Does the Cream Franchise Agreement's non-competition covenant after termination apply to the franchisee's owners?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Agreement | Summary | |
|---|---|---|---|
| of first refusal, or there is a material change in terms, we will have an additional right of first refusal. | |||
| (o) | Franchisor's option to purchase franchisee's business | Franchise Agreement – Section 15.D Area Development Agreement | We may purchase any or all of the assets of your Shop (including the Premises, if it is owned by you or one of your owners or affiliates) upon the termination or expiration of the Franchise Agreement. The purchase price will be based upon the net realizable value of the tangible assets in accordance with the liquidation basis of accounting. We may exercise this right by giving you written notice of our election within 30 days after the termination or expiration. If challenged, the purchase price will be determined by an appraiser designated by us, with costs and fees shared equally by both parties. While any decision regarding purchasing your Shop is pending, we may operate your Shop on an interim basis as provided in the Franchise Agreement. Not Applicable |
| (p) | Death or disability of franchisee | Franchise Agreement – Section 12.D Area Development Agreement – Section 5.C | Upon death or disability of you or your owners, the estate of such person must transfer all interest in your Shop to a party we approve within 180 days following the date of death or disability. If, as a result of the death or incapacity of the transferor, your Shop is not otherwise being managed by a Shopkeeper, a personal representative must appoint a Shopkeeper who we approve and who has completed our then-current Initial Training Program to supervise the day-to-day operations of your Shop within 15 days from the date of death or disability. Neither the Area Development Agreement nor any ownership interests in you may be transferred without our prior written consent. |
| (q) | Non competition covenants during the term of the franchise | Franchise Agreement – Section 7.A Area Development Agreement – Section 3.C | You and your owners agree may not directly or indirect own and/or provide services to a Competitive Business, and/or divert any customers to a Competitive Business, during the term of the Franchise Agreement, in any location worldwide. "Competitive Business" means any business 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 items represents more than 10% of the total gross revenue (subject to state law). You and your owners agree may not directly or indirect own and/or provide services to a Competitive Business, and/or divert any customers to a Competitive Business during the term of the Area Development Agreement, in any location worldwide. |
| (r) | Non competition covenants after the franchise is | Franchise Agreement –Section 15.C | For two years after termination, expiration, or transfer of the Franchise Agreement, you and your owners may not directly or indirect own and/or provide services to a Competitive Business, and/or divert any customers to a Competitive Business, which is located or operating (i) at the Premises or within a 5-mile radius of |
| Provision |
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 covenant within the Franchise Agreement extends to the franchisee's owners after termination, expiration, or transfer of the agreement. Specifically, for a period of two years, both the franchisee and their owners are restricted from engaging in or providing services to a Competitive Business. This restriction applies if the Competitive Business is located or operating at the premises of the Cream franchise or within a 5-mile radius of any Jeni's Ice Creams Scoop Shop.
This post-term non-compete obligation means that a franchisee's owners cannot be involved with a competing ice cream business within the specified geographic areas for two years after the franchise relationship ends. This includes owning any direct or indirect interest in a Competitive Business or performing services for one. The definition of a "Competitive Business" is any business (excluding any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with Cream) 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 items represents more than 10% of the total gross revenue.
Cream includes this provision to protect its market share and brand integrity by preventing former franchisees and their owners from using their knowledge and experience gained during the franchise term to compete against the Cream system in close proximity to existing locations. Prospective franchisees should carefully consider the implications of this restriction, especially if they or their owners have existing or planned business ventures in the ice cream or frozen dessert industry. It is also important to note that the non-compete obligations continue even after a transfer of the franchise to a new owner, applying to the transferor and their owners.