Circle K is a convenience store. It is the ultimate one-stop destination for retail and fuel needs. It offers a variety of products such as snacks, beverages, fresh fruits and vegetables, gas stations, gifts, and more.

However, most franchisees cite the lack of capital as their biggest problem when applying for its franchise.

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The reasons for not buying a Circle K franchise are the high investment cost, fees, and royalties. The company needs a certain amount of money to get started. Along with this, there are other expected costs that you will need to pay for, including rent of the property, electricity, IT, inventory. All in all, these could end up costing you more than you expect.

We gathered from many franchisees’ reviews that it might take more than 10 years to get enough traction to break even.

Circle K’s recent issues with underpayment and discrimination have put a severe dent in the company’s reputation amongst potential customers — leaving many to wonder whether or not Circle K will be able to turn its business around. These allegations are dreadful for the convenience store industry, seeing a dip in its profitability over the years.

Company Description and Business Overview:

Circle K is one of the biggest store chains in the United States, with 15000 locations worldwide. Circle K offers everything a customer might need on the go, apart from fuel, including a coffee bar, beverages, dry foods, packaged foods, refrigerated foods, groceries. It is owned by Alimentation Couche-Tard, a Canadian convenience store operator also owning many other Canadian, American and European convenience brands.

Circle K was Started in 1951 by Fred Hervey by the purchase of three Kay’s Food Stores in El Paso, Texas.

Company Statistics

  • Global Sales: $12,457,942,533
  • US Units: 5,976
  • International Units: 3,416
  • Total Units: 9,392
  • Percent Franchised: 31%
  • % International Units: 36%
  • US Franchised Units: 615
  • International Franchised Units: 2,288
  • Sales Growth %: 22.0%
  • Unit Growth %: 16.7%

The Circle K Franchise Fee

Circle K franchise’s initial investment is between the range of $185,000 and $1,600,000. New franchisees will also need a net worth of about $500,000 and a liquid cash requirement that are non-borrowed of about $100,000.

The Circle K franchise fee is a new franchisee’s payment to get a license to operate. It is non-refundable and is renewable after ten years of operation. The initial franchise fee is $25,000, with an additional royalty fee of 3% to 7.5% of their monthly revenue. Franchisees also have to pay an ad royalty fee of 1.5%.

Is Circle K Franchise Good?

Franchising works because it allows individuals to go into business FOR themselves, but NOT BY themselves. But are you aware that 80% of all franchise ventures fail in the first two to five years, leaving a massive debt on the heads of their owners?

We have researched Circle K, its franchises, its market trends, and company policies to determine how profitable it could be for you. Also, To evaluate the accurate profit of any franchise owners, watch the video below, which gives you the potential financial model of how much profit is earned by franchise owners after making investment and operation costs.

#1 Bad Employee Management Impacting The Image Of The Brand

Circle K has recently faced underpayment charges to its employees. The convenience store chain also faces claims of discriminatory pay practices based on race and gender. This is especially bad for an industry that’s already plagued by instability and decreasing financial clout. With such lousy employee management policies, it will be hard for the franchise owner to recruit eligible staff members.

#2 Year on Year Dripping Profit:

The market for convenience stores is saturated. Even before the pandemic, these stores were facing increased competition and lower margins on items sold. The pandemic has further given a dent in the revenues of these stores. With high initial setup costs and less experienced, it will undoubtedly be a strenuous terrain for the franchise owner of 2022.

#3 Changing Labour Management Law:

The change in the labor-management law has made it mandatory for a company to own the franchise employees jointly. This law makes a company liable for the employment decision of individual franchisees. This change in law has made the franchising business less sweet for both the franchisor and the franchisees. The brand would not want to take additional responsibility for a large number of franchises. On the other hand, the franchisees who are already restricted on doing business have to lose their control further.

#4 News of Discrimination By the Company:

There has been recent news and lawsuits against Circle K for discriminating amongst the employees. The company name has come under fire for discriminating against non-white employees in payment of wages and other areas. Such allegations are no help for franchise owners and severely damage the brand’s image, especially in countries outside the US and Canada.

Convenience store business: Non-convenience is more than convenience

A convenience store is a business that stocks everyday items which a person might need. These stores sell snack foods, beverages, toiletries, groceries, and tobacco products. In the United States, convenience stores often have fuel stations.

These are some of the significant problems of owning a convenience store business:

  • Long Operational hours: A convenience store usually has to open very early in the morning, and they close pretty late in the night. Working so many hours creates employee management issues for these stores. Keeping employees in shifts can get more expensive for the franchise, and working for that many hours by the owners themselves can get stressful.
  • Often a target of criminal elements: Retail stores are prone to have shoplifting thefts and deal regularly. These convenience stores also face armed robberies and ATM thefts. Even with a robust security system, around 6% of their budget covers the losses from these thefts.
  • Convenience stores incur losses from expiry date: Food products sellers have a significant task of managing inventory. Many perishable food products get wasted because of expiry dates. If these food items are not managed properly, it can lead to heavy losses for the stores.
  • Prices at a convenience store are pretty high: Products in convenience stores are almost always higher than in online stores. These places have to pay much money on rent in the premium localities, which makes their cost of running business higher than e-retailing.

Conclusion

Like all investments, franchising also has many risks involved. Success is an outcome of making the right business decisions which include choosing the right franchise. There has been a paradigm shift recently with the ways businesses are done. The established name of the past may not have a great future in the industry.

Sources:

  1. https://www.franchisetimes.com/top-200-2020/10-circle-k/article_6af38c46-6a4d-5a4f-9b2b-3cd37ae9f07e.html
  2. https://startupback.com/circle-k-franchise-cost-opportunities/
  3. https://thehill.com/blogs/congress-blog/labor/236764-one-government-lawyers-war-on-the-franchising-business?rl=1
  4. https://web.archive.org/web/20150925002843/http://www.cspnet.com/industry-news-analysis/corporate-news/articles/circle-k-transformation-goes-beyond-rebranding
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