Under what conditions will the Outstanding Amount be automatically reduced for a Circle K franchise?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
merchandise sales levels at the Store drop below the amount that Franchisor used to set the Maximum Amount. Franchisee shall use Fundings hereunder solely for Permitted Purposes. Franchisee acknowledges that Franchisor may, in its discretion, pay the proceeds of any Funding directly to the applicable suppliers and other payees intended to be paid with the proceeds of such Funding.
3. REDUCTIONS AND PAYMENT.
(a) So long as the Site is open and operating in full compliance with the
terms of the Franchise Agreement as of each such date and no event has occurred and is then continuing that would permit Franchisor to
Source: Item 22 — CONTRACTS (FDD page 100)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Outstanding Amount related to Equipment/Construction Funding will be automatically reduced under specific conditions. The Outstanding Amount refers to the remaining balance of the funding provided by Circle K to the franchisee for store equipment and construction costs. These reductions apply only if the Circle K site is open and operating in full compliance with the terms of the Franchise Agreement. Additionally, there must be no ongoing events that would allow Circle K to terminate the Franchise Agreement.
Specifically, the Outstanding Amount will be reduced (i) on the day following the third anniversary of the Open Date, by an amount equal to 30% of the Amount Funded, and (ii) on the last day of each month thereafter until the Outstanding Amount has been reduced to $0, by an amount equal to 1/120th of the Amount Funded (or, if less, the then-applicable Outstanding Amount). This means that after three years of compliant operation, a Circle K franchisee will receive a 30% reduction of the initial funding amount. Following this, the remaining balance will be reduced monthly over the next ten years (120 months) until the entire amount is paid off.
This arrangement benefits the franchisee by providing a structured and predictable repayment schedule for the Equipment/Construction Funding. It also incentivizes the franchisee to maintain compliance with the Franchise Agreement, as any breach that could lead to termination would require the franchisee to immediately repay the entire Outstanding Amount. Prospective franchisees should carefully review the Equipment/Construction Funding Agreement (Exhibit 4) and the Personal Guaranty (Exhibit 5) to fully understand the terms and conditions associated with this funding option.