Besides the franchisee, who else is bound by the non-competition agreement during the term of the Cream franchise agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, during the term of the franchise agreement, the non-competition agreement extends beyond just the franchisee. Specifically, the agreement also applies to the franchisee's owners. Furthermore, Cream requires the franchisee to use their best efforts to ensure that their current and former spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns also adhere to the non-competition terms. This means Cream holds the franchisee responsible for influencing a broad range of related parties to avoid competitive activities.
This provision is designed to protect Cream's market position and proprietary information by preventing those closely associated with the franchisee from engaging in competing businesses. The definition of a "Competitive Business" includes any business (excluding other Jeni's Ice Creams Scoop Shops) that derives more than 10% of its gross revenue from ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks. This broad definition means franchisees and their related parties must be cautious about any involvement in the frozen dessert industry, even if it's not their primary business.
For a prospective Cream franchisee, this has significant implications. It's crucial to understand that the non-compete obligations extend to numerous individuals and entities connected to the franchisee. Franchisees need to communicate these restrictions clearly to their family members, business partners, and anyone else who might be affected. Failure to do so could result in breaches of the franchise agreement, potentially leading to legal action or termination of the franchise. Franchisees should carefully consider these obligations before signing the agreement and ensure they are prepared to enforce these restrictions within their network.