Besides the franchisee, who else is obligated to avoid competitive business activities 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, in addition to the franchisee, several other parties are obligated to avoid competitive business activities during the term of the franchise agreement. These parties include the franchisee's owners, current and former spouses, immediate family members, officers, directors, employees, representatives, affiliates, successors, and assigns. Cream requires the franchisee to use their best efforts to ensure these individuals and entities also comply with the non-compete obligations.
This non-compete obligation prevents these individuals and entities from having any direct or indirect interest in a Competitive Business, which is defined as any business (excluding other Jeni's Ice Creams Scoop Shops) where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, or similar products represent more than 10% of the total gross revenue. They are also prohibited from performing services for a Competitive Business as a director, officer, manager, employee, consultant, representative, or agent. Furthermore, they cannot divert or attempt to divert any actual or potential business or customer of any Jeni's Ice Creams Scoop Shop to a Competitive Business.
However, there is an exception: equity ownership of less than 5% of a Competitive Business is allowed if the business's stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange. This exception provides some flexibility for franchisees and related parties to invest in publicly traded companies that may have some competitive overlap with Cream, without violating the non-compete agreement. This is a fairly standard clause in franchise agreements to protect the brand's market position.
This broad scope of the non-compete agreement is designed to protect Cream's market share and prevent franchisees and related parties from using confidential information or business strategies gained from the franchise to benefit a competing business. Prospective franchisees should carefully consider the implications of these restrictions, especially if they or their close associates have existing interests in similar businesses.