Does the Cream Area Development Agreement's non-competition covenant after termination apply to the franchisee's owners?

According to Cream's 2025 Franchise Disclosure Document, the non-competition covenant within the Area Development Agreement extends to the franchisee's owners after termination, expiration, or transfer of the agreement. Specifically, for two years following the termination, expiration, or transfer, the franchisee and their owners are restricted from directly or indirectly owning or providing services to a Competitive Business. This restriction also includes diverting customers to a Competitive Business. The restrictions apply to businesses located or operating at the premises or within a 5-mile radius of the premises, or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. These restrictions are subject to state law.

This means that if a Cream franchisee's Area Development Agreement is terminated, expires, or is transferred, both the franchisee and their owners are legally bound to refrain from engaging in competitive business activities as defined in the agreement. This includes not only direct ownership or operation of a competing business but also providing services to one. The geographic scope of this restriction is limited to the immediate location of the former Cream shop and a 5-mile radius around it, as well as around any other Cream location.

For a prospective Cream franchisee, this clause has significant implications. It means that upon exiting the Cream system, they and their owners cannot immediately start or join a competing ice cream business in the same area. This restriction is in place to protect Cream's market share and brand reputation. Franchisees should carefully consider this post-term non-compete obligation, especially if their future plans involve staying in the ice cream industry. It is also important to note that the enforcement of these covenants can vary by state, so franchisees should be aware of the specific laws in their jurisdiction.