What is the relationship between the litigation described in Cicis's Item 3 and the bankruptcy filings described in Item 4?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 3: LITIGATION]
Litigation Against Franchisees in the Last Fiscal Year
In 2024, CiCi Enterprises, as the franchisor under Franchise Agreements for Cicis Restaurants, to which it was a party prior to when we commenced offering franchises, initiated the following lawsuits against the franchisees:
Suits for Recovery of Outstanding Payments:
CiCi Enterprises, LP v. Matison Bixby and Sarah Bixby; Case No. DC-24-07340; filed on May 20, 2024 before the 162nd District Court, Dallas County, Texas.
CiCi Enterprises, LP v. Tunde Bankole and Mopelola Bankole; Case No. DC-24-07332; filed on May 20, 2024 before the 193rd District Court, Dallas County, Texas.
Suits to Enforce Post-Termination Obligations of Franchises:
CiCi Enterprises, LP and Yes Caps, LLC v. Pies For You, LLC, Stacy Scherr, Bernard Scherr and Deorios Pizza, LLC, Case No. 3:24-cv-02244-D, filed on September 2, 2024 before the United States District Court, Northern District of Texas.
Other than these actions, no litigation is required to be disclosed in this Item. [Item 4: BANKRUPTCY]
ITEM 4 BANKRUPTCY
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.
[Item 3: Litigation]
ITEM 3 LITIGATION
*GCP Cici's, LLC v.
Sunil D.
Dharod, as Trustee of The Sunil D.
Dharod Revocable Trust, SSCP Management, LLC, and OnWin, LLC*, Case No.
DC-24-01196, District Court of Dallas County, Texas, filed January 23, 2024 (the "Gala Action"), and *Smiley Slice, LLC and Sunil D.
Dharod v.
Anand Gala*, Case No.
DC-24-03968, District Court of Dallas County, Texas, filed March 12, 2024 (the "Dharod Action").
These are related actions that present disputes by family members, Anand Gala ("Gala") and Sunil Dharod ("Dharod"), arising out of their acquisition and co-ownership of the Cicis Pizza brand.
The complaints allege that, following the acquisition of the Cicis Pizza brand, 30% of the ownership of Smiley Slice, the post-acquisition franchisor of the Cicis brand, was held indirectly and controlled by Gala, 70% was held indirectly and controlled by Dharod, and Gala was appointed as Smiley Slice's chief executive officer.
The plaintiff in the Gala Action alleges that Gala was not paid for his services as Smiley Slice's chief executive officer and that Dharod used his majority position to, among other things, amend Smiley Slice's operating agreement to require payment by Smiley Slice of an excessive management fee that diluted the value of Smiley Slice and to restrict the members' rights to invest in other restaurant opportunities independently of each other.
The plaintiff seeks unspecified damages, injunctive relief and costs based on claims of breach of contract, breach of fiduciary duty, fraud, and civil conspiracy.
On March 11, 2024, the defendants in the Gala Action denied the plaintiff's allegations, and Dharod asserted a counterclaim alleging that the plaintiff fraudulently misrepresented that it would present other restaurant investment opportunities to Dharod for potential participation.
Dharod seeks actual, consequential and exemplary damages and reimbursement of costs.
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Item 3 and Item 4 describe separate legal events. Item 3 details litigation, including suits against franchisees for outstanding payments and to enforce post-termination obligations, as well as disputes between family members related to the acquisition and co-ownership of the Cicis brand. These lawsuits occurred in 2024 and involve various allegations such as breach of contract, breach of fiduciary duty, fraud, and civil conspiracy. Item 4, on the other hand, discusses a bankruptcy filing in 2021 by Cicis's affiliates, including CiCi Enterprises. The court approved a Plan of Reorganization, and CiCi Enterprises emerged from bankruptcy in March 2021. The bankruptcy case was closed against Pizza Parent, LLC, in August 2024.
There is no direct connection established between the litigation described in Item 3 and the bankruptcy filing in Item 4. The litigation primarily concerns disputes with franchisees and internal ownership conflicts, while the bankruptcy relates to a restructuring of Cicis's affiliated entities. The suits against franchisees are for recovery of outstanding payments and enforcement of obligations, suggesting potential financial strain or contractual disagreements with individual franchise operators. The family disputes over brand ownership highlight internal conflicts within the Cicis organization.
For a prospective franchisee, this distinction is important. The litigation indicates potential challenges in franchisee relationships and internal management, while the bankruptcy reflects a past restructuring of the company's financial obligations. While the bankruptcy was resolved, the ongoing litigation could signal areas of concern regarding franchisee compliance and internal stability. A potential franchisee should investigate the nature and resolution of these legal issues to assess any potential impact on their investment and the overall health of the Cicis franchise system.