How does Cicis recognize fees on gift cards sold through third-party retailers?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Gift cards: The Company records a liability in the period in which a gift card is sold. As gift cards are redeemed, the Company reimburses the restaurant for the gift card value and derecognizes the related liability. When a gift card is not subject to escheatment, and it is probable that a portion of a gift card will not be redeemed, this amount is considered breakage and recognized within other general and administrative expenses. Breakage is recognized consistent with the historic redemption patterns of the associated gift cards. In addition, the Company incurs various expenses in operating the gift card program, including fees on gift cards that are sold through third-party retailers. These fees are recognized as incurred.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the company incurs expenses related to operating its gift card program, specifically fees on gift cards sold through third-party retailers. Cicis recognizes these fees as they are incurred. This means that the expense is recorded in the accounting period when the fee obligation arises, rather than when the gift card is sold or redeemed.
For a prospective Cicis franchisee, this accounting practice has implications for understanding the financial statements. The franchisee should be aware that these third-party gift card fees will be reflected as an expense in the period they are incurred, impacting the overall profitability for that period. This is a standard accounting practice, ensuring that expenses are matched with the revenues they help generate.
It's important for franchisees to understand all the costs associated with the gift card program, including these third-party fees, to accurately assess the financial performance of their Cicis franchise. Franchisees should inquire about the typical range of these fees and how they might fluctuate based on sales volume or agreements with different third-party retailers.