Are insurance proceeds for business interruption included in the calculation of 'Net Sales' for a Cicis restaurant?

According to Cicis's 2025 Franchise Disclosure Document, the definition of "Net Sales" includes all insurance proceeds received by a franchisee to compensate for lost revenue due to business interruption. This means that if a Cicis restaurant experiences a casualty or other event covered by business interruption insurance, the insurance money received to replace lost revenue will be factored into the restaurant's Net Sales calculation.

This is significant because Net Sales are used to calculate various fees and contributions that a Cicis franchisee must pay, such as royalty fees and marketing contributions. The franchisee contributes 5% of Net Sales to the Fund. Additionally, franchisees must spend at least 1% of Net Sales on local marketing programs. Therefore, an increase in Net Sales due to insurance proceeds will result in higher royalty fees and marketing contributions for the franchisee.

Including business interruption insurance proceeds in Net Sales is not uncommon in franchising, as it ensures that the franchisor receives its share of revenue even when a restaurant experiences a temporary disruption. However, franchisees should be aware of this provision and factor it into their financial planning, especially when considering insurance coverage and potential business disruptions. Franchisees should consult with their insurance provider and financial advisor to fully understand the implications of this policy.