Under the Circle K Incentive and Amortization Agreement, what is the 'Competitive Allowance' referring to?
Circle_K Franchise · 2025 FDDAnswer from 2025 FDD Document
thereof, whether at law or in equity.
| TMC: TMC FRANCHISE CORPORATION | PURCHASER: | ||
|---|---|---|---|
| By: | By: | ||
| Title: | Title: |
Exhibit 2 to Motor Fuel Agreement
CREDIT NETWORK AGREEMENT
[Attached as Exhibit 6 to the Convenience Store Franchise Agreement]
Exhibit 3 to Motor Fuel Agreement
INCENTIVE AND AMORTIZATION AGREEMENT
| 5.2 | Royalty Fees. | As set | forth in | Section | 7.6, | Franchisor may | offer |
|---|
- (i) By their initials in the space provided above for application of this paragraph 1(a) and their execution of this Agreement, Seller and Purchaser agree as follows. Seller agrees to pay unto Purchaser the competitive allowance specified in the Incentive Amounts Schedule, attached hereto and made a part hereof, for each gallon of product purchased from Seller under the Motor Fuel Agreement (said competitive allowance referred to herein as the "Competitive Allowance").
- (ii) Seller agrees to pay unto Purchaser the amount equal to the Competitive Allowance set forth in the Incentive Amounts Schedule, provided that, as of the time each such payment is due from Seller to Purchaser as set forth in the Incentive Amounts Schedule, Purchaser has satisfied those conditions contained in paragraph 1(c) and in the Incentive Amounts Schedule.
- (iii) Seller may, at any time, in its sole discretion and upon thirty (30) days' prior written notice, modify the Competitive Allowance amount payable hereunder or terminate the obligation to make any further Competitive Allowance payment to Purchaser without any liability to Purchaser. If the Motor Fuel Agreement or this Agreement is terminated or not renewed, Seller's obligation to pay, and Purchaser's entitlement to receive, the Competitive Allowance shall immediately terminate or expire, without notice, concurrently therewith.
- (iv) Purchaser shall not be obligated to reimburse to Seller the Competitive Allowance, or any portion thereof, received from Seller.
- (b) Conversion/Improvement Amount. The terms of this paragraph 1(b) shall apply only if the following blanks are initialed by both Seller and Purchaser:
| Seller's Initials | Purchaser's Initials |
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- (i) By their initials in the space provided above for application of this paragraph 1(b) and their execution of this Agreement, Seller and Purchaser agree as follows. Seller agrees to loan Purchaser the "Conversion Amount" and/or the "Improvement Amount" (collectively, the "Conversion/Improvement Amount"), as defined in subparagraph (ii) below. Purchaser desires to make certain improvements at the Premises as set forth more fully in the Conversion/Improvements Schedule attached hereto and made a part hereof (the "Improvements") and/or desires to convert the Premises to Seller's requirements for marketing motor fuel under the Proprietary Marks, including Seller's Image Standards (such conversion hereinafter referred to as the "Conversion"). The "Conversion" shall include, without limitation, the implementation, installation, and performance of the items set forth in the Conversion/Improvements Schedule attached hereto and incorporated herein.
- (ii) Seller agrees to loan Purchaser: (A) an improvement amount equal to the Improvement Amount set forth in the Incentive Amounts Schedule (said amount is the "Improvement Amount") for the sole purposes of constructing, installing and implementing the Improvements, provided that the Improvements conform with Seller's Image Standards; and/or (B) a conversion amount equal to the Conversion Amount set forth in the Incentive Amounts Schedule (said amount is the "Conversion Amount") to assist Purchaser in implementing the Conversion. Seller's obligation to disburse unto Purchaser the Conversion/Improvement Amount is conditioned upon Purchaser's satisfaction, at the time such disbursement is due by Seller to Purchaser as set
forth in the Incentive Amounts Schedule, of all of the following conditions and the conditions contained in paragraph 1(c) below: (A) Purchaser shall have obtained, and provided to Seller written verification reasonably satisfactory to Seller that Purchaser has obtained, all approvals, permits, licenses, entitlements, and consents required to make the Improvements and/or Conversion. (B) Purchaser shall have duly executed and delivered to Seller (1) a promissory note in substantially the form attached hereto as Exhibit A and incorporated herein, in a principal amount equal to the Conversion/Improvement Amount ("Note"), and (2) a Security Agreement and Personal Guaranty in substantially the form attached to the Franchise Disclosure Document as Exhibit J.
Source: Item 23 — RECEIPTS (FDD pages 100–359)
What This Means (2025 FDD)
According to Circle K's 2025 Franchise Disclosure Document, the Competitive Allowance refers to an amount Circle K agrees to pay the franchisee for each gallon of motor fuel purchased from Circle K under the Motor Fuel Agreement. This allowance is detailed in the Incentive Amounts Schedule attached to the Incentive and Amortization Agreement. The specific amount of the Competitive Allowance is based on a cents-per-gallon (CPG) calculation and is dependent on the volume of gasoline or diesel product purchased during a given Allowance Period. The Allowance Period is defined as any calendar month during the term of the agreement, starting with the first full month after the effective date.
The Incentive Amounts Schedule outlines different CPG rates based on volume tiers. For example, there may be a certain CPG rate for gallons purchased between a lower and upper volume limit, and a higher CPG rate for volumes exceeding a certain threshold. These specific volume and CPG amounts are not specified in the excerpt but are to be detailed in the Incentive Amounts Schedule. The Competitive Allowance is typically paid within thirty days of the last day of the applicable Allowance Period, provided the franchisee has met the conditions outlined in paragraph 1(c) of the agreement and in the Incentive Amounts Schedule.
Circle K retains the right to modify the Competitive Allowance amount or terminate the obligation to make further payments with thirty days' prior written notice, without incurring any liability. The obligation to pay the Competitive Allowance also terminates immediately if the Motor Fuel Agreement or the Incentive and Amortization Agreement is terminated or not renewed. The franchisee is not obligated to reimburse any Competitive Allowance received from Circle K. This allowance is designed to incentivize franchisees to purchase fuel from Circle K by providing a financial benefit tied to sales volume.