What is the impact of failing to remain in Good Standing on the modified royalty fees for a Cicis franchise?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Provided you remain a participant in the Program (as we determine in our sole discretion) and are in good standing, for Net Sales generated through the 1st anniversary of the Opening Date of the Restaurant, the Royalty Fee will be calculated at 3% of those Net Sales; and for Net Sales generated from the day following the 1st anniversary of the Opening Date through the 2nd anniversary of the Opening Date, the Royalty Fee will be calculated at 4% of those Net Sales. If, at any time prior to the 2nd anniversary of the Opening Date, you cease to be either approved to participate in the Program or in good standing, the foregoing Royalty Fee reductions will automatically, and without any further notice, be null and void, and the Royalty Fee will thereafter be calculated as described in Section 4.C without regard to this paragraph.
Source: Item 23 — RECEIPTS (FDD pages 65–263)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, maintaining 'good standing' is crucial for franchisees to benefit from reduced royalty fees. Specifically, for Net Sales generated through the first and second anniversaries of the restaurant's opening date, the royalty fee is calculated at a reduced rate of 3% for the first year and 4% for the second year, provided the franchisee remains in good standing and participates in the Program.
However, if a Cicis franchisee ceases to be in good standing or is no longer approved to participate in the Program at any time before the second anniversary of the opening date, these royalty fee reductions become null and void automatically, without any further notice. Consequently, the royalty fee will then be calculated as described in Section 4.C of the Franchise Agreement, which means the franchisee will lose the benefit of the reduced royalty rates.
In essence, failure to maintain good standing results in Cicis franchisees paying the standard, higher royalty fees as outlined in their Franchise Agreement, which would negatively impact their profitability. Good standing, as defined in the document, generally means compliance with all material obligations under the franchise agreement and other agreements with Cicis.