How does the litigation described in Cicis's Item 3 potentially affect the franchisee's ability to operate their business in compliance with the Franchise Agreement, as referenced in Item 9?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
t 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 4 BANKRUPTCY
*U.S.
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Item 3 discloses litigation initiated by CiCi Enterprises, as the franchisor, against franchisees in 2024. These lawsuits include suits for recovery of outstanding payments and suits to enforce post-termination obligations of franchises. While Item 3 provides a list of lawsuits, it does not elaborate on how these specific lawsuits might impact a franchisee's ability to comply with the Franchise Agreement.
However, the existence of litigation, particularly suits for recovery of outstanding payments, suggests potential financial strain or disputes in the Cicis franchise system. If a franchisee is struggling financially, they may find it difficult to meet their obligations under the Franchise Agreement, such as maintaining the required standards, paying royalties, or participating in marketing programs. Similarly, suits to enforce post-termination obligations indicate potential disagreements over the terms of termination, which could affect a franchisee's ability to exit the system smoothly and without legal repercussions.
While the litigation itself might not directly prevent a franchisee from operating in compliance, it can create an environment of uncertainty and risk. Prospective franchisees should carefully review the details of the disclosed litigation and consider its potential implications for their own business. It would be prudent to inquire with Cicis about the nature of these disputes, the franchisor's perspective on the issues, and any steps being taken to mitigate similar problems in the future. Understanding the franchisor-franchisee relationship and the potential for conflict is a crucial part of the due diligence process.
Item 3 lists the cases, the court, and the filing date, but it does not provide details on the nature of the disputes or their current status. A prospective franchisee should seek clarification from Cicis regarding the specifics of these lawsuits and their potential impact on the franchise system. Understanding the context and resolution of these legal actions is essential for making an informed investment decision.