Under what specific circumstances are liquidated damages waived upon termination of the Circle K agreement?
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 Circle K's 2025 Franchise Disclosure Document, the requirement to pay liquidated damages upon termination of the franchise agreement is waived under specific circumstances. These circumstances include the death or incapacity of the franchisee (or the principal equity holder if the franchisee is an entity) that results in the inability to personally operate the store. The waiver also applies if the franchised location is subject to condemnation or other taking due to eminent domain, or if the location is destroyed through no fault of the franchisee.
Additionally, liquidated damages are waived if the franchisee fails to secure the necessary permits for the construction of the store. Another condition for waiver is a determination made by Circle K in good faith and in the normal course of business to withdraw from marketing in the geographical area where the store is located. However, even if these conditions are met, Circle K retains the right to pursue other available remedies, including consequential damages, if a court determines that the liquidated damages provision is unenforceable.
It is important to note that these waivers of liquidated damages do not apply if the agreement expires at the end of its initial term. This means that if the franchise agreement simply runs its course and is not renewed, the franchisee may still be subject to certain post-termination obligations, but not the specific liquidated damages outlined in the agreement. This distinction is crucial for prospective franchisees to understand, as it clarifies the financial implications of different termination scenarios.