How does Cicis record the liability for gift cards?
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 records a liability during the period in which a gift card is sold. When these gift cards are redeemed, Cicis reimburses the restaurant for the gift card value and subsequently removes the corresponding liability from its books.
Furthermore, Cicis accounts for what is known as "breakage." Breakage refers to the portion of gift card balances that are not expected to be redeemed, provided that the gift cards are not subject to escheatment laws (which require companies to turn over unclaimed property to the state). This breakage amount is recognized as revenue within other general and administrative expenses. The recognition of breakage revenue is determined by the historical redemption patterns observed for the gift cards.
In addition to these accounting practices, Cicis also incurs expenses related to operating its gift card program. These expenses include fees on gift cards sold through third-party retailers, and these fees are recognized as they are incurred.