Does the Cream Area Development Agreement contain a non-competition covenant?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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; and/or (2) 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:
- (a) within the Development Area, or
- (b) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 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, 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 will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section 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.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
Yes, according to the 2025 FDD, the Cream Area Development Agreement includes a covenant not to compete. This covenant restricts the franchisee and their owners from engaging in competitive business activities during the term of the agreement and for a period after termination or expiration.
Specifically, for two years after the agreement ends, the franchisee and their owners (including family members, officers, etc.) are prohibited from having an interest in or performing services for a Competitive Business within the Development Area or within a 5-mile radius of any Jeni's Ice Creams Scoop Shop. A Competitive Business is defined as any business where ice cream or similar products represent more than 10% of gross revenue.
The FDD states that if someone violates this covenant, the two-year restriction period starts when they begin complying with the provision, potentially extending the restriction. Cream emphasizes that the franchisee's skills are general and that enforcing the non-compete will not deprive them of their ability to earn a living. These restrictions also apply to any transfer of the agreement, with the same two-year period applying to the transferor.