What was the total amount Cicis expensed related to the management services agreement for the years ended December 31, 2023 and 2022?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
l property license agreement with Yes Caps, LLC, owner of all rights, title and interest in the trademarks of the CiCi's Pizza Concept. The agreement grants the Company an exclusive, non-transferable, non-assignable, royaltyfree license to use and sublicense the use of the trademarks and other intellectual property.
The Company entered into an agreement where an affiliate will provide management services for a fee, plus out of pocket expenses as incurred. Effective January 1, 2023, the fee is calculated at 1% of marketing fund contributions and 50% of other net revenue. The Company expensed $7,112,185 and $1,223,149 related to this agreement for the years ended December 31, 2023 and 2022, respectively. The management services fees are included in other general and administrative expenses on the combined statements of income. At December 31, 2023
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the company expensed $7,112,185 related to the management services agreement for the year ended December 31, 2023. For the year ended December 31, 2022, Cicis expensed $1,223,149 related to this agreement. These management services fees are included in other general and administrative expenses on the combined statements of income.
This indicates that Cicis has a significant expense related to management services provided by an affiliate. For a potential franchisee, this highlights the importance of understanding related-party transactions and how they can impact the financial performance of the company. The fees are for management services provided by an affiliate, and the expense is included in general and administrative costs.
It's also worth noting that the method for calculating these management fees changed effective January 1, 2023, and again on January 1, 2024. In 2023, the fee was calculated at 1% of marketing fund contributions and 50% of other net revenue. In 2024, the management fees were calculated at 60% of other net revenue. A prospective franchisee should investigate the nature of these management services, the rationale for the fee structure, and how these expenses might affect the overall profitability of their franchise location.
At the end of 2023, Cicis had a payable to an affiliate for these services in the amount of $583,611, while at the end of 2022, the payable was $154,418. These payables are recorded in related party payable on the combined balance sheets. Monitoring these related-party transactions and understanding their impact on the financial statements is crucial for any potential investor or franchisee.