Does the Cream franchise agreement's non-competition clause apply to Competitive Businesses located or operating outside of the United States?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
We have granted you the rights in this Agreement in consideration of and reliance upon your agreement to deal exclusively with us. You therefore agree that, during the Term, 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, 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 (defined below), wherever located or operating (except that equity ownership of less than 5% of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
- (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating; or
- (3) divert or attempt to divert any actual or potential business or customer of any Jeni's Ice Creams Scoop Shop to a Competitive Business.
The term "Competitive Business" means any business (excluding any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with us) operating or granting franchises or licenses to others to operate any business for which ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, or similar products represents more than 10% of the total gross revenue.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the non-competition clause applies to Competitive Businesses regardless of their location, including those outside the United States. During the term of the agreement, 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 to a Competitive Business, wherever it is located or operating. The only exception is if the franchisee has equity ownership of less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange.
The term "Competitive Business" is defined as any business (excluding other Cream franchises) that operates or grants franchises or licenses to others to operate a business where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, or similar products represents more than 10% of the total gross revenue. This definition is important because it clarifies the scope of the non-competition clause, focusing on businesses that are primarily involved in the ice cream and frozen dessert market.
After the termination or expiration of the Cream franchise agreement, the covenant not to compete extends for two years. However, this post-term non-compete is limited geographically. It applies only to Competitive Businesses located or operating within the Development Area or within a 5-mile radius of any other Cream Scoop Shop. This means that after the franchise agreement ends, the franchisee is free to engage with Competitive Businesses outside of these specified areas, including those located internationally.
Cream also retains significant rights, including the right to establish and operate other businesses, including those that compete with Cream Scoop Shops, under different trade names and trademarks anywhere in the world, including within the franchisee's Development Area. They can also establish businesses and distribution channels other than Cream Scoop Shops, regardless of location, and engage in marketing and promotional activities worldwide, even if they compete with the franchisee's business. These reserved rights highlight the importance of understanding the limitations of the franchisee's protected territory and the potential for competition from Cream itself or other businesses authorized by Cream.