What is the purpose of the Equipment/Construction Funding program offered to qualified Circle K franchisees?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
anding Agreement | Items 14 & 15 |
ITEM 10 FINANCING
SUMMARY OF FINANCING OFFERED
Circle K Store
We offer an Equipment/Construction Funding program to qualified franchisees for our Convenience Store offering. If you accept funding for your Store, we will use these funds to off-set the cost of equipment and construction at your Store and pay invoices on your behalf. The amount of funding offered to you will depend on whether your Circle K Store is a newly constructed store or conversion Circle K Store; however, the funding offered will not exceed the actual costs incurred. We will retain a security interest in each item of equipment purchased with Equipment/Construction Funding until the Convenience Store Franchise Agreement expires. Upon any such expiration, we will release our security interest. If the Convenience Store Franchise Agreement is terminated, you will (a) pay us the remaining net value of the equipment, which amount will reflect the unamortized portion of the Equipment/Construction Funding you receive, or, at our option, (b) grant us access to the Store so we can remove the equipment. Upon receipt of such payment, we will release our security interest in the equipment.
For a newly constructed Circle K Store, or the raze and rebuild of a Circle K Store, two levels of funding are available, which, for purposes of the calculation of Royalty Fees are referred to as "Level 2" funding amount and "Level 3" funding amount. The Level 2 funding amount of the Equipment/Construction Funding is up to $50 for each square foot of selling space your Store contains. The Level 3 funding amount of the Equipment/Construction Funding is up to $70 for each square foot of selling space your Store contains. TMC has the right to determine the square footage to establish the maximum amount of the funding.
For bay-conversions, store re-openings, store expansion projects, or conversions where TMC cannot adequately verify existing sales levels, two levels of funding are available, which for purposes of the calculation of Royalty Fees are referred to as "Level 2" funding amount and "Level 3" funding amount. The Level 2 funding amount of the Equipment/Construction Funding is up to $40 for each square foot of selling space your Store contains, capped at $90,000. The Level 3 funding amount of the Equipment/Construction Funding is up to $60 for each square foot of selling space your Store contains, capped at $135,000. TMC has the right to determine the square footage to establish the maximum amount of the funding.
For a conversion Store, the amount of the funding specified in the Equipment/Construction Funding Agreement is based on the verified annual amount of your existing convenience store's Gross Sales for the most recently completed 12-month period as determined by you and us. If your conversion Store's tobacco sales as a percentage of your total sales are substantially over the average for such percentage, your funding may be altered. In addition, TMC reserves the right to modify the amount of the funding if, subsequent to the parties' execution of the Equipment/Construction Funding Agreement but before the store is deemed open as a Circle K Store, the merchandise sales levels drop below the amount used by TMC to set the original funding amount.
Source: Item 10 — FINANCING (FDD pages 55–60)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Equipment/Construction Funding program is offered to qualified franchisees to help offset the costs of equipment and construction for their Circle K convenience stores. The funds are specifically used by Circle K to pay invoices on behalf of the franchisee for these expenses. The amount of funding a franchisee can receive depends on whether the store is newly constructed or a conversion, but the funding will not exceed the actual costs incurred. Circle K retains a security interest in the equipment purchased with these funds until the franchise agreement expires.
For newly constructed Circle K stores, there are two levels of funding available: Level 2 and Level 3. Level 2 funding provides up to $50 per square foot of selling space, while Level 3 funding offers up to $70 per square foot. The specific square footage used to calculate the funding is determined by TMC. Similarly, for bay-conversions, store re-openings, store expansion projects, or conversions where TMC cannot adequately verify existing sales levels, Level 2 funding is up to $40 per square foot (capped at $90,000), and Level 3 funding is up to $60 per square foot (capped at $135,000).
For conversion stores, the funding amount is based on the store's verified annual gross sales for the most recent 12-month period. The FDD provides tables showing funding availability based on average gross sales. For example, if a store has average gross sales of $50,000 or less, the Equipment/Construction Funding available is up to 0.8 times gross sales. If sales are between $100,001 and $150,000, the funding can be up to 1.2 times gross sales. For sales of $150,001 or more, funding can reach up to 1.3 times gross sales. However, if a conversion store's tobacco sales are substantially above average, the funding may be adjusted. TMC also reserves the right to modify the funding amount if merchandise sales drop before the store opens as a Circle K.
It's important to note that if a franchisee accepts Equipment/Construction Funding, their monthly royalty fee will be affected. Electing not to accept funding results in a 3.0% royalty fee on gross sales. Accepting Level 1, Level 2, or Level 3 funding increases the royalty fee to 3.75%, 4.5%, and 5.5% of gross sales, respectively. Regardless of the funding level, the monthly royalty fee will be the greater of $1,000 or the calculated percentage of gross sales. Franchisees must also execute an Equipment/Construction Funding Agreement. Additionally, franchisees are responsible for maintaining the equipment, replacing damaged or lost equipment, filing tax returns, and obtaining insurance coverage for the equipment.