Is Cicis obligated to compensate the franchisee if it exercises rights not expressly granted in the Area Development Agreement?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding the foregoing, we reserve for ourselves and our affiliates all rights not expressly granted to you in the Area Development Agreement without any obligation to compensate you, including the right to do and to authorize others to do the following: (i) use and license others to use the System and any elements of the System in any business located or operated anywhere in the world; (ii) own and operate, and license others to own and operate, or otherwise become associated with, any business, anywhere in the world, that uses or is identified by any names, symbols or trademarks, except, as described above, in a restaurant that is located in the Development Area and is identified by the Marks; (iii) acquire, be acquired by, merge, affiliate with or engage in any transaction with other businesses (whether competitive or not) located anywhere and, even if such businesses are located in the Development Area, (a) convert the other businesses to the Cicis brand, (b) allow such other businesses to operate as part of the System, whether or not converted to the Cicis, and/or (c) permit the other businesses to continue to operate under another name; (iv) solicit customers, advertise, and authorize others to advertise, and promote sales of and from Restaurants, and fill customer orders by providing catering and delivery services anywhere, including within the Development Area; and (v) market and sell, and grant to others the right to market and sell, within and outside of the Development Area, products and services authorized for sale at Restaurants through alternative channels of distribution such as Internet, catalog sales, telemarketing, grocery stores, kiosks, mail order, or through Cicis To Go) using the Marks or other trademarks and commercial symbols.
Source: Item 12 — TERRITORY (FDD pages 38–40)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Cicis retains all rights not expressly granted to the franchisee in the Area Development Agreement without any obligation to compensate the franchisee. This means Cicis can use and license the Cicis system and its elements in any business worldwide, own, operate, or be associated with any business using Cicis's trademarks anywhere, and engage in transactions with other businesses, even within the Development Area, without compensating the franchisee. Cicis can also solicit customers, advertise, promote sales, and fulfill orders anywhere, including within the Development Area. Additionally, Cicis can market and sell products and services through alternative channels like the Internet or grocery stores, using Cicis's trademarks, within or outside the Development Area.
This lack of obligation to compensate franchisees for exercising reserved rights has significant implications for prospective Cicis franchisees. Even if Cicis's actions negatively impact a franchisee's business within their Development Area, the franchisee has no recourse for compensation. This could include Cicis opening competing locations through alternative channels or partnering with other businesses that draw customers away from the franchisee's restaurant. The franchisee's profitability and market share could be affected by Cicis's decisions, and the franchisee would bear the financial burden without any compensation from Cicis.
In the franchise industry, it is common for franchisors to reserve certain rights to maintain control over their brand and system. However, the extent to which Cicis can exercise these rights without compensating franchisees is noteworthy. Prospective franchisees should carefully consider the potential impact of these reserved rights on their business and negotiate for more favorable terms if possible. Understanding the scope of Cicis's reserved rights is crucial for assessing the risks and opportunities associated with investing in a Cicis franchise.
Prospective franchisees should seek clarification from Cicis regarding specific scenarios where these reserved rights might be exercised and how they could affect the franchisee's business. It is important to understand the potential for competition from other channels and businesses and to assess the likelihood of Cicis taking actions that could negatively impact the franchisee's revenue and profitability. A clear understanding of these risks is essential for making an informed investment decision.