How are upfront fees paid for development rights for a Cicis franchise recognized?

According to Cicis's 2025 Franchise Disclosure Document, upfront fees paid for development rights are not immediately recognized as revenue. Instead, these fees are apportioned to each franchised restaurant that is part of the development agreement. Cicis recognizes the fees over the contractual term of the franchise agreement, but only once each individual restaurant is opened. This accounting method ensures that revenue recognition aligns with the actual opening and operation of each franchise location.

For a prospective Cicis franchisee, this means that the upfront development fee you pay will not be fully recognized by Cicis as revenue until each of your franchised restaurants begins operation. The revenue recognition is spread out over the life of each franchise agreement, which ranges from five to ten years. This approach is tied to the performance obligation of Cicis, which is providing access to their symbolic intellectual property over the term of the agreement.

This accounting practice is fairly standard in the franchise industry, as it aligns revenue recognition with the delivery of services and the ongoing relationship between the franchisor and franchisee. The initial payment is treated as deferred revenue on Cicis's balance sheets until the restaurants open and the revenue can be recognized. This method provides a more accurate reflection of the value provided to the franchisee over time and reduces the risk of prematurely recognizing revenue before the franchisee is operational.