How does Cicis record gift card sales?
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, when Cicis sells a gift card, the company records it as a liability during that period. This means Cicis acknowledges that it owes the value of the gift card to the holder. When the gift card is used at a Cicis restaurant, Cicis reimburses the restaurant for the gift card value and reduces the liability accordingly.
If a gift card is not subject to escheatment (meaning it doesn't revert to the state after a period of inactivity), and Cicis determines that it's likely a portion of the gift card will never be redeemed, this unredeemed amount is considered "breakage." Cicis recognizes this breakage as income within other general and administrative expenses. The recognition of breakage income is based on the historical redemption patterns of similar gift cards.
Cicis also incurs expenses related to operating the gift card program, such as fees for gift cards sold through third-party retailers. These fees are recognized as expenses when they are incurred. This accounting treatment provides transparency into how Cicis manages its gift card program and recognizes revenue and expenses associated with it.