Under what circumstances, besides the expiration of the term or termination of the Franchise Agreement, can the Circle K agreement be terminated?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
ailing shall be deemed the date of giving such notice, except for notice of change of address, which must be received to be effective.
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- Equipment; Trade Fixtures. Purchaser shall provide all necessary buildings, improvements, equipment, tools, and like appliances required in order to perform its obligations hereunder.
22. Termination.
- (a) This Agreement shall terminate upon expiration of the Term of this Agreement or upon an earlier termination of the Franchise Agreement, or as otherwise provided in this Section. In addition, the termination provisions of the Franchise Agreement are hereby incorporated into this Agreement and shall apply to Seller's performance under and compliance with the terms and conditions of this Agreement.
- (b) Without limiting the foregoing, this Agreement may be terminated by Seller upon written notice if Purchaser fails to cure the default within 30 days (or any other time period noted in this Agreement) of receiving a notice of default for the following reasons: (i) if Purchaser fails to pay in a timely manner any sums when due hereunder within 5 days of receiving notice of default; (ii) if Purchaser defaults in any of its obligations under this Agreement; (iii) under other circumstances described as causes for termination by Seller elsewhere in this Agreement; (iv) if Purchaser fails to purchase at least 75% of the minimum volume requirements contained in the attached Commodity Schedule(s); or (v) if Purchaser fails to maintain an inventory of any one or more grades of motor fuel covered by this Agreement in an amount adequate to meet customer demand.
- (c) For avoidance of doubt, upon the expiration of the Term hereof or upon earlier termination hereof, Purchaser shall comply with all post-termination/post-expiration obligations set forth in the Franchise Agreement, and Seller shall have the right to purchase the Business Assets (as defined in the Franchise Agreement) pursuant to the terms of the Franchise Agreement. In addition, Purchaser understands and agrees that Seller is relying upon Purchaser to purchase the minimum volume of motor fuel product set forth in paragraph 3 above and the applicable Commodity Schedule(s) attached hereto, and that any breach or repudiation of this Agreement, or other failure to purchase those minimum volumes of motor fuel product by Purchaser will result in serious losses to Seller. Purchaser and Seller acknowledge that the amount of such losses is, and will be, difficult to determine. Therefore, Purchaser agrees that in the event of a termination of this Agreement Purchaser shall pay unto Seller, as liquidated damages, and not as a penalty, the greater of: (i) three and one-half cents ($0.035) per gallon multiplied by the minimum monthly volume in gasoline and diesel gallons set forth in paragraph 3 above and the applicable Commodity Schedule(s) attached hereto multiplied by the lesser of: a) 48 months or b) the number of months remaining under the Term of this Agreement, or (ii) three and one-half cents ($0.035) per gallon multiplied by the average monthly volume in gasoline and diesel gallons actually purchased by Purchaser (calculated for the period starting on the date of commencement of the Term and continuing until the date of termination or repudiation, as the case may be) multiplied by the lesser of: a) 48 months or b) the number of months remaining under the Term of this Agreement. The provisions of this Section 21 do not apply if the Agreement expires at the end of its initial Term or is terminated due to (i) Purchaser's (or if Purchaser is an entity, Purchaser's principal equity holder's) death; (ii) Purchaser's (or if Purchaser is an entity, Purchaser principal equity holder's) incapacity for at least 90 consecutive days, in either case which event results in Purchaser's (or if Purchaser is an entity, Purchaser's principal equity holder's) inability to personally operate the business hereunder;
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Circle K Branding Agreement can be terminated under certain circumstances, including failure to cure a default after receiving notice. Specifically, the agreement may be terminated if the Purchaser (franchisee) fails to pay sums when due within 5 days of notice, defaults on other obligations within 30 days of notice, or fails to purchase at least 75% of the minimum volume requirements outlined in the Commodity Schedules. Termination can also occur under circumstances described elsewhere in the agreement.
Additionally, the Circle K agreement can be terminated if the Purchaser (or their principal equity holder) dies or becomes incapacitated for at least 90 consecutive days, preventing them from operating the business. Termination is also possible if the Franchised Location is condemned or substantially destroyed through no fault of the Purchaser. Furthermore, Circle K (referred to as the Seller in this context) can terminate the agreement if they make a good faith determination to withdraw from marketing in the geographical area where the Circle K Business is located.
These termination conditions provide Circle K with recourse if the franchisee fails to meet key obligations or if unforeseen circumstances render the business inoperable. For a prospective franchisee, this highlights the importance of understanding the minimum volume requirements and ensuring financial stability to avoid payment defaults. The conditions related to death, incapacity, condemnation, or destruction of the location are more standard force majeure clauses, but franchisees should still be aware of these potential termination triggers.
It is important to note that if the agreement is terminated due to a breach by the Purchaser, the Purchaser may be required to pay liquidated damages to Circle K. These damages are calculated based on a formula involving the minimum or average monthly volume of gasoline and diesel gallons purchased, multiplied by a set amount per gallon and the remaining term of the agreement, up to a maximum of 48 months. However, these liquidated damages do not apply if the agreement expires at the end of its initial term or is terminated due to death, incapacity, condemnation, or Circle K's withdrawal from the market area.