What expenses are considered when calculating EBITDA during the Assessment Period for a Cicis franchise under the Reopen Incentive Program Addendum?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
- Right to Close Restaurant. You and we agree that you will have a one-time right to permanently close the Restaurant if, for the period beginning on the date the Restaurant reopens for regular business and ending on the day that is 1.5 years after that date (the "Assessment Period"), the Restaurant's EBITDA (earnings before interest, taxes, depreciation and amortization), considering only those expenses that are normal restaurant-level operating expenses, is a negative number. To exercise the right to close, you must provide us, no sooner than the end of the Assessment Period and no later than 30 days after the end of the Assessment Period, (a) a profit and loss statement for the Assessment Period, which may be internally prepared in accordance with generally accepted accounting principles, showing the negative EBITDA, and (b) written notice of your intention to close and the date on which you intend to do so. On or prior to the closure, you and we will execute a written mutual termination of the Franchise Agreement, which will include a general release of any and all claims you and your related parties might have against us and our related parties, standard confidentiality and non-disparagement provisions, and your
Source: Item 23 — RECEIPTS (FDD pages 65–263)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, specifically Exhibit D-3 regarding the Reopen Incentive Program Addendum, the EBITDA calculation during the Assessment Period considers only normal restaurant-level operating expenses. The Assessment Period spans the first 1.5 years after the restaurant reopens for regular business.
This is relevant because if the restaurant's EBITDA is negative during this Assessment Period, the franchisee has a one-time right to permanently close the restaurant. To exercise this right, the franchisee must provide Cicis with a profit and loss statement for the Assessment Period, prepared in accordance with generally accepted accounting principles, showing the negative EBITDA, along with written notice of their intention to close.
It is important to note that the agreement requires a mutual termination of the Franchise Agreement, including a general release of claims against Cicis, standard confidentiality and non-disparagement provisions, and the franchisee's agreement to comply with obligations that survive the termination. This clause protects Cicis from potential legal action and ensures the franchisee maintains confidentiality even after closure. The focus on 'normal restaurant-level operating expenses' suggests that extraordinary or non-recurring expenses might be excluded from the EBITDA calculation, which could impact the franchisee's decision to close the restaurant based on the EBITDA result.