How does Cicis handle continuing royalties from franchisees?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
the combined balance sheets.
Upfront fees paid for development rights are apportioned to each franchised restaurant and recognized over the contractual term of the franchise agreement once each restaurant is opened.
Continuing royalties are calculated as a percentage of franchise restaurant sales that are related entirely to our performance obligation under the franchise agreement. These royalties are considered variable consideration but, because they relate to a license of intellectual property, they are not included in the transaction price. Instead, royalty revenue is recognized as franchised restaurant sales occur. Advertising contributions received from the franchisees are recorded as a component of marketing fees in the combined statements of income.
Technology and support fees of $100 are charged monthly and relate entirely to the Company's performance obligation under the franchise agreement and are recognized monthly as they are charged.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, continuing royalties are calculated as a percentage of franchise restaurant sales. These royalties are directly tied to Cicis's performance obligations under the franchise agreement. The document specifies that these royalties are considered variable consideration due to their nature as a license of intellectual property. As such, they are not included in the initial transaction price. Instead, Cicis recognizes royalty revenue as franchised restaurant sales occur.
In addition to royalties, Cicis franchisees also contribute to the marketing fund. These advertising contributions are recorded as a component of franchise royalties and fees within the combined statements of income. This means that a portion of what franchisees pay as royalties is allocated to marketing efforts, which Cicis manages. The marketing contributions are generally the greater of a set amount or approximately 5% of sales per month, as dictated by the individual franchise agreement.
For a prospective Cicis franchisee, this means that royalty payments will fluctuate based on sales performance. A portion of these payments will be directed towards marketing initiatives, which are managed by Cicis. It is important for franchisees to understand how these marketing funds are used and to review the specific terms outlined in their franchise agreement regarding royalty percentages and marketing contributions. Franchisees also pay a $100 monthly technology and support fee.