How does the Cream franchise agreement define 'owner'?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, or partnership (each, an "Entity"), you represent that you have the authority to execute, deliver, and perform your obligations under this Agreement and all related agreements and are duly organized or formed. You agree to remain validly existing and in good standing under the laws of the state of your formation throughout the Term. You agree to maintain organizational documents, including your operating agreement or partnership agreement, as applicable, that reflect the restrictions on issuance and transfer of any ownership interests
in you described in this Agreement, and all certificates and other documents representing ownership interests in you will bear a legend referring to this Agreement's restrictions.
You agree and represent that Attachment A to this Agreement completely and accurately describes all of your owners and their interests in you as of the Effective Date. Each of your owners with a 10% or greater ownership interest in your Entity must execute a guarantee in the form we prescribe undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between you and us. Our current form of guarantee is attached herein as Attachment D. Subject to our rights and your obligations under Section 12, you and your owners agree to sign and deliver to us revised Attachment A to reflect any permitted changes in the information that Attachment A now contains.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
Based on the 2025 Cream Franchise Disclosure Document, the term 'owner' is referenced within the context of restrictive covenants and obligations related to the franchise agreement, particularly when the franchisee is an entity. While the document doesn't provide a specific, standalone definition of 'owner,' it outlines the responsibilities and restrictions placed upon owners, especially those with a 10% or greater ownership interest in an Entity (corporation, limited liability company, or partnership). These owners may be required to execute a guarantee, binding them personally to the franchise agreement's provisions.
Specifically, if the franchisee is an entity, Attachment A to the franchise agreement must accurately describe all owners and their interests as of the effective date. Any owner with a 10% or greater ownership interest in the franchisee entity must execute a personal guarantee, making them jointly and severally liable for the franchisee's obligations under the agreement. This means that Cream can pursue individual owners for the entity's debts and responsibilities.
Furthermore, the franchise agreement stipulates that both the franchisee and its owners must adhere to non-compete and non-interference clauses, both during and after the term of the agreement. These clauses extend not only to the owners themselves but also to their immediate family members, current and former spouses, and other related parties. This broad reach aims to prevent any direct or indirect involvement in competitive businesses or any actions that could harm Cream's relationships with its customers, franchisees, or suppliers.
In summary, while the Cream FDD does not provide a succinct definition of 'owner,' it emphasizes the significant responsibilities and potential liabilities that owners of a Cream franchise, particularly those holding substantial ownership stakes in an entity franchisee, must bear. Prospective franchisees should carefully review these obligations and seek legal counsel to fully understand the implications of becoming an owner within the Cream franchise system.