Under what circumstances does Circle K have the right to purchase the business assets of a franchisee?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
ship interests represented by this ownership certificate will be subject to the terms and conditions of the Franchise Agreement between the company named on the face of this certificate and Franchisor, which includes provisions containing covenants not to compete that apply to all owners."
16.3 Notice of Purchase. The notice by Franchisee required under Section 16.1, specifying the Price and Terms of the proposed Transfer, shall also include all ancillary agreements for the Franchised Location and pertinent supplemental financial information necessary to evaluate the merits of the proposed Transfer, including, but not limited to, fuel volume, car wash sales and QSR sales. Franchisor will notify Franchisee once Franchisor has received all of the required information. Franchisor will have sixty (60) days from the date of such notice (or from the date of the notice required under Section 15.3 in the case of a proposed Transfer of Ownership Interest) to either waive its right to purchase or express its interest in purchasing all or a portion of the Business Assets by delivering an acceptance notice ("Acceptance Notice"). If Franchisor waives its right to purchase, then Franchisee may complete the Transfer of the relevant Business Assets, or Ownership Interests (as applicable), according to the Price and Terms set forth in the written notice to Franchisor (or the terms provided in the notice delivered under Section 15.3, as applicable); however, any such Transfer to a third party is expressly subject to the other terms and conditions set forth in Article 15. If Franchisee does not consummate the Transfer of the Business Assets or Ownership Interests (as applicable) upon the Price and Terms, or in the case of Ownership Interests, on the terms provided in the notice delivered under Section 15.3, within six months of the date of the original notice to Franchisor containing the Price and Terms, the offer must be made again to Franchisor as set forth in this Article 16. Franchisee's obligations to comply with all of the terms and conditions of this Agreement, including, but not limited to, its obligations to pay the Royalty Fees and Promotional Fees, and to operate the business as a Circle K Store in
compliance with the terms hereof, will in no way be affected or changed because of Franchisor's rejection of Franchisee's offer to purchase the Business Assets hereunder.
- 16.4 Offsets. The purchase price payable by Franchisor to Franchisee under this Article 16 will be reduced by (a) all amounts owed by Franchisee to Franchisor hereunder, (b) all amounts owed by Franchisee to Franchisor or any Affiliate of Franchisor under any other agreement, (c) Franchisee's unpaid balance of the purchase price with respect to any of the assets purchased by Franchisor hereunder, or if any such assets are subject to a lien, by the balance due on the underlying indebtedness, together with (d) any interest or other charges to be paid in order for Franchisor to acquire such assets free and clear of all liens. If the amount due by Franchisee with respect to any asset exceeds its purchase price paid by Franchisor hereunder, Franchisee will remain solely liable for the difference.
- 16.5 Assessment of Property Condition; Purchase of Business Assets. Franchisor will have an additional 60 days from the date Franchisee receives the Acceptance Notice to complete the purchase hereunder (the "Diligence Period"). During the Diligence Period, Franchisor may enter the Franchised Location to inspect, test, and otherwise make an assessment of the condition of the Business Assets subject to Acceptance Notice, including without limitation the environmental and/or geological condition of any real property included in such Business Assets, and Franchisee hereby grants Franchisor a limited license to enter the Franchised Location for such purposes; provided that any such inspection, testing, and assessment shall be made in a manner so as to minimize interference with normal operations of at the Franchised Location. Franchisor's rights hereunder shall include the right to undertake any testing, surveying, drilling or other analysis, including subsurface testing of the Franchised Location. Franchisor shall indemnify, defend and hold harmless Franchisee against any personal injury or property damage caused by Franchisor or its contractors or employees in making any such inspections, testing, or assessment; provided, however, that in no event shall Franchisor have any liability as a result of any condition of the Franchised Location discovered by Franchisor during the inspections, testing and assessments, or as a result of any statement in any report or other written statement or oral communication regarding the Franchised Location;
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, Circle K has the right to purchase a franchisee's business assets under certain conditions, primarily related to the transfer of the franchise.
Specifically, if a franchisee intends to transfer their business, they must notify Circle K of the proposed sale, including the price and terms. Circle K then has the option to either waive their right to purchase the business or express interest in buying the assets themselves. This is known as the Right of First Refusal. Circle K has sixty days from the date of notification to decide whether to exercise this right.
If Circle K exercises its purchase right, the purchase may be limited to assets related to the Circle K business. The FDD also states that for a period of twelve months after the expiration or termination of the agreement, the franchisee will be subject to the provisions regarding the transfer of the business, implying Circle K retains the right to purchase during this period as well. Additionally, if Circle K is the lessor of the property, they have the right to take possession of the location upon request.