What actions are prohibited by the non-competition covenants after the Cream franchise is terminated or expires?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
ning any Marks from your Shop. You must reimburse us for all costs and expenses we incur in correcting any such deficiencies. You hereby appoint us as your true and lawful attorney-in-fact to take such actions and execute such documents on your behalf as may be required to effect the foregoing purposes.
C. COVENANT NOT TO COMPETE.
For two years beginning on the date of termination or expiration of this Agreement, you and your owners agree not to (and to use each of your best efforts to cause each of your respective current and former spouses, immediate family members, owners, officers, directors, employees, representatives, affiliates, successors, and assigns not to): (1) have any direct or indirect interest as an
owner (whether of record, beneficially, or otherwise) in a Competitive Business; (2) lease or sublease the Premises to a Competitive Business; and/or (3) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, in each case, if such Competitive Business is located or operating:
- (i) at the Premises or within a 5-mile radius of the Premises, or
- (ii) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 15.C fails to comply with these obligations as of the date of termination or expiration, the two-year restricted period for that person will commence on the date the person begins to comply with this Section 15.C, which may be the date a court order is entered enforcing this provision. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills. Consequently, our enforcing the covenants made in this Section 15.C will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section 15.C will also apply after any transfer, to the transferor and its owners, for a period of two years beginning on the effective date of the transfer, with the force and effect as though this Agreement had been terminated for such parties as of such date.
D.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, for two years after the franchise agreement terminates or expires, the franchisee and their owners must not engage in certain competitive activities. Specifically, they are prohibited from having any direct or indirect ownership interest in a Competitive Business. They are also barred from performing services for a Competitive Business as a director, officer, manager, employee, consultant, representative, or agent.
These restrictions apply if the Competitive Business is located or operating within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. The term 'Competitive Business' refers to any business (excluding Jeni's Ice Creams Scoop Shops operated under a franchise agreement with Cream) that operates or grants franchises or licenses to others to operate a business where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, or similar products represents more than 10% of the total gross revenue.
Cream states that if anyone fails to comply with these obligations, the two-year restricted period will begin when the person starts to comply with the requirements, which may be the date a court order is entered enforcing the provision. Cream emphasizes that these restrictions will not deprive franchisees of their personal goodwill or ability to earn a living, as they possess general skills and abilities and have other opportunities to use them. These restrictions also apply to transferors and their owners for two years after any transfer, as if the agreement had been terminated for those parties on the transfer date.
In addition to the non-compete obligations, all obligations that naturally survive the agreement's expiration or termination will remain in effect. These include obligations related to non-disparagement, non-interference, confidentiality, information security, innovations, and indemnification. This means that even after the franchise agreement ends, franchisees must continue to uphold these responsibilities.