What is the impact on a Cicis franchisee's royalty fee if they or their affiliates are not in Good Standing?
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' 2025 Franchise Disclosure Document, a franchisee's royalty fees can be impacted if they or their affiliates are not in good standing. For franchisees participating in the Underperforming Incentive Program, the royalty fee is reduced to 3% of Net Sales for the first year and 4% for the second year of operation, provided they remain in good standing and continue to be approved for the Program. However, if at any point before the second anniversary of the Opening Date, the franchisee ceases to be approved for the Program or is no longer in good standing, these royalty fee reductions become void. In such cases, the royalty fee will revert to the rate specified in Section 4.C of the Franchise Agreement, without regard to the reduced rates offered under the Program.
Similarly, for franchisees who are re-opening a previously closed Cicis restaurant, a modification of royalty fees is available if the franchisee and their affiliates are in good standing. For Net Sales generated through the first anniversary of the agreement's effective date, the royalty fee is 3%, and for Net Sales generated from the day following the first anniversary through the second anniversary, the royalty fee is 4%. However, if the franchisee ceases to be in good standing before the second anniversary, these reduced royalty fees become null and void, and the royalty fee will be calculated as described in the Franchise Agreement, without considering the reduced rates.
'Good Standing' is defined by Cicis as compliance with all material obligations under the relevant agreements, including the Development Agreement, Franchise Agreements, and any other agreements between the franchisee, their affiliates, and Cicis. Cicis retains sole discretion to determine whether particular obligations are 'material' for the purpose of determining good standing, and their decision is final. This means that maintaining good standing is crucial for Cicis franchisees to benefit from reduced royalty fees, and any failure to comply with the material obligations can result in the loss of these financial incentives.