Does the Cream Franchise Agreement allow for exceptions to the non-compete agreement based on state law?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
The following provision applies if you or the franchise granted hereby are subject to the franchise registration laws in Illinois, Indiana, Maryland, Michigan, Minnesota, Virginia, or Wisconsin: No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (1) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (2) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
G. GOVERNING LAW.
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.), or other United States federal law, this Agreement and any related agreements, the franchise for your Shop, and all claims arising from the relationship between us or any of our affiliates (and our and their respective owners, officers, directors, agents, representatives and employees), and you (and your owners, guarantors, affiliates, and employees), will be governed by the laws of the State of Ohio, without regard to its conflict of laws rules. Any state law regulating the offer or sale of franchises or governing the relationship of a franchisor and its franchisee, including the terms set forth on Attachment F (as applicable), will not apply unless the jurisdictional requirements of such state law are met independently without reference to this Section.
MARYLAND
The following provisions are annexed to and form part of this Agreement if and only if, and in such case to the extent that: (a) you are a resident of the State of Maryland; or (b) your franchised business is or will be operated in the State of Maryland; or (c) the offer of the franchise was made or accepted in the State of Maryland.
- The following is added to the end of Sections 12.C(4), 12.E, 13.A(8), and 15.D of the Agreement:
Pursuant to COMAR 02.02.08.16L, any release required as a condition of renewal and/or assignment/transfer will not apply to claims arising under the Maryland Franchise Registration and Disclosure Law.
- The following is added to the end of Section 14.A of the Agreement:
This provision might not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).
- Section 17.F of the Agreement is supplemented by adding the following to the end of the Section:
A Maryland franchise regulation states that it is an unfair or deceptive practice to require a franchisee to waive its right to file a lawsuit in Maryland claiming a violation of the Maryland Franchise Registration and Disclosure Law. In light of the Federal Arbitration Act, there is some dispute as to whether this forum selection requirement is legally enforceable.
- Section 17.H of the Agreement is supplemented by adding the following to the end of the Section.
A franchisee may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure law.
- The following is added to the end of Section 17.L of the Agreement:
Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the franchise agreement is generally governed by Ohio law, but there are specific stipulations for franchisees in certain states. Specifically, the agreement notes that any state law regulating the offer or sale of franchises or governing the relationship of a franchisor and its franchisee, including the terms set forth on Attachment F (if applicable), will not apply unless the jurisdictional requirements of such state law are met independently without reference to a specific section regarding governing law. This suggests that while Ohio law generally applies, state laws may take precedence if their jurisdictional requirements are independently satisfied. Attachment F is not included in the provided excerpts.
For franchisees in Illinois, Indiana, Maryland, Michigan, Minnesota, Virginia, or Wisconsin, the FDD states that no statement signed by a franchisee can waive claims under applicable state franchise law, including fraud in the inducement, or disclaim reliance on statements made by the franchisor. This provision supersedes any other term in documents related to the franchise agreement, offering additional protection to franchisees in those states.
For Maryland franchisees, there are several specific provisions that modify the standard agreement. For example, any release required as a condition of renewal or transfer will not apply to claims arising under the Maryland Franchise Registration and Disclosure Law. Additionally, a Maryland franchise regulation states that requiring a franchisee to waive their right to file a lawsuit in Maryland for violations of the Maryland Franchise Registration and Disclosure Law is an unfair or deceptive practice. These state-specific provisions indicate that Cream's franchise agreement does acknowledge and incorporate certain state law requirements, particularly concerning franchisee rights and disclosures.