How are Cicis marketing contributions and expenses tracked?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
unts payable—marketing fund, restricted | | (275,741) | (206,861) | | Accrued expenses and other current liabilities | | (357,548) | (175,560) | | Marketing fund liabilities, restricted | | (1,513,594) | (1,937,309) |
Marketing fund contributions are included in revenue in the accompanying combined statements of income, and marketing fund expenses are included in marketing general and administrative costs in the accompanying combined statements of income.
Notes to Combined Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
Cash flows of the marketing fund are included in the combined statements of cash flows, but are restricted. Under the franchise agreements, contributions to the marketing fund are restricted to advertising, public relations, merchandising, similar activities and administrative expenses to increase sales and further enhance the public reputation of the CiCi's Pizza brand. The aforementioned administrative expenses may also include personnel expenses and allocated costs incurred by the Company which are directly associated with administering the marketing fund, as outlined in the provisions of the franchise agreements. The Company received $27,257,964 and $26,342,984 in marketing fund contributions in the years ended December 31, 2024 and 2023, respectively, which includes beverage rebates. The Company incurred marketing fund expenditures of $27,681,679 and $24,935,940 in the years ended December 31, 2024 and 2023, respectively.
Marketing costs are expensed when advertisements are run. Production costs for advertisements are generally expensed when incurred, unless production costs are incurred and paid in the current year for the next year's advertising campaign. In those instances, production costs are recorded as prepaid expenses and then expensed in the subsequent fiscal year.
Consideration from vendors: The Company has entered into beverage supply agreements with certain major vendors. Pursuant to the terms of these arrangements, consideration is provided to the Company for the benefit of the Marketing Fund from the vendors, based upon the dollar volume of purchases for company-operated restaurants and franchised restaurants. In accordance with U.S. GAAP governing consideration received from vendors, these amounts are recognized as earned throughout the year and are classified in the combined statements of income within revenue with an offset included
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, marketing contributions and expenses are tracked separately from other activities. Franchisees and corporate-owned restaurants generally contribute the greater of a set amount (as specified in their individual franchise agreement) or approximately 5% of monthly sales as a marketing contribution. These contributions are recorded as cash and cash equivalents—marketing fund and accounts receivable—marketing fund on the combined balance sheets. Any unspent funds at the end of the fiscal year are carried over to the next year and shown as a deferred liability. If marketing expenses exceed contributions, the excess is recognized as an expense within advertising costs on the combined statements of income.
Marketing fund contributions are included as revenue in the combined statements of income, while marketing fund expenses are categorized under marketing general and administrative costs in the same statements. The cash flows of the marketing fund are included in the combined statements of cash flows but are restricted for specific uses. These uses, as outlined in the franchise agreements, are limited to advertising, public relations, merchandising, similar activities, and administrative expenses aimed at increasing sales and enhancing the public reputation of the Cicis brand. Administrative expenses can also include personnel expenses and allocated costs incurred by the company directly associated with managing the marketing fund.
For example, in the years ending December 31, 2024, and 2023, Cicis received $27,257,964 and $26,342,984 in marketing fund contributions, respectively, including beverage rebates. During those same years, marketing fund expenditures amounted to $27,681,679 and $24,935,940, respectively. This detailed tracking and reporting provide transparency regarding how marketing funds are collected, managed, and spent, which is crucial for franchisees to understand the value and impact of their contributions to the Cicis brand's marketing efforts.
Cicis also has agreements with major beverage vendors where consideration is provided to the company for the benefit of the Marketing Fund based on the dollar volume of purchases for company-operated and franchised restaurants. These amounts are recognized as earned throughout the year and are classified in the combined statements of income within revenue with an offset included in marketing general and administrative costs representing contributions to the marketing fund. The company received rebates amounting to $7,907,088 and $8,874,070 in the years ended December 31, 2024 and 2023, respectively.