Does Cicis use beverage rebates as part of its marketing fund contributions?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
unts payable—marketing fund, restricted | | (275,741) | (206,861) | | Accrued expenses and other current liabilities | | (357,548) | (175,560) | | Marketing fund liabilities, restricted | | (1,513,594) | (1,937,309) |
Marketing fund contributions are included in revenue in the accompanying combined statements of income, and marketing fund expenses are included in marketing general and administrative costs in the accompanying combined statements of income.
Notes to Combined Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
Cash flows of the marketing fund are included in the combined statements of cash flows, but are restricted. Under the franchise agreements, contributions to the marketing fund are restricted to advertising, public relations, merchandising, similar activities and administrative expenses to increase sales and further enhance the public reputation of the CiCi's Pizza brand. The aforementioned administrative expenses may also include personnel expenses and allocated costs incurred by the Company which are directly associated with administering the marketing fund, as outlined in the provisions of the franchise agreements. The Company received $27,257,964 and $26,342,984 in marketing fund contributions in the years ended December 31, 2024 and 2023, respectively, which includes beverage rebates. The Company incurred marketing fund expenditures of $27,681,679 and $24,935,940 in the years ended December 31, 2024 and 2023, respectively.
Marketing costs are expensed when advertisements are run. Production costs for advertisements are generally expensed when incurred, unless production costs are incurred and paid in the current year for the next year's advertising campaign. In those instances, production costs are recorded as prepaid expenses and then expensed in the subsequent fiscal year.
Consideration from vendors: The Company has entered into beverage supply agreements with certain major vendors. Pursuant to the terms of these arrangements, consideration is provided to the Company for the benefit of the Marketing Fund from the vendors, based upon the dollar volume of purchases for company-operated restaurants and franchised restaurants. In accordance with U.S. GAAP governing consideration received from vendors, these amounts are recognized as earned throughout the year and are classified in the combined statements of income within revenue with an offset included
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 does include beverage rebates as part of its marketing fund contributions. In 2024, the company received $27,257,964 in marketing fund contributions, which includes beverage rebates. In 2023, this figure was $26,342,984, also inclusive of beverage rebates.
These contributions are restricted for use in advertising, public relations, merchandising, and administrative expenses aimed at increasing sales and enhancing the brand's public reputation. The administrative expenses can cover personnel expenses and allocated costs incurred by Cicis directly related to administering the marketing fund, as outlined in the franchise agreements.
Cicis has beverage supply agreements with major vendors, where consideration is provided to the company for the benefit of the Marketing Fund based on the dollar volume of purchases for both company-operated and franchised restaurants. These rebates are recognized as earned throughout the year and are classified within revenue with an offset included in marketing general and administrative costs representing contributions to the marketing fund. The rebates received amounted to $7,907,088 in 2024 and $8,874,070 in 2023.
For a prospective franchisee, this means that a portion of the marketing fund is derived from rebates negotiated by Cicis with beverage suppliers, based on the collective purchasing power of the franchise system. This arrangement could potentially lower the direct contribution required from franchisees, while still maintaining a robust marketing fund. However, the franchisee should be aware that the actual amount of rebates can fluctuate from year to year, impacting the overall marketing budget.