Who has the sole discretion to determine whether particular obligations are 'material' for purposes of determining good standing for a Cicis franchise under the Reopen Incentive Program Addendum?

According to Cicis's 2025 Franchise Disclosure Document, Cicis retains sole discretion in determining whether particular obligations are considered 'material' when assessing a franchisee's good standing. This determination is final and applies to various incentive programs, including the Reopen Incentive Program Addendum, the Veterans Incentive Program, and the Development Incentive Program.

For a prospective Cicis franchisee, this means that Cicis has the ultimate authority to decide if a franchisee is meeting the requirements to be considered in 'good standing'. This is particularly important because a franchisee's good standing can affect their eligibility for reduced fees, such as the Initial Franchise Fee or Development Fee, and can impact royalty fee calculations. For instance, under the Reopen Incentive Program, the Initial Franchise Fee could be reduced to $5,000, but this reduction can be revoked if the franchisee is not in good standing.

This clause gives Cicis significant power, as their decision on what constitutes a 'material' obligation is final. Franchisees should, therefore, ensure they fully understand all obligations under the Franchise Agreement and any related addenda. They should also maintain open communication with Cicis to clarify any uncertainties regarding compliance and what Cicis considers 'material'.

While it is common for franchisors to set standards for franchisee compliance, the extent of sole discretion granted to Cicis is something potential franchisees should carefully consider. It highlights the importance of adhering to all contractual obligations and maintaining a strong, compliant relationship with the franchisor to avoid potential penalties or loss of benefits.