Does the definition of 'Competitive Business' in the Cream Franchise Agreement depend on state law?
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)
According to the 2025 FDD, the definition of 'Competitive Business' for Cream franchisees does not depend on state law. The FDD specifies a uniform definition that applies regardless of location. A 'Competitive Business' is defined as any business (excluding other Cream franchises) that operates or franchises businesses where ice cream, ice cream-based desserts/drinks, or other frozen desserts/drinks constitute more than 10% of total gross revenue.
This definition is crucial because during the term of the franchise agreement, franchisees and their owners are restricted from having an interest in, performing services for, or diverting business to a 'Competitive Business'. The only exception is if the franchisee has equity ownership of less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange.
Furthermore, the Cream franchise agreement is generally governed by the laws of Ohio, except to the extent governed by the United States Trademark Act or other federal law. State franchise laws will not apply unless their jurisdictional requirements are met independently of the agreement's governing law section. This means that the definition of 'Competitive Business' and the non-compete obligations are dictated by the franchise agreement itself and Ohio law, not by the specific state in which the franchise operates.