What post-termination obligations must the Franchisee comply with if the Circle K Franchise Agreement is terminated?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
sor'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. Notwithstanding the foregoing, if a court determines that the payment under this Section 14.7(B) is unenforceable, then Franchisor may pursue all other available remedies, including consequential damages to the extent proved;
Exhibit F - Franchise Agreement (C) immediately discontinue all use of the Marks and the Business System.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, franchisees face several obligations upon termination or expiration of the Franchise Agreement. Within five days of termination, the franchisee must pay all outstanding Royalty Fees, Promotional Fees, and any other amounts owed to Circle K, its suppliers, or vendors, including the principal and accrued interest on any debts. These payments are accelerated, meaning all outstanding debt becomes immediately due, even if payment schedules were previously in place. Circle K also has a lien and security interest against the franchisee's personal property, equipment, and fixtures at the store to secure these payments.
Additionally, the franchisee must immediately pay liquidated damages to Circle K. This amount is calculated as the lesser of 48 months or the remaining months under the original term, multiplied by the average monthly Royalty Fee payments from the 12 months preceding termination (assuming the franchisee was in good standing). If the store never opened and has no royalty fee history, the liquidated damages will be based on the average monthly Gross Sales of all Circle K franchisees in the same state. For 12 months after termination, the franchisee is subject to Article 16 of the agreement, which likely contains additional restrictions or obligations.
Furthermore, if Circle K exercises its purchase right or is the lessor of the property, the franchisee must surrender possession of the franchised location. The franchisee must also execute any documents necessary to transfer their interest in the property to Circle K. Even with the transfer of possession, the franchisee remains responsible for any unpaid obligations that accrued before Circle K took control. If Circle K does not take possession, the franchisee must modify the location to ensure it cannot be confused with a Circle K business and must prominently display a notice for six months indicating it is no longer a Circle K franchise. Circle K is entitled to seek injunctive relief to enforce these post-termination obligations, and the franchisee will indemnify Circle K for all costs incurred in such proceedings.