How does Cicis's Item 8, regarding standards and specifications, affect the franchisee's ability to control their costs as outlined in Item 7?

According to Cicis's 2025 Franchise Disclosure Document, Item 8, concerning restrictions on sources of products and services, significantly impacts a franchisee's ability to control costs, as detailed in Item 7, which covers the estimated initial investment. Cicis mandates that franchisees adhere strictly to System Standards, utilizing only approved Operating Assets for their restaurants. To ensure consistency and quality across all locations, Cicis may approve or designate specific vendors and suppliers for these Operating Assets.

This requirement means franchisees must purchase a substantial portion of their goods and services from Cicis's designated suppliers. The FDD states that these required purchases constitute a significant portion of the franchisee's total costs, estimating 90% to 95% of the total cost incurred in establishing and operating a Cicis restaurant. This limited control over sourcing directly affects the franchisee's ability to negotiate prices or find potentially more cost-effective alternatives.

While Cicis aims to leverage volume purchasing power through approved suppliers, franchisees bear the risk of potential cost increases if these suppliers are not the most competitive in the market. Franchisees are also required to participate in gift and loyalty card programs managed by Cicis's affiliate, CiCi Services, adding another layer of mandatory expenditure. Therefore, prospective franchisees should carefully evaluate the list of approved suppliers and understand the pricing structure to assess the potential impact on their overall profitability and cost management.