How does Cicis account for marketing costs when advertisements are run?

According to Cicis's 2025 Franchise Disclosure Document, marketing costs are generally expensed when the advertisements are run. However, there is an exception for production costs. If Cicis incurs and pays production costs in the current year for an advertising campaign that will run in the subsequent fiscal year, these production costs are recorded as prepaid expenses. These prepaid expenses are then expensed in the subsequent fiscal year when the advertising campaign takes place.

This accounting practice means that Cicis aims to match the expense of advertising with the period in which the advertising actually benefits the company through increased sales or brand awareness. By expensing costs when ads are run, Cicis avoids inflating its profits in the year the costs are incurred if the ads don't generate immediate revenue. The exception for prepaid expenses ensures that costs associated with future campaigns are properly accounted for and recognized in the correct period.

For a prospective Cicis franchisee, this accounting method is relevant because it affects how the marketing fund is managed and reported. Franchisees contribute a percentage of their sales to the marketing fund, and these contributions, along with other revenues like beverage rebates, are used to fund advertising and promotional activities. The FDD states that the company received $27,257,964 in marketing fund contributions for the year ending December 31, 2024. Understanding how these funds are expensed helps franchisees see how their contributions are being used to support the Cicis brand.