Who has the sole discretion to determine whether obligations are 'material' for determining good standing in the Cicis Veteran's Incentive Program?

According to Cicis's 2025 Franchise Disclosure Document, Cicis has sole discretion in determining whether particular obligations are considered "material" when assessing a franchisee's good standing within the Veteran's Incentive Program. This determination is final.

This means that Cicis, at its discretion, can decide which obligations under the Franchise Agreement, or any other agreements between the franchisee and Cicis, are significant enough to affect the franchisee's eligibility and standing in the Veteran's Incentive Program. This includes compliance with the Development Agreement and all Franchise Agreements between Cicis and the franchisee or their affiliates.

For a prospective franchisee, this implies that Cicis has considerable power in deciding whether a franchisee remains eligible for the benefits of the Veteran's Incentive Program, such as the waiver of the Initial Franchise Fee or Development Fee, or modifications to royalty fees. The franchisee must adhere to all obligations, but Cicis decides which ones are critical. This could create uncertainty, as the franchisee may not always know in advance which specific actions or omissions could jeopardize their "good standing" and, consequently, their participation in the program. Franchisees should seek clarity from Cicis regarding the criteria used to determine materiality to mitigate potential risks.

This level of franchisor discretion is not uncommon in franchising, as franchisors need to protect their brand and ensure system-wide compliance. However, it places a significant responsibility on Cicis to exercise this discretion fairly and transparently. A prospective franchisee should carefully review the Franchise Agreement and related documents, and discuss with Cicis what specific obligations are most likely to be considered material.