What is the impact of the litigation described in Cicis's Item 3 on the franchisee's obligations outlined in Item 9?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 3: LITIGATION]
Litigation Against Franchisees in the Last Fiscal Year
In 2024, CiCi Enterprises, as the franchisor under Franchise Agreements for Cicis Restaurants, to which it was a party prior to when we commenced offering franchises, initiated the following lawsuits against the franchisees:
Suits for Recovery of Outstanding Payments:
CiCi Enterprises, LP v. Matison Bixby and Sarah Bixby; Case No. DC-24-07340; filed on May 20, 2024 before the 162nd District Court, Dallas County, Texas.
CiCi Enterprises, LP v. Tunde Bankole and Mopelola Bankole; Case No. DC-24-07332; filed on May 20, 2024 before the 193rd District Court, Dallas County, Texas.
Suits to Enforce Post-Termination Obligations of Franchises:
CiCi Enterprises, LP and Yes Caps, LLC v. Pies For You, LLC, Stacy Scherr, Bernard Scherr and Deorios Pizza, LLC, Case No. 3:24-cv-02244-D, filed on September 2, 2024 before the United States District Court, Northern District of Texas.
Other than these actions, no litigation is required to be disclosed in this Item. [Item 9: FRANCHISEE'S OBLIGATIONS]
| Obligation | Section in Agreement | Disclosure Document item |
|---|---|---|
| a. | Franchise Agreement – | Items 8 and 11 |
| Site selection and | Section 1.B. | |
| acquisition/lease | Area Development Agreement – Section 2.D. | |
| b. | Franchise Agreement – | Items 5, 6, 7, 8, 9, |
| Pre-opening | Section 6 | |
| purchases/leases | Area Development Agreement – N/A | and 11 |
| c. Site development and other pre-opening | Franchise Agreement - Sections 2, 5.D., 5.E., and 5.F. | Items 7, 8, and 11 |
| requirements | Area Development Agreement – N/A | |
| Obligation | Section in Agreement | Disclosure Document item |
| -------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- |
| d. | Franchise Agreement - | Items 6 and 11 |
| Initial and ongoing | Sections 4.B. and | |
| training | 5.F. Area Development Agreement – N/A | |
| e. | Franchise Agreement - | Items 7 and 11 |
| Opening | Section 2.C. Area Development Agreement – Section 2 | |
| f. Fees | Franchise Agreement – Section 4 and Reopen Incentive Addendum, Underperforming Incentive Addendum, Development Incentive Addendum, and Veteran's Incentive Addendum Area Development Agreement – Section 3, Development Incentive Addendum, and Veteran's Incentive Addendum | Items 5, 6, 7, 8, and 11 |
| g. | Franchise Agreement - | Items 8, 11, 14, and |
| Compliance with | Section 6 | |
| standards and policies/Operating Manual | Area Development Agreement – N/A | 16 |
| h. | Franchise Agreement - | Items 11, 13, and |
| Trademarks and | Section 8 | 14 |
| proprietary | Area Development Agreement – | |
| information | N/A | |
| i. | Franchise Agreement - | Items 8 and 16 |
| Restrictions on | Sections 6.D, 6.E., | |
| products/services | and 6.F. | |
| offered | Area Development Agreement – N/A | |
| j. | Franchise Agreement - | Item 8 |
| Warranty and | Section 6.D. and | |
| customer service | 6.F. | |
| requirements | Area Development Agreement – N/A | |
| k. Territorial development and sales | Franchise Agreement – N/A | Item 12 |
| quotas | Area Development Agreement - Section 2 | |
| l. | Franchise Agreement – | Item 8 |
| Ongoing | Section 6 | |
| product/service | Area Development Agreement – | |
| purchases | N/A | |
| m. Maintenance, appearance and remodeling requirements | Franchise Agreement - Sections 2, 6.A. and 6.B., and Reopen Incentive Addendum Area Development Agreement – N/A | Items 8, 11, 16, and 17 |
| n. | Franchise Agreement – | Items 7 and 8 |
| Insurance | Section 11 | |
| Obligation | Section in Agreement | Disclosure Document item |
| ------------------------------------------- | -------------------------------------------------------------------- | ----------------------------- |
| Area Development Agreement – N/A | ||
| o. | Franchise Agreement – | Items 6, 8, and 11 |
| Advertising | Section 7 Area Development Agreement – N/A | |
| p. Indemnification | Franchise Agreement – Section 14 Area Development Agreement – Section 8.B. | Item 6 |
| q. Owner's participation/managem | Franchise Agreement – Sections 5.C., 5.D. and 5.E. | Items 1, 11, and 15 |
| ent/staffing | Area Development Agreement – Section 1.B. | |
| r. | Franchise Agreement – | Item 6 |
| Records and reports | Section 10 Area Development Agreement – Section 4 | |
| s. | Franchise Agreement –Sections 1.B., 2.B., | Items 6, 8, and 11 |
| Inspections and audits | 6.F., and 10.C. Area Development Agreement – N/A | |
| t. | Franchise Agreement – | Items 6 and 17 |
| Transfer | Section 13 Area Development Agreement – Section 5 | |
| u. Renewal (or Extension of Rights) | Franchise Agreement – Section 3.B. of Franchise Agreement Area Development Agreement – N/A | Items 6 and 17 |
| v. | Franchise Agreement - | Items 6 and 17 |
| Post-termination | Section 16 | |
| obligations | Area Development Agreement – Section 7 | |
| w. | Franchise Agreement - | Item 17 |
| Noncompetition | Sections 9.C. and | |
| covenants | 16.H. Area Development Agreement -N/A | |
| x. Dispute resolution | Franchise Agreement - Section 17.E., 17.F., and 17.G. Area Development Agreement – Section 9 | Items 6 and 17 |
| y. | Franchise Agreement – | |
| Guarantee | Attachment B | |
| Obligation | Section in Agreement | Disclosure Document item |
| ------------ | ------------------------------ | ----------------------------- |
| Area Development Agreement – | Special Risk | |
| sheet, | ||
| Attachment B | Items 1 and 15 |
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Item 3 discloses litigation initiated by CiCi Enterprises against franchisees in 2024. These lawsuits include suits for recovery of outstanding payments and suits to enforce post-termination obligations of franchises. However, Item 3 does not explicitly state how this litigation directly impacts a franchisee's obligations as outlined in Item 9. Item 9 generally lists the franchisee's obligations under the Franchise Agreement, such as site selection, pre-opening purchases, site development, training, fees, compliance with standards, trademarks, and other operational requirements.
While Item 3 lists legal actions against specific franchisees, it doesn't automatically change the obligations detailed in Item 9 for all franchisees. However, the existence of such litigation suggests potential areas of concern for prospective franchisees. For instance, suits for recovery of outstanding payments highlight the importance of meeting financial obligations to Cicis, as detailed in Item 9 under 'Fees'. Similarly, suits to enforce post-termination obligations emphasize the significance of adhering to the terms of the Franchise Agreement even after termination, as covered in Item 9 under 'Post-termination obligations'.
Therefore, the litigation described in Item 3 serves as a reminder of the potential consequences of failing to meet the obligations outlined in Item 9. It underscores the need for franchisees to fully understand and comply with all contractual requirements to avoid legal disputes with Cicis. A prospective franchisee should carefully review the Franchise Agreement and seek legal counsel to fully understand their rights and obligations. They should also inquire with the franchisor about the specific circumstances that led to the lawsuits mentioned in Item 3 to better assess the risks involved in operating a Cicis franchise.