In the Cream franchise agreement, what is the agreement between the franchisor and franchisee regarding covenants restricting competitive activity?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
ranchise Agreements; (2) return to us or destroy (as we require) any and all Confidential Information (other than as used by you in connection with the operation of any Jeni's Ice Creams Scoop Shop under a Franchise Agreement with us); (3) comply with all other standards we establish from time to time (and all applicable laws) in connection with the wind-down of your business contemplated by this Agreement; and (4) without limiting any other rights or remedies to which we may be entitled, you must pay all amounts owing to us pursuant to this Agreement up to the date of termination.
E. 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; 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:
- (a) within the Development Area, or
- (b) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 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, 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 will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section 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.
F. CONTINUING OBLIGATIONS.
All of our and your (and your owners') obligations which expressly or by their nature survive this Agreement's expiration or termination will continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire, including all obligations relating to non-disparagement, non-competition, non-interference, confidentiality, information security, Innovations, and indemnification.
6. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
A. INDEPENDENT CONTRACTORS.
This Agreement does not create a fiduciary relationship between you and us, that you and we are and will be independent contractors, and that nothing in this Agreement is intended to make either you or us a general or special agent, joint venturer, partner, or employee of the other for any purpose. You agree to identify yourself conspicuously in all dealings with customers, vendors, public officials, your personnel, and others as the sole holder of the Development Rights and to place notices of independent ownership on the forms, business cards, stationery, advertising, and other materials we require from time to time. You also acknowledge that you will have a contractual relationship only with us and may look only to us to perform under this Agreement, and not our affiliates, designees, officers, directors, employees, or other representatives or agents.
B. NO LIABILITY TO OR FOR ACTS OF OTHER PARTY.
We and you may not make any express or implied agreements, warranties, guarantees, or representations, or incur any debt, in the name or on behalf of the other or represent that our respective relationship is other than franchisor and franchise owner. We will not be obligated for any damages to any person or property directly or indirectly arising out of the exercise of your Development Rights or the business you conduct under this Agreement. We will have no liability for your obligations to pay any third parties, including any product Vendors.
C. INDEMNIFICATION.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, the Cream franchise agreement includes covenants restricting competitive activities both during the term of the agreement and after termination or expiration. During the term, franchisees and their owners are prohibited from having any direct or indirect interest in a Competitive Business, performing services for a Competitive Business, or diverting business from any Jeni's Ice Creams Scoop Shop to a Competitive Business. A Competitive Business is defined as any business (excluding other Jeni's Ice Creams Scoop Shops) where ice cream or similar products represent more than 10% of gross revenue. An exception exists for owning less than 5% of a publicly traded Competitive Business.
Post-termination, for a period of two years, franchisees and their owners are restricted from having any interest in or performing services for a Competitive Business within the Development Area or within a 5-mile radius of any Jeni's Ice Creams Scoop Shop. The agreement specifies that if someone fails to comply with these obligations, the restricted period will commence when compliance begins, potentially after a court order. Cream acknowledges that franchisees have general skills and opportunities, and enforcing these covenants will not deprive them of their ability to earn a living. These restrictions also apply to transferors after any transfer for two years from the effective date of the transfer.
The Cream franchise agreement also states that if any restriction on competitive activity is deemed unenforceable due to its scope, the parties agree that the covenant will be enforced to the fullest extent permissible under applicable laws. All obligations related to non-competition survive the expiration or termination of the agreement. Cream also retains the right to modify any invalid or unenforceable provision to ensure it is valid and enforceable.