Does the Cicis franchisee need to be in compliance with obligations under agreements with its affiliates to maintain 'Good Standing'?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
eements, at least five (5) Cicis Pizza Restaurants. In light of your acquisition of the Development Rights and your agreement to remain in good standing (as defined below), we have agreed to allow you to participate in our Development Incentive Program (the "Program") with respect to the Development Agreement and Franchise Agreements that you or your affiliates execute pursuant to the Development Agreement from and after the Effective Date of this Addendum (the "Qualifying Franchise Agreements"). We may revoke your participation in the Program if, at any time, we determine that you no longer qualify to participate.
-
- Reduction of Development and Initial Franchise Fees. Section 3 of the Development Agreement is supplemented and amended by adding the following to the end of the Section:
While you are approved to participate in the Program and provided you and your affiliates remain in good standing, we agree that the Development Fee will be reduced to $10,000 times the total number of Restaurants to be developed hereunder, and the Initial Franchise Fee under each Qualifying Franchise Agreement shall be reduced to $10,000. We reserve the right to revoke the foregoing reductions at any time you are no longer approved to participate in the Program or you ceas
Source: Item 23 — RECEIPTS (FDD pages 65–263)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, a franchisee's "Good Standing" is contingent upon compliance with obligations under agreements with its affiliates. Specifically, the definition of "Good Standing" includes the franchisee and their affiliates being in compliance with all material obligations under the Development Agreement and all Franchise Agreements between Cicis and the franchisee or their affiliates. This extends to all other agreements between Cicis and the franchisee or their affiliates. Cicis retains the sole discretion to determine whether particular obligations are "material" for purposes of determining good standing, and their decision is final.
This definition of "Good Standing" has significant implications for franchisees. Failure to maintain "Good Standing" can lead to the revocation of certain benefits, such as reductions in the Development Fee and Initial Franchise Fee. For example, the Development Fee may be reduced to $10,000 times the total number of Restaurants to be developed, and the Initial Franchise Fee under each Qualifying Franchise Agreement may be reduced to $10,000, provided the franchisee and their affiliates remain in good standing. If "Good Standing" is not maintained, Cicis reserves the right to revoke these reductions, requiring the franchisee to pay the full Development Fee and Initial Franchise Fees.
Furthermore, Cicis retains the right to revoke waivers of fees if the franchisee is no longer approved to participate in the Program or ceases to be in "Good Standing". This means that any non-compliance, even by an affiliate, could trigger the loss of financial benefits and require the franchisee to pay the full fees as outlined in the Development Agreement and Qualifying Franchise Agreements. The franchisee should ensure that they and their affiliates are diligent in meeting all obligations under all agreements with Cicis to avoid jeopardizing their "Good Standing" and associated benefits.
In summary, maintaining "Good Standing" is crucial for Cicis franchisees, and this status is directly tied to the compliance of both the franchisee and their affiliates with all agreements with Cicis. The broad definition of "Good Standing" and Cicis's sole discretion in determining materiality highlight the importance of careful adherence to all contractual obligations.