Does the Cream Area Development Agreement specify any exceptions to the non-competition covenants?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
to do all other lawfully permitted acts to further the purposes of this Section with the same legal force and effect as if executed by you.
7. RESTRICTIVE COVENANTS.
A. NON-COMPETITION DURING TERM.
We have granted you the rights in this Agreement in consideration of and reliance upon your agreement to deal exclusively with us. You therefore agree that, during the Term, 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, 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 (defined below), wherever located or operating (except that equity ownership of less than 5% of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
- (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating; or
- (3) divert or attempt to divert any actual or potential business or customer of any Jeni's Ice Creams Scoop Shop to a Competitive Business.
The term "Competitive Business" means any business (excluding any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with us) operating or granting franchises or licenses to others to operate any business for which 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.
B. NON-INTERFERENCE.
During and after the Term, 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) solicit, interfere, or attempt to interfere with our or our affiliates' relationships with any customers, franchisees, licensees, lenders, suppliers, or consultants.
C.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to the 2025 Cream FDD, the Area Development Agreement includes exceptions to the non-competition covenants. During the term of the Area Development Agreement, a franchisee is permitted to hold equity ownership of less than 5% of a Competitive Business if its stock is publicly traded on a recognized United States stock exchange. A "Competitive Business" is defined as 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.
Following the termination or expiration of the Area Development Agreement, the franchisee and their owners agree not to have any direct or indirect interest as an owner in a Competitive Business, or perform services for a Competitive Business. This restriction applies if the Competitive Business is located within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. The non-compete period lasts for two years, beginning on the date of termination or expiration of the Area Development Agreement. If a person fails to comply with these obligations, the two-year restricted period will commence on the date the person begins to comply, which may be the date a court order is entered enforcing the provision.
These non-competition covenants are designed to protect Cream's market position and prevent franchisees from using confidential information or business strategies gained during their time with Cream to benefit a competing business. The restrictions apply not only to the franchisee but also to their owners, immediate family members, and other related parties. This broad application aims to prevent any indirect involvement in competitive businesses that could undermine Cream's interests. Prospective franchisees should carefully consider these restrictions and ensure they understand the scope of the non-compete obligations before entering into an Area Development Agreement with Cream.