What is the 'Royalty Adjustment' for Cicis, and why does it exist?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
efore after deductions for the Royalty and the Technology and Support Fees actually paid by the restaurant.
- "Royalty Adjustment" is the difference between the average amount paid by the franchisees in the Data Set for Royalty Expense and the amount franchisees are required to pay under the current form Franchise Agreement (5%). The reason for the difference is that some franchisees in the Data Set are subject to older forms of Franchise Agreement that provided for a lower royalty rate than is provided for under the current form Franchise Agreement.
- "Technology and Support Fee" is the difference between the average amount paid by the franchisees in the Data Set for Technology and Support Fee and the amount franchisees are required to pay under the current form Franchise Agreement ($100/month).
- "Advertising National Adjustment" is the difference between the average contributions paid by the franchisees in the Data Set to the Brand Fund and the amount franchisees are required to contribute under the current form Franchise Agreement (5% of Net Sales).
- "Adjusted EBITDA" means Restaurant EBITDA After minus the Royalty Adjustment, Technology and Support Fee Adjustment, and the Advertising National Adjustment necessary to bring those amounts to the current amounts required under the current form of Franchise Agreement.
The Results
Table 1 - 2024 Average Monthly Metrics for Restaurants in Data Set
| Financial Metrics | Average Amount | Average Percentage |
|---|---|---|
| Fee Based Net Sales (1) | $110,664 | 94.6% |
| Game Room Sales | $6,362 | 5.4% |
| (3) | $117,025 | 100.0% |
| Net Company Sales | ||
| COGS | $32,080 | 27.4% |
| Payroll Costs | $37,058 | 31.7% |
| Controllable Expenses | $13,775 | 11.8% |
| (5) | $5,396 | 4.9% |
| Advertising National | ||
| Non-Controllable Expenses | $9,735 | 8.3% |
| RESTAURANT EBITDA | $18,982 | 16.2% |
| BEFORE | ||
| (5) | $4,947 | 4.5% |
| Royalty Expenses | ||
| Technology and Support Fee | $37 | 0.0% |
| RESTAURANT EBITDA | $13,998 | 12.0% |
| AFTER | ||
| Royalty Adjustment (5) | $586 | 0.5% |
| Technology and Support Fee | $63 | 0.1% |
| Adjustment | ||
| Advertising National | $137 | 0.1% |
| Adjustment | ||
| ADJUSTED EBITDA (6) | $13,211 | 11.3% |
Table 2 - 2024 Average Annual Metrics for Restaurants in Data Set
| Financial Metrics | Average Amount | Average Percentage |
|---|---|---|
| Fee Based Net Sales (2) | $1,327,963 | 94.6% |
| Game Room Sales | $76,342 | 5.4% |
| (4) | $1,404,304 | 100.0% |
| Net Company Sales | ||
| COGS | $384,960 | 27.4% |
| Payroll Costs | $444,691 | 31.7% |
| Controllable Expenses | $165,305 | 11.8% |
| (5) | $64,751 | 4.9% |
| Advertising National | ||
| Non-Controllable Expenses | $116,818 | 8.3% |
| RESTAURANT EBITDA | $227,779 | 16.2% |
| BEFORE | ||
| Royalty Expenses (5) | $59,367 | 4.5% |
| Technology and Support Fee |
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 53–58)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the 'Royalty Adjustment' is the difference between the average royalty amount paid by franchisees in the data set and the amount franchisees are required to pay under the current franchise agreement, which is 5%. This adjustment is necessary because some franchisees in the data set are subject to older franchise agreements that provided for a lower royalty rate than the current agreement. The Royalty Adjustment is used in calculating the Adjusted EBITDA.
In 2024, the average monthly Royalty Adjustment was $586, representing 0.5% of sales. The average annual Royalty Adjustment was $7,031, also representing 0.5% of sales. This adjustment reflects the impact of varying royalty rates on the overall financial performance data presented in Item 19.
For a prospective franchisee, understanding the Royalty Adjustment is crucial because it highlights the impact of older, potentially more favorable, royalty terms on the financial performance of existing Cicis restaurants. While new franchisees will be subject to the current 5% royalty rate, the financial data includes restaurants with lower rates, necessitating the adjustment to provide a more accurate representation of potential earnings under the current franchise agreement. This adjustment helps to normalize the data and provides a clearer picture of what a new franchisee might expect to pay in royalties.