Does the Cream Franchise Agreement's non-competition covenant apply to the franchisee's owners?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: RECEIPTS]
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.
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 non-competition covenants within the franchise agreement do apply to the franchisee's owners. During the term of the agreement, both the franchisee and their owners are restricted 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 where ice cream, ice cream-based desserts/drinks, or similar products represent more than 10% of the total gross revenue, excluding other Jeni's Ice Creams Scoop Shops. This restriction extends to current and former spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns.
Following the termination or expiration of the franchise agreement, the franchisee and their owners are subject to a two-year covenant not to compete. This post-term covenant prevents them from having an ownership interest in or performing services for a Competitive Business within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. The agreement specifies that if any restricted person fails to comply with these obligations, the two-year restricted period will commence on the date they begin to comply, potentially starting from the date of a court order enforcing the provision.
Cream emphasizes that franchisees and their owners possess general skills and abilities, and enforcing these covenants will not deprive them of their personal goodwill or ability to earn a living. These restrictions also apply to transferors and their owners for two years following any transfer of the franchise, as if the agreement had been terminated for those parties on the transfer date. Furthermore, obligations related to non-competition continue even after the agreement expires or terminates.