Does the Cream franchise agreement require franchisees to warrant that any funds provided to the franchisor will be legally obtained in compliance with anti-money laundering and counter-terrorism financing laws?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: RECEIPTS]
You further represent and warrant to us that you and your owners are now, and have been, in compliance with U.S. anti-money laundering and counter-terrorism financing laws and regulations, and that any funds provided by you or your owners to us or our affiliates are and will be legally obtained in compliance with these laws. You agree not to, and to cause all of your owners, employees, agents, representatives, and any other person or entity associated with you not to, during the Term, take any action or refrain from taking any action that would cause such person or entity to become a target of any such laws and regulations.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the franchise agreement stipulates that franchisees and their owners must comply with U.S. anti-money laundering and counter-terrorism financing laws and regulations. Franchisees must warrant that any funds provided to Cream or its affiliates are legally obtained in compliance with these laws. This requirement extends to the franchisee's owners as well.
This provision means that a prospective Cream franchisee must ensure that all funds used for the franchise investment, including franchise fees, royalties, and any other payments, are derived from legitimate sources. The franchisee also agrees to ensure that their owners, employees, agents, and any other associated parties do not take any action that would cause them to become a target of these laws and regulations during the term of the franchise agreement.
Cream's inclusion of this clause is a measure to protect itself from legal and reputational risks associated with money laundering and terrorism financing. It is a fairly standard practice in franchising and other industries to ensure compliance with these regulations. Franchisees should maintain thorough records of their financial transactions to demonstrate compliance if requested.
In practical terms, this means a Cream franchisee needs to be prepared to provide documentation and assurances regarding the source of their funds. Failure to comply with these regulations could lead to legal consequences and potential termination of the franchise agreement.