Does the Cicis franchise agreement allow for exceptions to the Managing Owner's ownership interest being free of encumbrances?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
n of your activities under this Agreement. Your initial Managing Owner is identified on Attachment A. Unless otherwise approved by us, the Managing Owner will be the same for all franchise agreements executed pursuant to any Development Agreement between you (or your affiliate) and us and the same as the Managing Owner designated under any such Development Agreement. The Managing Owner must own and maintain at least 25% of the direct ownership interests in you. Except as may otherwise be provided in this Agreement, the Managing Owner's interest in you will be and will remain free of any pledge, mortgage, hypothecation, lien, charge, encumbrance, voting agreement, proxy, security interest, or purchase right or options.
- (2) In addition to exercising general supervisory responsibility for your activities under this Agreement, the Managing Owner shall directly oversee your Restaurant's operations, unless you designate another natural person whom we approve to serve as your "Operator". Your initial Operator, if applicable, is identified on Attachment A.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to the 2025 Cicis Franchise Disclosure Document, the franchise agreement stipulates that the Managing Owner's interest in the franchise must generally remain free of any encumbrances. However, there is an exception: the agreement allows for other provisions regarding encumbrances to be made elsewhere within the franchise agreement.
Specifically, the Managing Owner must maintain at least 25% direct ownership in the Cicis franchise. The standard agreement requires this ownership stake to be unencumbered, meaning it cannot be pledged as collateral, mortgaged, or subject to any liens or security interests. This requirement ensures the Managing Owner has a clear and direct financial stake in the business, aligning their interests with the success of the franchise.
The exception indicates that under certain, possibly negotiated, circumstances, the standard requirement for an unencumbered ownership interest may be altered. A prospective franchisee should carefully review the franchise agreement and any related documents to understand the specific conditions under which exceptions to this rule may apply. It would be prudent to seek legal counsel to fully understand the implications of any such exceptions.