What happens if a Cicis franchisee becomes insolvent?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
our affiliates or guarantors) and us (or our affiliates) within the applicable cure period, if any. | | | h. "Cause" defined – non-curable defaults | Franchise Agreement – Section 15.A. | If you (or any of your owners, as applicable) (i) become insolvent; (ii) operate your Cicis Restaurant at a location we have not approved or sell any products or services authorized by us; (iii) fail to acquire the right to possess the location or to develop and open your Cicis Restaurant for business within the prescribed timeframe; (iv) fail to construct or remodel your Cicis Restaurant in accordance with the approved plans and specifications; (v) lose the right to possess the premises of your Cicis Restaurant; (vi) close your Cicis Restaurant for business or inform us of your intention to permanently cease operation of your Cicis Restaurant (except as permitted under the Reopen Incentive Addendum), (vii) fail to actively operate your Cicis Restaurant for 3 or more consecutive days, (viii) otherwise abandon or appear to have abandoned your rights; (ix) are convicted of or plead guilty to felony or any other crime or offense that we believe is reasonably likely to have an adverse effect on the System, the Marks, or our goodwill; (x) endanger or threaten public health or safety from the construction, maintenance, or operation of your Cicis Restaurant; (xi) fail to ensure that you and your required personnel complete our initial training; (xii) make or attempt an unauthorized transfer; (xiii) fail, refuse, or neglect promptly to pay (or cause your affiliates to pay) any monies owing to us, any of our affiliates, or the designated suppliers or to submit the financial or other information required by us; (xiv) are in default of any other agreement with us, our affiliate or our designated suppliers (including the Area Development Agreement); (xv) engage in Competing Businesses; (xvi) fail to comply with the confidentiality obligations; (xvii) falsify records; or (xviii) are in breach of your (or their) obligations. | | | Provision | Section in Franchise or other Agreement | Summary | |------------------------------------------------------------------|----------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | Area Development Agreement – Section 6.B. | If you (or any of your owners, as applicable) (i) have made or make any material misrepresentation or omission in the application materials; (ii) you fail to comply with the Development Schedule; (iii) make or attempt to make an unpermitted transfer; (iv) fail to comply with 3 or more of your or their obligations during any 12 consecutive month period or on 2 or more separate occasions within any 6 consecutive month period fail to comply with the same obligation under the Area Development Agreement; (v) become insolvent; (vi) fail to comply with anti-terrorism laws, ordinances, regulations and Executive Orders; (vii) fail to comply with any other provision of this Agreement and do not correct the failure within 30 days after we deliver written notice of the failure to you; (viii) or an affiliate fails to comply with any other agreement with us or our affiliate, including any Franchise Agreement, unless the failure is timely and completely cured within any cure period provided under the applicable agreement); or (ix) you (or any of your owners) engage in any conduct which, in our opinion, adversely affects the reputation of Cicis Restaurants or the goodwill associated with the Marks. | | i. Franchisee's obligations on termination/ non-renewal | Franchise Agreement – Section 16 | You must immediately (i) cease operating the applicable Cicis Restaurant; (ii) cease using the Marks and the Confidential Information; (iii) cancel any assumed name or equivalent registrations which contain any Mark; (iv) stop identifying yourself and your business as associated with the Cicis brand; (v) pay all outstanding amounts due to us and our affiliates, including enforcement cost; (vi) return the Manual and other Confidential Information to us without retaining a copy of it; and (vii) comply with the non-compete covenants. | | | Area Development Agreement – Section 7. | You and your owners must immediately (i) cease to exercise or attempt to exercise any of the rights granted under the Area Development Agreement; (ii) comply with all obligations that either expressly survive or by their nature are intended to survive the expiration or termination; and (iii) refrain from interfering or attempting to interfere with our or our affiliates' relationships with any vendors, franchisees or consultants or engage in any other activity which might injure the goodwill of the Marks or the System.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 45–53)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if a franchisee becomes insolvent, it constitutes a non-curable default under the Franchise Agreement. Specifically, Section 15.A of the Franchise Agreement states that franchisee insolvency is an event of default that cannot be cured. This means Cicis can terminate the franchise agreement immediately without providing an opportunity for the franchisee to rectify the situation.
Insolvency also triggers certain obligations for the franchisee upon termination. The franchisee must immediately cease operating the Cicis restaurant, discontinue using Cicis's trademarks and confidential information, cancel any assumed name registrations containing Cicis's marks, and stop representing themselves as associated with the Cicis brand. Additionally, the franchisee is required to pay all outstanding amounts owed to Cicis and its affiliates, including enforcement costs, and return the operations manual and other confidential information without retaining copies. The franchisee must also comply with non-compete covenants, preventing them from engaging in similar businesses.
Under the Area Development Agreement, franchisee insolvency is also listed as a cause for default. According to Section 6.B of the Area Development Agreement, if a franchisee becomes insolvent, Cicis has grounds to terminate the agreement. This section provides a 30-day cure period for some defaults, insolvency is not one of them. Upon termination or expiration of the Area Development Agreement, the franchisee and their owners must cease exercising any rights granted under the agreement, comply with obligations that survive termination, and refrain from interfering with Cicis's relationships with vendors, franchisees, or consultants, or engaging in activities that could harm the goodwill associated with the Cicis brand.