How are upfront fees paid to Cicis for development rights handled for revenue recognition?

According to Cicis's 2025 Franchise Disclosure Document, upfront fees paid for development rights are specifically addressed in how Cicis recognizes revenue. These fees are not immediately recognized as revenue. Instead, Cicis apportions these fees to each franchised restaurant that is part of the development agreement. This means the total upfront fee is divided among all the restaurants the developer plans to open.

The revenue recognition for these apportioned fees occurs over the contractual term of the franchise agreement, but only once each individual restaurant is opened. This indicates that Cicis links the recognition of revenue to the actual opening and operation of each franchise location. The contractual term of the franchise agreement ranges from five to ten years.

For a prospective Cicis franchisee, this accounting practice means that Cicis does not recognize all the upfront development fees as income immediately. This approach aligns the revenue recognition with the actual performance and operation of the franchised restaurants, which is a common practice in the franchise industry. This policy provides a clearer picture of Cicis's financial performance related to its franchise operations.