What is the impact of a Cicis franchisee's owner being in default of the Franchise Agreement on the franchisee's 'Good Standing'?

According to Cicis's 2025 Franchise Disclosure Document, a franchisee's 'Good Standing' is directly impacted if the franchisee, their owners, or their affiliates are in default of the Franchise Agreement or any other agreement with Cicis or its affiliates. 'Good Standing' requires that these parties are not in default and have substantially and timely complied with all terms and conditions, including the timely satisfaction of all monetary obligations.

If a franchisee or their owners are in default, they are not considered in 'Good Standing'. This can lead to several negative consequences. For example, Cicis may revoke reductions in the initial franchise fee or development fee, requiring the franchisee to pay the full amount. Reduced royalty fees may also be nullified, increasing the franchisee's financial obligations. Cicis retains sole discretion to determine whether particular obligations are 'material' for determining good standing, and their decision is final.

Maintaining 'Good Standing' is crucial for Cicis franchisees because it affects various benefits and obligations outlined in the Franchise Agreement. Failure to maintain 'Good Standing' can result in increased fees, loss of incentives, and potential modification or termination of territorial rights. Therefore, franchisees must ensure strict compliance with all agreements to avoid jeopardizing their 'Good Standing' and the associated benefits.