How does Cicis recognize initial and renewal franchise fees as revenue?

According to Cicis's 2025 Franchise Disclosure Document, initial and renewal franchise fees are recognized as revenue on a straight-line basis. This revenue recognition begins when the restaurant opens and extends over the term of the franchise agreement, which ranges from five to ten years. This means that Cicis does not recognize the entire franchise fee as revenue immediately upon receipt but spreads it out evenly over the life of the franchise agreement.

For a prospective Cicis franchisee, this accounting practice means that Cicis recognizes the initial and renewal franchise fees gradually over the term of the agreement. Any payments received before the restaurant opens are recorded as deferred revenue on Cicis's combined balance sheets. This deferred revenue is then recognized as actual revenue as the franchise agreement progresses.

This approach is a common practice in the franchise industry, as it aligns the revenue recognition with the ongoing services and support that Cicis provides to the franchisee throughout the term of the agreement. It also reflects the fact that the value of the franchise is realized over time, rather than all at once at the beginning of the relationship. This method ensures that Cicis's financial statements accurately reflect the economic substance of the franchise agreement.