What is the purpose of the monthly Promotional Fee collected by Circle K?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
terials submitted to us by you (Convenience Store Franchise Agreement, Section 6.4).
Marketing/Sales Promotions
The monthly Promotional Fee collected by us (see Item 6) will be used to establish and develop local, regional and national marketing, sales promotions, image/customer service programs, franchisee incentive programs, equipment upgrades and advertising. Currently, the Promotional Fee consists of three components: Tier I (General Promotion), Tier II (Local and Regional Promotion) and Tier III (National Promotional). These components are discussed below:
Tier I – General Promotion. You will pay a monthly fee of 0.25% of your Store's monthly Gross Sales (on Gross Sales of up to $125,000) for general promotional costs. We will use this fee for store image/ customer service inspections, incentive programs for franchisees, administrative costs associated with the Promotional Fund, and to pay for work done by outside advertising agencies in developing creative advertising concepts and in various promotional materials for the Circle K System.
Tier II – Local and Regional Promotion. The Tier II component covers local and regional promotional costs to promote Circle K Stores. The monthly fee for this component may
vary based on the particular Designated Marketing Area (DMA) in which your Store is located and is subject to change from time to time. You will pay up to 1.25% of your Store's monthly Gross Sales (on Gross Sales of up to $125,000) for regional promotional costs. All Circle K franchisees who have signed a single site franchise agreement located within a given DMA may not pay the same fee. The Tier II funds will be used to cover regional promotion and equipment upgrades for the Circle K Stores located in your region or DMA, which may also include radio, direct mailings, and newspaper advertising and other regional advertising efforts. At our option, and if there are surplus Local and Regional Promotional Fees, TMC may elect to direct a portion of the Local and Regional Promotional Fees to be used to fund the Local Store Marketing Program ("LSM"). The LSM will allow each franchisee the ability to use a portion of these funds on approved, store level marketing and promotional programs. LSM funds may not be available each year.
Tier III – National Promotion. This component of the Promotional Fees will be used primarily to conduct national advertising. The Tier III component is not currently in effect. If implemented (upon 60 days advance written notice), you will pay up to 0.25% of your Store's monthly Gross Sales (on Gross Sales of up to $125,000) for national promotion.
We have the final decision-making authority over all matters relating to the Promotional Fees collected and expended. We currently establish promotional programs for the promotion of the Circle K system and products. Our marketing department is responsible for category development, as well as the development of the promotional programs, which includes the production, research, and administration of advertising, marketing calendars, production of television, radio, newspaper, direct mail, and point of purchase advertising, grand opening activities for new Store openings and all collateral materials. Upon written request, we will provide you with an annual unaudited accounting of the total amount of Promotional Fees collected and the total costs incurred by us. Our possession and custody of funds as Promotional Fees from you and other franchisees shall not be construed as making us a fiduciary with respect to the collection or expenditure of such funds, and any Promotional Fees will not be held in a trust or escrow account. In addition to Promotional Fees from franchisees, our affiliate Circle K Stores Inc. and outside vendors and suppliers may contribute monies to various promotional programs, although the company-operated Circle K Stores are not required to contribute on the same basis. We are not obligated to spend the Promotional Fees collected in any particular market nor are we obligated to spend all of the Promotional Fees collected in any fiscal year. We cannot guaranty that you will benefit directly or pro rata from the Promotional Fund, and allocations from the Promotional Fund may benefit other franchise or company-owned Stores disproportionately to your Store. If our costs for a fiscal year for the advertising and promotions described above exceed or fall short of the Promotional Fees collected for a fiscal year, we may, at our option, carry the exces
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 60–72)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the monthly Promotional Fee is collected to establish and develop local, regional, and national marketing and sales promotions. These fees also support image and customer service programs, franchisee incentive programs, and equipment upgrades. The Promotional Fee is divided into three tiers: Tier I (General Promotion), Tier II (Local and Regional Promotion), and Tier III (National Promotional).
Tier I, funded by a monthly fee of 0.25% of a store's monthly Gross Sales (on Gross Sales of up to $125,000), covers general promotional costs such as store image and customer service inspections, franchisee incentive programs, administrative costs for the Promotional Fund, and work by outside advertising agencies. Tier II supports local and regional promotional costs, with franchisees paying up to 1.25% of their store's monthly Gross Sales (on Gross Sales of up to $125,000). These funds are used for regional promotion and equipment upgrades, including radio, direct mail, and newspaper advertising. Surplus Tier II funds may be directed to a Local Store Marketing Program, allowing franchisees to use funds on approved store-level marketing programs, although these funds may not be available each year.
Tier III is designated for national advertising but is not currently in effect. If implemented, franchisees would pay up to 0.25% of their store's monthly Gross Sales (on Gross Sales of up to $125,000) for national promotion, with 60 days advance written notice. Circle K retains final decision-making authority over the Promotional Fees, establishing promotional programs through its marketing department, which handles category development, advertising, marketing calendars, and various advertising materials. While Circle K will provide an annual unaudited accounting of Promotional Fees collected and costs incurred upon written request, these fees are not held in a trust or escrow account, and Circle K is not obligated to spend the fees in any particular market or fiscal year. There is no guarantee that franchisees will directly or proportionally benefit from the Promotional Fund, and allocations may disproportionately benefit other stores. Circle K may also use a portion of the Promotional Fees to solicit new franchise sales.
During the year ended April 27, 2025, Circle K used the Promotional Fees for various marketing and promotional activities. Franchisees should be aware that participation in these programs and the benefits derived can vary, and the franchisor has significant discretion in how the funds are spent. This arrangement is typical in franchising, where marketing funds are used to promote the brand as a whole, though individual franchisee benefits may not always be direct or equal.