing, in any and all cases, the average monthly Royalty Fee payment amount used in the Liquidated Damages calculation shall be no less than $1,000 since that is the minimum required monthly Royalty Fee. Franchisor and Franchisee acknowledge and agree that the termination of this Agreement will result in Franchisor incurring damages based on lost revenues from Royalty Fees and other amounts payable by Franchisee if the Franchised Location is no longer a Circle K Store, and that it will be difficult to calculate with certainty the amount of damages Franchisor will incur. The provisions of this Section 14.7(B) do not apply if the Agreement expires at the end of its initial Term or is terminated due to (i) Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) death; (ii) Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) incapacity for at least 90 consecutive days, in either case which event results in Franchisee's (or if Franchisee is an entity, Principal Equity Holder's) inability to personally operate the Store; (iii) condemnation or other taking, in whole or in part, of the Franchised Location due to eminent domain; (iv) destruction of all or a substantial part of the Franchised Location through no fault of Franchisee; (v) Franchisee's failure to secure the necessary permits for the construction of the Store or (vi) a determination made by Franchisor in good faith and in the normal course of business to withdraw from marketing in the geographical area in which the Store is located.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, a franchisee must meet certain financial obligations before they can transfer their franchise. Specifically, upon the expiration or termination of the Franchise Agreement, the franchisee is required to pay all Royalty Fees, Promotional Fees, and any other amounts owed to Circle K, its suppliers, or vendors. This includes the outstanding principal amounts and accrued interest on any notes or evidences of indebtedness of the franchisee payable to Circle K or its affiliates. All amounts owing will be accelerated on all debt obligations, even if payments were being made promptly according to an agreed schedule. To secure these payments, the franchisee grants Circle K a lien and security interest against any personal property, equipment, and fixtures used in connection with the store.
In addition to the above, the franchisee may also be required to pay liquidated damages upon expiration or termination of the agreement. These liquidated damages are calculated based on a formula that considers the remaining number of months under the term (up to 48 months) and the average monthly Royalty Fee payments over the 12 months preceding the termination, assuming the franchisee was in good standing. If the store has never opened and has no history of Royalty Fee payments, the liquidated damages will be based on the average monthly Gross Sales of all Circle K franchisees in the same state.
Furthermore, if Circle K exercises its Right of First Refusal and the franchisee refuses to sign Circle K's standard franchise agreement, the agreement will be subject to immediate termination. In such cases, the franchisee will be required to comply with all post-termination obligations, including the payment of liquidated damages and the unamortized portion of any funding provided by Circle K. It is important for prospective franchisees to understand these financial obligations and how they could impact their ability to transfer the franchise or exit the business.