What is the consequence if the Cream franchisee violates the non-competition covenant after the agreement is terminated?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
ning any Marks from your Shop. You must reimburse us for all costs and expenses we incur in correcting any such deficiencies. You hereby appoint us as your true and lawful attorney-in-fact to take such actions and execute such documents on your behalf as may be required to effect the foregoing purposes.
C. COVENANT NOT TO COMPETE.
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; (2) lease or sublease the Premises to a Competitive Business; and/or (3) 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:
- (i) at the Premises or within a 5-mile radius of the Premises, or
- (ii) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 15.C fails to comply with these obligations as of the date of termination or expiration, the two-year restricted period for that person will commence on the date the person begins to comply with this Section 15.C, which may be the date a court order is entered enforcing this provision. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills. Consequently, our enforcing the covenants made in this Section 15.C will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section 15.C will also apply after any transfer, to the transferor and its owners, for a period of two years beginning on the effective date of the transfer, with the force and effect as though this Agreement had been terminated for such parties as of such date.
D.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to the 2025 FDD, if a Cream franchisee or their owners fail to comply with the non-compete obligations after the termination or expiration of the franchise agreement, the two-year restricted period for that person will commence on the date the person begins to comply with the non-compete terms. This date may be when a court order is entered to enforce the provision.
Cream emphasizes that franchisees possess general skills and abilities and have other opportunities to use these skills. Therefore, Cream believes that enforcing the non-compete agreements will not deprive franchisees of their personal goodwill or ability to earn a living. The restrictions also apply to any transferor and its owners after a transfer, for two years from the transfer date, as if the agreement was terminated for those parties on that date.
Furthermore, all obligations of both Cream and the franchisee (and their owners) that expressly or by their nature survive the agreement's expiration or termination will remain in effect. This includes obligations related to non-disparagement, non-competition, non-interference, confidentiality, information security, innovations, and indemnification. This means that even after the franchise agreement ends, the franchisee must continue to uphold these responsibilities until they are fully satisfied or naturally expire.