Regarding the Circle K Franchise Agreement, what legal counsel is a franchisee encouraged to consult with to determine the applicability of California and federal laws?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
The following information applies to franchises and franchisees subject to the California Franchise Investment Act. Item numbers correspond to those in the main body:
- THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE FRANCHISE DISCLOSURE DOCUMENT. SECTION 31125 OF THE FRANCHISE INVESTMENT LAW REQUIRES US TO GIVE TO YOU A DISCLOSURE DOCUMENT APPROVED BY THE DEPARTMENT OF BUSINESS OVERSIGHT BEFORE WE ASK YOU TO CONSIDER A MATERIAL MODIFICATION OF YOUR FRANCHISE AGREEMENT.
OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT. ANY COMPLAINTS CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT AT www.dbo.ca.gov.
2. Item 3.
Item 3 is amended to provide that neither TMC nor any other person identified in Item 2 is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such persons from membership in such association or exchange.
3. Items 6 and 17.
The Franchise Agreement may contain a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
4. Item 17.
California Business & Professions Code Sections 20000 through 20043 provide rights to you concerning termination or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
5. Item 17.
Termination of the Franchise Agreement by TMC because of Franchisee's insolvency or bankruptcy may not be enforceable under applicable federal law (11 U.S.C.A. 101 et seq.).
6. Item 17.
The Franchise Agreement requires you to sign a general release if you transfer your franchise. This provision may be unenforceable under California law. California Corporations
Code 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code 31000 through 31516). Business and Professions Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
7. Item 17.
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
The 2025 Circle K Franchise Disclosure Document includes specific information for franchisees in California, given the state's franchise investment laws. Item 22 of the FDD highlights several key points regarding California law, emphasizing the importance of understanding your rights and obligations.
Specifically, the FDD notes that California law requires that a copy of all proposed agreements relating to the sale of the franchise be delivered together with the Franchise Disclosure Document. It also mentions that Section 31125 of the Franchise Investment Law requires Circle K to provide a disclosure document approved by the Department of Business Oversight before asking you to consider a material modification of your franchise agreement.
The document further clarifies that the Franchise Agreement may contain a liquidated damages clause, which may be subject to California Civil Code Section 1671 regarding enforceability. Additionally, California Business & Professions Code Sections 20000 through 20043 provide rights concerning termination or nonrenewal of a franchise, and these laws will control if the Franchise Agreement contains any inconsistent provisions. The FDD also points out that certain provisions, such as those related to termination due to insolvency or bankruptcy and general releases upon franchise transfer, may not be enforceable under applicable federal or California law.
Given these specific legal considerations for California franchisees, it is advisable to seek legal counsel to fully understand the implications of the Franchise Agreement under both California and federal laws.