What is the definition of 'ownership interest' in the Cream franchise agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
References in this Agreement to: (1) "we," "us," and "our," with respect to all of our rights and all of your obligations to us under this Agreement, include any of our affiliates with whom you deal; (2) "affiliate" of any person means any other person that is directly or indirectly owned or controlled by, under common control with, or owning or controlling such person; (3) "control" of any person means the ownership interest of greater than 50% of the outstanding ownership interests of any entity, and/or the power to direct or cause the direction of management and policies; (4) "ownership interest" means any direct or indirect title, ownership and/or beneficial interest in the equity, voting rights, or economic interest in any Entity; (5) "owner" means any person that holds any direct or indirect ownership interest in an Entity; (6) "person" means any natural person, Entity, unincorporated association, cooperative, or other legal or functional organization; (7) unless otherwise specified, "days" means
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, an 'ownership interest' in the context of the Cream franchise agreement means any direct or indirect title, ownership, and/or beneficial interest in the equity, voting rights, or economic interest in any Entity. This definition is important because it clarifies the scope of restrictions and obligations placed on owners of Cream franchises, especially those operating as corporations, LLCs, or partnerships.
For a prospective Cream franchisee, this definition has several implications. First, it means that any form of ownership, whether direct or indirect, is subject to the terms of the franchise agreement. This includes not only formal ownership but also any beneficial interest, such as the right to receive profits or control voting rights. Second, the definition is broad, encompassing equity, voting rights, and economic interests, ensuring that all aspects of ownership are covered.
This definition is relevant when considering non-compete clauses, transfer restrictions, and personal guarantees. For example, owners with a 10% or greater ownership interest in the franchise entity must execute a personal guarantee, binding them to the franchise agreement. Additionally, the franchise agreement restricts the issuance and transfer of any ownership interests, requiring organizational documents to reflect these restrictions. Understanding this definition is crucial for franchisees to comply with the terms of the franchise agreement and avoid potential breaches.