Who is bound by the covenant not to compete for a Cream franchise, besides the franchisee?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
For two years beginning on the date of termination or expiration of this Agreement, 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): (1) have any direct or indirect interest as an owner (whether of record, beneficially, or otherwise) in a Competitive Business; and/or (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, in each case, if such Competitive Business is located or operating:
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the covenant not to compete extends beyond just the franchisee. Specifically, the agreement stipulates that the franchisee and their owners must ensure that their current and former spouses, immediate family members, owners, officers, directors, employees, representatives, affiliates, successors, and assigns also adhere to the non-compete terms. This means Cream holds the franchisee accountable for making their best efforts to prevent these related parties from engaging in competitive activities.
This provision is designed to protect Cream's market position and proprietary information. By including such a broad range of affiliated individuals and entities, Cream aims to prevent any potential circumvention of the non-compete agreement through related parties. This is a fairly standard practice in franchising, as franchisors seek to safeguard their business model and customer base.
For a prospective Cream franchisee, this has significant implications. It's not enough for the franchisee to personally avoid competitive activities; they must also actively manage and monitor the actions of a wide circle of individuals and entities connected to them. This could require clear communication, contractual agreements, and ongoing vigilance to ensure compliance. Failure to do so could result in legal action against the franchisee for breaches committed by these related parties. The franchisee should carefully consider the scope of these obligations and the practical challenges of enforcing them before investing in a Cream franchise.