Does the Cream Area Development Agreement specify any requirements for the transfer of ownership interests?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
appropriate governmental agency or authority.
4. TRANSFER.
A. BY US.
We maintain a staff to manage and operate the franchise system and you understand that staff members can change as employees come and go. You represent that you have not signed this Agreement in reliance on any particular manager, owner, director, officer, or employee remaining with us in any capacity. We may change our ownership or form or assign this Agreement and any other agreement to a third party without restriction.
B. BY YOU.
The rights and duties this Agreement creates are personal to you (and if you are conducting business as an Entity, each of your owners) and we have granted you the Development Rights in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability, and financial capacity. Accordingly, none of the following may be transferred, mortgaged, pledged, or encumbered, without our prior written approval: (1) this Agreement (or any interest in this Agreement), (2) your Development Rights, or (3) any direct or indirect ownership interest in you. A transfer of your Development Rights may be made only with a transfer of this Agreement. Any transfer without our approval is a breach of this Agreement and has no effect. In this Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition, including transfer by reason of merger, consolidation, issuance of additional securities, death, disability, divorce, insolvency, encumbrance, foreclosure, surrender or by operation of law, and/or any transfer of control or management of the Development Rights.
If you intend to list your Development Rights for sale with any broker or agent, you shall do so only after obtaining our written approval of the broker or agent and of the listing agreement. You shall not use or authorize the use of, and no third party shall on your behalf use, any written materials to advertise or promote the transfer of your Development Rights or of any ownership interest in you without our prior written approval.
C. CONDITIONS FOR APPROVAL OF TRANSFER.
We will approve a transfer if all of the following requirements are met:
- (1) you submit an application in writing requesting our consent and providing us all information or documents we request about the transferee and its owners that we request to evaluate their ability to satisfy their respective obligations under our then-current form of Franchise Agreement and any documents ancillary thereto, and each such person must have completed and satisfied all of our application and certification requirements, including the criteria that neither the transferee nor its owners (if the transferee is an Entity) or affiliates have an ownership interest in or perform services for a Competitive Business;
- (2) you and your owners have not violated any provision of this Agreement or any other agreement with us or our affiliates during both the 60-day period before you requested our consent to the transfer and the period between your request and the effective date of the transfer;
- (3) you provide us executed versions of any documents executed by you (or your owners) and transferee (and its owners) to effect the transfer, and all other information we request about the proposed transfer, and such transfer meets all of our requirements, including terms, closing date, purchase price, amount of debt, and payment terms, and we have determined that the purchase price and other terms of the transfer will not adversely affect the transferee's fulfillment of your Development Rights;
- (4) you (and your owners) and the transferee (and its owners) sign all of the documents we are then requiring in connection with a transfer, in a form satisfactory to us, including: (i) a release of any and all claims (except for claims which cannot be released or
waived pursuant to applicable law) against us and our affiliates and our and their owners, officers, directors, employees, and agents, and (ii) covenants that you and your transferring owners agree to satisfy all post-termination obligations under this Agreement;
- (5) if the transfer is of this Agreement or your Development Rights, you have satisfied all of the conditions to transfer all Franchise Agreements that you have executed in connection with this Agreement (and you understand that you may not transfer this Agreement or your Development Rights, without concurrently transferring all associated Franchise Agreements executed pursuant to the terms hereof, and the operations of any associated Jeni's Ice Creams Scoop Shops);
- (6) the transferee must (if the transfer is of this Agreement or your Development Rights) sign our then-current form of area development agreement and related documents, any and all of the provisions of which may differ materially from any and all of those contained in this Agreement; provided, that the term of the new area development agreement signed will equal the then-remaining Term and Development Schedule;
- (7) you pay us a transfer fee in the amount of $25,000, provided, that no transfer fee is due for the transfer from a deceased owner to such owner's surviving spouse, provided that such transfer is otherwise subject to the terms and conditions of this Section 4 (provided further, that you reimburse us for any direct costs we incur in connection with documenting and otherwise processing such transfer, including reasonable legal fees); and
- (8) the transferee(s) must (if the transfer is any beneficial or ownership interest in you), sign our then-current form of guaranty undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between you and us, and an updated Attachment D;
- (9) you provide us the evidence we request to show that appropriate measures have been taken to effect the transfer as it relates to the fulfillment of your Development Rights, including, transferring all necessary business licenses, and material agreements, or obtaining new business licenses and material agreements.
