What is the impact of a Cicis franchisee's affiliate failing to substantially comply with the terms of the Franchise Agreement on the franchisee's 'Good Standing'?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
-
- Definitions. As used in this Amendment, "Good Standing" means that you, your owners, and your affiliates (if any) are not in default of the Franchise Agreement or any other agreement with us or our affiliates; and that you, your owners, and your affiliates have substantially and timely complied with all of the terms and conditions of all such agreements, including the timely satisfaction of all monetary obligations owed to us or our affiliates.
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 impacted if the franchisee's affiliates fail to comply with the terms of the Franchise Agreement. Specifically, if a Cicis franchisee's affiliate does not substantially comply with all the terms and conditions of agreements with Cicis or its affiliates, including timely satisfaction of monetary obligations, the franchisee will not be considered in "Good Standing".
This "Good Standing" status is important because it affects several benefits and obligations. For instance, a franchisee in good standing may have the option to terminate the Franchise Agreement early under certain conditions. Conversely, failure to maintain good standing can lead to the revocation of certain benefits, such as a reduction in the initial franchise fee or development fee. Cicis retains the sole discretion to determine whether obligations are "material" for determining good standing, making their decision final.
For a prospective Cicis franchisee, this means that the actions of their affiliates can directly impact their own franchise agreement. It is crucial to ensure that all affiliated entities are in full compliance with their agreements with Cicis to avoid jeopardizing the franchisee's standing and associated benefits. This includes not only adhering to operational standards but also ensuring all financial obligations are met promptly. The broad definition of "Good Standing" and Cicis's ultimate authority in determining materiality underscores the importance of maintaining a strong and compliant relationship across all related business entities.