What is the effect of the Cicis franchisee's failure to remain in Good Standing on their ability to terminate the Franchise Agreement without cause?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Termination; Lost Revenue Damages. Provided you and your affiliates have been in Good Standing from the Effective Date and remain so during the notice period specified below, you may, at any time prior to [insert date that is the 18-month anniversary of the Effective Date], and without cause, deliver (as defined in the Franchise Agreement) a written notice to us of your election to terminate the Franchise Agreement. Termination will be effective at the close of business on the 30th day following delivery of your written notice of termination, and you will thereafter be required to comply with all obligations under the Franchise Agreement that are either triggered by or that expressly or by implication survive termination (except the obligation to pay Lost Revenue Damages under Section 16.M of the Franchise Agreement).
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- Definitions. As used in this Amendment, "Good Standing" means that you, your owners, and your affiliates (if any) are not in default of the Franchise Agreement or any other agreement with us or our affiliates; and that you, your owners, and your affiliates have substantially and timely complied with all of the terms and conditions of all such agreements, including the timely satisfaction of all monetary obligations owed to us or our affiliates.
Source: Item 23 — RECEIPTS (FDD pages 65–263)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, a franchisee's ability to terminate the Franchise Agreement without cause is contingent upon remaining in Good Standing. Specifically, if a franchisee and their affiliates have been in Good Standing from the Effective Date and remain so during the notice period, they may terminate the Franchise Agreement without cause at any time prior to the 18-month anniversary of the Effective Date by providing written notice. This termination becomes effective 30 days after the notice is delivered, and the franchisee must still comply with obligations that survive termination, except for the obligation to pay Lost Revenue Damages.
Good Standing is defined as not being in default of the Franchise Agreement or any other agreement with Cicis or its affiliates. It also requires substantial and timely compliance with all terms and conditions of these agreements, including the timely satisfaction of all monetary obligations owed to Cicis or its affiliates. Therefore, any failure to meet these criteria would mean the franchisee is not in Good Standing.
In practical terms, if a Cicis franchisee fails to maintain Good Standing at any point from the Effective Date through the notice period, they lose the right to terminate the Franchise Agreement without cause. This could occur due to a variety of reasons, such as failing to make timely payments, violating operational standards, or breaching any other agreement with Cicis. This provision incentivizes franchisees to adhere strictly to the terms of their agreements to retain the flexibility of early termination.
This condition is significant because it limits the franchisee's options if they encounter difficulties or wish to exit the franchise early. Without Good Standing, the franchisee may be bound to the full term of the agreement, potentially incurring further financial losses or operational challenges. Prospective franchisees should carefully consider the implications of this requirement and ensure they can consistently meet the standards for Good Standing to maintain their termination rights.