How are Advertising National and Royalty Expenses shown in the tables for Cicis, and why?

According to Cicis's 2025 Franchise Disclosure Document, Advertising National and Royalty Expenses, along with their corresponding adjustments, are presented in the financial performance tables as both a dollar amount and as a percentage of Fee Based Net Sales. This presentation corresponds with Cicis's current practice of not requiring franchisees to pay royalties and fund contributions on Game Room Sales. All other financial metrics in the tables are shown as dollar amounts and as a percentage of Net Company Sales.

This distinction is important for prospective franchisees because it clarifies how these specific expenses are calculated relative to different revenue streams. Fee Based Net Sales include most sales revenues, excluding sales tax, refunds, vending machine sales, and video game machine revenue. Net Company Sales, on the other hand, is the sum of Fee Based Net Sales and Game Room Sales. By tying Advertising National and Royalty Expenses to Fee Based Net Sales, Cicis provides a transparent view of how these costs directly relate to the revenue on which they are assessed.

For example, in the 2024 Average Annual Metrics table, Advertising National is shown as $64,751, which is 4.9% of Fee Based Net Sales, and Royalty Expenses are shown as $59,367, which is 4.5% of Fee Based Net Sales. The Royalty Adjustment is shown as $7,031, or 0.5%, and the Advertising National Adjustment is shown as $1,648, or 0.1%. Similarly, the 2024 Average Monthly Metrics table shows Advertising National as $5,396 (4.9%), Royalty Expenses as $4,947 (4.5%), Royalty Adjustment as $586 (0.5%), and Advertising National Adjustment as $137 (0.1%). These adjustments account for differences in payment amounts under older franchise agreements compared to the current agreement.

This approach ensures that franchisees understand the specific costs associated with royalties and advertising contributions relative to the revenue streams on which these fees are based. Prospective franchisees should pay close attention to these figures and how they are calculated, as they directly impact the restaurant's profitability and financial performance. Understanding the distinction between Fee Based Net Sales and Net Company Sales is crucial for accurately assessing the financial implications of these expenses.