What are the consequences of failing to comply with Cicis's System Standards described in Item 8, as they relate to the potential for increased royalty fees as outlined in Item 6?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee(1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty Fee | 5% of Net Sales for a Cicis Buffet Restaurant; 6% of Net Sales for a Cicis To Go Restaurant (subject to reduction for participation in current incentive programs). | The day of the week we specify (currently, Thursday) | See Notes 2, 3, 4, and 5 |
| Non-Compliance Fee | $250 per failure to comply with the Franchise Agreement, plus, your royalty fee will increase by one (1) percentage point until you have cured all deficiencies | On demand, the day after non- compliance occurs | Payable only if you are in default of your obligations under the Franchise Agreement. |
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, failing to comply with the Franchise Agreement, which includes adherence to System Standards, can lead to financial penalties. Specifically, Cicis may impose a Non-Compliance Fee of $250 for each instance of non-compliance. More significantly, the royalty fee will increase by one percentage point until the franchisee corrects all identified deficiencies.
For a Cicis Buffet Restaurant, the standard royalty fee is 5% of Net Sales, while for a Cicis To Go Restaurant, it is 6% of Net Sales. This increase means that a franchisee operating a Cicis Buffet Restaurant would pay 6% of Net Sales in royalties instead of 5%, and a Cicis To Go Restaurant would pay 7% instead of 6%, until all issues are resolved. This increase in the royalty fee directly impacts the franchisee's profitability, as a larger portion of their revenue will be allocated to royalty payments.
The System Standards cover various aspects of the restaurant's operation, including marketing, staffing, use of trademarks, hours of operation, payment methods, online presence, menus, and bookkeeping. Franchisees must strictly comply with these standards to avoid the Non-Compliance Fee and the increase in royalty fees. The Operations Manual and other written communications outline these standards, and franchisees are responsible for implementing and maintaining them in their daily operations. Therefore, it is crucial for prospective franchisees to carefully review and understand the System Standards to ensure compliance and avoid potential financial penalties.