We may review all information regarding your Development Rights that you give the transferee, correct any information that we believe is inaccurate, and give the transferee copies of any reports that you have given us or we have made regarding your Development Rights.
Our consent to a transfer pursuant to this Section is not a representation of the fairness of the terms of any contract between you and the transferee, a guarantee of your or such transferee's prospects of success, or a waiver of any claims we have against you (or your owners) or of our right to demand the transferee's full compliance with this Agreement.
D. TRANSFER TO A WHOLLY-OWNED ENTITY.
If you do not originally sign this Agreement as an Entity, you may transfer this Agreement to an Entity; provided, that: (1) such Entity conducts no business other than the fulfillment of your Development Rights and the operation of Jeni's Ice Creams Scoop Shops; (2) you maintain management control of such Entity; (3) you own and control 100% of the economic interests, equity, and voting power of all issued and outstanding ownership interests in such Entity; (4) you satisfy all
conditions applicable to a transfer described in Section 4.C, except that we will not require payment of a transfer fee as described in Section 4.C(7) (provided, that you reimburse us for any direct costs we incur in connection with documenting and otherwise processing such transfer, including reasonable legal fees) and our right of first refusal under Section 4.E will not apply; and (5) that Entity must expressly assume all of your obligations under this Agreement. You agree to remain personally liable under this Agreement as if the transfer to the Entity did not occur, including by signing our then-current form of personal guaranty of the obligations of such Entity.
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, the Area Development Agreement outlines specific requirements for transferring ownership interests. Cream emphasizes that the rights and duties under the agreement are personal to the developer and their owners, and the Development Rights are granted based on Cream's assessment of their character, skills, and financial capacity. Therefore, any transfer of the Area Development Agreement, Development Rights, or any direct or indirect ownership interest requires Cream's prior written approval. Transferring Development Rights can only occur alongside the transfer of the Area Development Agreement. Any transfer conducted without Cream's approval constitutes a breach of the agreement and is considered invalid. The term 'transfer' encompasses various scenarios, including voluntary, involuntary, direct, or indirect assignments, sales, gifts, or other dispositions, such as those resulting from mergers, consolidations, issuance of additional securities, death, disability, divorce, insolvency, or legal operations, as well as any transfer of control or management of the Development Rights.
Cream will approve a transfer if certain conditions are met. The transferring party must submit a written application requesting consent, providing all required information and documents about the transferee and its owners. The transferee and its owners must meet Cream's application and certification requirements, including not having an ownership interest in or providing services to a Competitive Business. The transferring party and its owners must not have violated any agreement with Cream or its affiliates during the 60-day period before requesting consent and the period between the request and the transfer's effective date. Executed versions of all transfer-related documents must be provided, and the transfer must meet all of Cream's requirements, including terms, closing date, purchase price, debt amount, and payment terms. Cream must determine that the purchase price and other terms will not adversely affect the transferee's ability to fulfill the Development Rights.
Furthermore, both the transferring party (and its owners) and the transferee (and its owners) must sign all required documents, including a release of claims against Cream and its affiliates, and covenants ensuring the transferring owners will satisfy all post-termination obligations. If the transfer involves any beneficial or ownership interest, the transferee(s) must sign Cream's current form of guaranty, undertaking personal responsibility for all provisions of the Area Development Agreement and any ancillary agreements, along with an updated Attachment D. The transferring party must provide evidence that appropriate measures have been taken to effect the transfer, including transferring necessary business licenses and material agreements or obtaining new ones. A transfer fee of $25,000 is required, although this fee is waived for transfers from a deceased owner to their surviving spouse, provided all other conditions are met. However, the transferring party must reimburse Cream for any direct costs incurred in documenting and processing the transfer, including reasonable legal fees.
If the Area Development Agreement is transferred to a wholly-owned entity, several conditions apply. The entity must conduct no business other than fulfilling the Development Rights and operating Cream Scoop Shops, and the transferring party must maintain management control and 100% ownership of the entity. All conditions applicable to a standard transfer must be met, except for the transfer fee, although reimbursement for direct costs still applies, and Cream's right of first refusal does not apply. The entity must expressly assume all obligations under the Area Development Agreement, and the transferring party remains personally liable, including by signing a personal guaranty. The transferring party must also sign a consent to assignment and assignment form satisfactory to Cream, which may include a release of claims against Cream and its affiliates.