How is the 'Agreed Value' of a Cicis restaurant determined for purchase after death or disability?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) During the Option Period, the purchase price for the Interests will be determined with reference to the agreed value of your Restaurant ("Agreed Value"), as set forth below.
If you are a natural person, then the Agreed Value will be an amount equal to 100% of the Agreed Value.
If you are a legal entity, then the purchase price for any Interest will be an amount which bears the same relationship to the Agreed Value as the interest of the Person whose interests are being purchased bears to the total ownership interests in you.
- (b) The Agreed Value will be an amount equal to the Initial Value (defined below), less the total current and long-term liabilities we or our designee assume.
The Initial Value will be equal to the following (the "Initial Value"):
- (i) If the triggering death or permanent disability occurs prior to six (6) months following the Opening Date of your Restaurant, then the Initial Value will be an amount equal to your Original Cost (defined below), plus 10%.
Your "Original Cost" will include all expenditures you incurred from and after the Effective Date directly related to the development and opening of your Restaurant ("Start Up Expenditures"), including the initial franchise fee paid pursuant to Section 4.A. of this Agreement, any local governmental impact fees, costs incurred for site location, leasehold improvements, equipment, inventory, smallwares, signage, the hiring and training of managers, and other miscellaneous Start Up Expenditures, provided that all
Start Up Expenditures are documented to our reasonable satisfaction, but excluding expenses such as lease deposits, utility deposits, and prepaid expenses to be refunded by third parties, and wages and related benefits paid by you prior to the Opening Date.
(ii) If the triggering death or permanent disability occurs on or after six (6) months following the Opening Date, but prior to 12 months following the Opening Date, then the Initial Value will be an amount equal to the Net Sales of your Restaurant for the five-month period immediately preceding the month in which the death or permanent disability occurs, annualized, then divided by two.
(iii)If the triggering death or permanent disability occurs on or after 12 months following the Opening Date, then the Initial Value will be an amount equal to the total Net Sales of your Restaurant for the 12-month period immediately preceding the month in which the death or permanent disability occurs, divided by two.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the 'Agreed Value' of a Cicis restaurant, which is used to determine the purchase price of the franchise in the event of death or permanent disability of the franchisee or managing owner, is calculated based on different criteria depending on when the triggering event occurs relative to the restaurant's opening date. The purchase of the franchise by Cicis is optional, and must be executed within 20 days of receiving notice of the death or disability.
If the death or permanent disability occurs prior to six months following the restaurant's opening date, the Initial Value is equal to the franchisee's Original Cost plus 10%. The Original Cost includes all expenditures incurred from the effective date related to the development and opening of the restaurant, such as the initial franchise fee, local governmental impact fees, site location costs, leasehold improvements, equipment, inventory, signage, and the hiring and training of managers. These Start-Up Expenditures must be documented to Cicis's satisfaction. However, expenses like lease deposits, utility deposits, prepaid expenses to be refunded, and wages paid before the opening date are excluded.
If the death or permanent disability occurs on or after six months but before 12 months following the opening date, the Initial Value is equal to the restaurant's Net Sales for the five-month period immediately preceding the month in which the event occurs, annualized, and then divided by two. If the death or permanent disability occurs on or after 12 months following the opening date, the Initial Value is equal to the total Net Sales of the restaurant for the 12-month period immediately preceding the month in which the event occurs, divided by two. In all scenarios, the Agreed Value is the Initial Value less the total current and long-term liabilities that Cicis or its designee assumes.
Prospective franchisees should understand these valuation methods, as they significantly impact the financial outcome for their estate or in case of disability. The method of calculating the value changes over time, so the timing of any such event is critical. The valuation also excludes certain costs, such as lease and utility deposits, which the franchisee will need to consider separately. It is also important to note that Cicis has the option, but not the obligation, to purchase the restaurant in these circumstances.