How does Cicis account for gift card breakage when gift cards are not subject to escheatment?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Gift cards: The Company records a liability in the period in which a gift card is sold. As gift cards are redeemed, the Company reimburses the restaurant for the gift card value and derecognizes the related liability. When a gift card is not subject to escheatment, and it is probable that a portion of a gift card will not be redeemed, this amount is considered breakage and recognized within other general and administrative expenses. Breakage is recognized consistent with the historic redemption patterns of the associated gift cards.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Cicis records a liability when a gift card is sold and reimburses the restaurant as the gift card is redeemed, removing the corresponding liability. When gift cards are not subject to escheatment (meaning the state does not claim the unredeemed value) and it is probable that a portion of the gift card will not be redeemed, Cicis considers this amount as "breakage."
Cicis recognizes this breakage within other general and administrative expenses. The amount of breakage recognized is determined by the historic redemption patterns of similar gift cards. This means Cicis analyzes past data to estimate how much of the gift card value will likely go unredeemed and accounts for that as income.
For a prospective Cicis franchisee, this accounting practice means that Cicis benefits from unredeemed gift card amounts, which are recorded as income to the company. The franchisee is only reimbursed for the value of gift cards actually redeemed at their restaurant. This policy is fairly standard in the franchise industry, as the franchisor typically manages the gift card program and reaps the financial benefits of breakage.