Under what circumstances does Circle K retain a security interest in equipment purchased with Equipment/Construction Funding?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 10 — FINANCING (FDD pages 55–60)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, if a franchisee accepts Equipment/Construction Funding from Circle K for their store, Circle K retains a security interest in each piece of equipment purchased with these funds. This security interest remains in place until the Convenience Store Franchise Agreement expires.
However, if the Convenience Store Franchise Agreement is terminated before its natural expiration, the franchisee has two options regarding the equipment. First, the franchisee can pay Circle K the remaining net value of the equipment, which reflects the unamortized portion of the Equipment/Construction Funding received. Upon receiving this payment, Circle K will release its security interest in the equipment. Alternatively, Circle K has the option to request access to the store to remove the equipment. If Circle K chooses to remove the equipment, they will then release their security interest.
This arrangement protects Circle K's investment in the equipment provided to the franchisee. It ensures that Circle K can recover the value of the equipment if the franchise agreement ends prematurely or upon expiration. For a prospective franchisee, this means understanding the terms of the Equipment/Construction Funding Agreement and the potential financial obligations upon termination or expiration of the franchise agreement. It is also important to note that the franchisee is responsible for maintaining the equipment, replacing any lost or damaged equipment, paying property taxes, and obtaining insurance coverage as required by the Convenience Store Franchise Agreement.