How is Cicis recognizing the income from the 2018 incentive payments from vendors?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
n 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.
In 2018, two vendors paid the former franchisor, CiCi Enterprises, LP, incentive payments of $9,450,000 in exchange for the commitment to purchase a set volume of their product. The Company is recognizing the income as earned, based on the volume of product purchased by the system. The current portion of deferred revenue was approximately $435,000 and $728,000 at December 31, 2024 and 2023, respectively, and is recorded within accrued expenses and other current liabilities on the combined balance sheets. The long-term portion of deferred revenue totaled approximately $619,000 and $1,006,000 at December 31, 2024 and 2023, respectively, and is recorded within deferred initial beverage fund on the combined balance sheets. The Company recognized approximately $680,000 and $759,000 of revenue in the years ended December 31, 2024 and 2023, res
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 received $9,450,000 in incentive payments from two vendors in 2018. These payments were in exchange for a commitment to purchase a set volume of the vendors' products. Cicis recognizes this income as it is earned, based on the volume of product purchased by the Cicis system. This means that the revenue is not recognized all at once but is spread out over time as franchisees and company-owned restaurants buy the vendors' products.
The deferred revenue, which represents the portion of the incentive payments that has not yet been recognized as income, is split into current and long-term portions on Cicis's combined balance sheets. At December 31, 2024, the current portion of deferred revenue was approximately $435,000, recorded within accrued expenses and other current liabilities. The long-term portion was approximately $619,000, recorded within deferred initial beverage fund. These figures indicate that Cicis still had a substantial amount of the initial $9,450,000 to recognize as of the end of 2024.
For the years ended December 31, 2024 and 2023, Cicis recognized approximately $680,000 and $759,000 of revenue, respectively, from these incentive payments. This income is recorded as incentive income from vendors on the combined statements of income. Notably, Cicis did not contribute any of these incentive payments to the marketing fund in either 2024 or 2023. As a prospective franchisee, it's important to understand how these vendor incentives impact Cicis's overall financial performance and whether these incentives are expected to continue in the future, as they can affect the company's profitability and potentially influence pricing or marketing strategies.