Under what circumstances is a Circle K franchisee permitted to close the franchised location without it being considered abandonment?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to the 2025 Circle K Franchise Disclosure Document, a franchisee may be permitted to close the franchised location without it being considered abandonment under specific circumstances related to the termination of the franchise agreement. These circumstances include the death or incapacity of the franchisee or a principal equity holder that prevents them from operating the store, condemnation or taking of the franchised location due to eminent domain, or destruction of a substantial part of the location through no fault of the franchisee. Additionally, a franchisee may be able to close the location without penalty if they fail to secure the necessary permits for the store's construction. Finally, Circle K may determine in good faith and in the normal course of business to withdraw from marketing in the geographical area in which the store is located.
If any of these conditions are met, the franchisee will not be subject to the liquidated damages typically associated with early termination. Liquidated damages are calculated based on lost revenues from royalty fees and other amounts payable by the franchisee if the franchised location is no longer a Circle K store. The calculation is based on the average monthly gross sales of Circle K franchisees in the state where the franchised location is located for the 12-month period preceding the termination. If there are no Circle K franchisees in that state, the calculation will be based on the average monthly gross sales of all Circle K franchisees in the United States. The minimum average monthly royalty fee used in the calculation is $1,000.
It is important to note that if a court determines that the payment of liquidated damages is unenforceable, Circle K may pursue other available remedies, including consequential damages. This highlights the importance of understanding the conditions under which termination can occur without penalty and the potential financial implications of terminating the agreement under other circumstances. Prospective franchisees should carefully review the franchise agreement and consult with legal counsel to fully understand their rights and obligations regarding termination and potential damages.