What is the relationship between the bankruptcy filings described in Cicis's Item 4 and the potential for non-compliance fees as outlined in Item 6?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
U.S. Bankruptcy Court, Northern District of Texas (Dallas) Bankruptcy Petition: 21-30146-sgj11: On January 25, 2021, some of our current and former affiliates, namely, Cici's Holdings, Inc., Awesome Acquisition Company, CAC, CiCi Enterprises, CiCi GP, LLC, CiCi Services, JMC GP, LLC, JMC Restaurant Distribution, LP, and Pizza Parent, LLC, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. All the debtors share our principal business address. On March 3, 2021, the court approved the debtors' and creditors' pre-packaged Plan of Reorganization, and March 10, 2021, CiCi Enterprises emerged from bankruptcy. On July 2, 2021, the bankruptcy cases against all the petitioners except Pizza Parent, LLC were closed. On August 30, 2024, the case was closed against Pizza Parent, LLC.
Other than this action, no bankruptcy is required to be disclosed in this Item.
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Item 4 discloses a past bankruptcy filing by Cicis's affiliates, while Item 6 outlines the non-compliance fees. The bankruptcy filing itself, as described in Item 4, can trigger additional remedies as described in Item 23, which could include termination of the franchise agreement. Item 6 details that a non-compliance fee of $250 may be charged for each violation of the Franchise Agreement, and the royalty fee will increase by one percentage point until all deficiencies are corrected.
Specifically, Item 23 outlines conditions under which Cicis can pursue additional remedies. One such condition is if the franchisee or any of their owners files a petition in bankruptcy, or a petition in bankruptcy is filed against them. This is directly related to the bankruptcy information disclosed in Item 4. If a franchisee were to enter bankruptcy, Cicis could pursue additional remedies as a result.
Item 22 further clarifies that the royalty fee charged is based on the assumption that the franchisee will comply with their obligations. If the franchisee does not comply with their obligations, Cicis will incur additional costs and expenses. Therefore, if Cicis determines that the franchisee is not in compliance with their obligations under the agreement, they may charge a non-compliance fee of $250 for each violation, and the royalty fee will be increased by one percentage point until Cicis determines that all deficiencies have been cured and the franchisee is compliant with all terms of the agreement. Payment of the non-compliance fee is not a cure of the non-compliance that triggered its payment.
In summary, while the historical bankruptcy of Cicis's affiliates (Item 4) does not directly cause non-compliance fees for franchisees, a franchisee's own bankruptcy filing (or other failures to comply with the Franchise Agreement) can trigger non-compliance fees and other penalties as detailed in Items 6 and 23. A prospective franchisee should understand these potential consequences of non-compliance, including bankruptcy, and how they could impact their financial obligations to Cicis.