What is the consequence if the Cream franchisee or their owners violate the non-competition covenants during the term of the Franchise Agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
to do all other lawfully permitted acts to further the purposes of this Section with the same legal force and effect as if executed by you.
7. RESTRICTIVE COVENANTS.
A. NON-COMPETITION DURING TERM.
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.
B. NON-INTERFERENCE.
During and after 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, employees, representatives, affiliates, successors and assigns not to) solicit, interfere, or attempt to interfere with our or our affiliates' relationships with any customers, franchisees, licensees, lenders, suppliers, or consultants.
C.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
The 2025 Cream Franchise Disclosure Document states that Cream grants franchise rights to franchisees based on the agreement that the franchisee will deal exclusively with them. During the term of the Franchise Agreement, the franchisee and their owners must not have any ownership interest in a Competitive Business, perform services for a Competitive Business, or divert business from any Jeni's Ice Creams Scoop Shop to a Competitive Business. A Competitive Business is defined as any business that operates or grants franchises or licenses to others to operate a 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. The FDD does not explicitly state the consequences of violating the non-competition covenants during the term of the Franchise Agreement.
However, the Cream FDD does state that Cream will not waive or impair any right, power, or option the Agreement reserves, including the right to demand exact compliance with every term, condition, and covenant or to declare any breach to be a default and to terminate the Agreement before the Term expires. This suggests that violating the non-competition agreement could lead to a breach of contract and potential termination of the franchise agreement.
To fully understand the consequences of violating the non-competition covenants during the term of the Franchise Agreement, a prospective Cream franchisee should seek clarification from the franchisor. Specifically, they should inquire about the specific actions Cream might take in response to a violation, such as issuing a warning, demanding corrective action, or terminating the agreement. Understanding these potential consequences is crucial for making an informed decision about investing in a Cream franchise.