After the Cream franchise is terminated, does the non-competition covenant apply to the franchisee's owners?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
ning any Marks from your Shop. You must reimburse us for all costs and expenses we incur in correcting any such deficiencies. You hereby appoint us as your true and lawful attorney-in-fact to take such actions and execute such documents on your behalf as may be required to effect the foregoing purposes.
C. 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; (2) lease or sublease the Premises to a Competitive Business; and/or (3) 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:
- (i) at the Premises or within a 5-mile radius of the Premises, or
- (ii) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 15.C 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 15.C, 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 15.C will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section 15.C 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.
D.
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 extends to the franchisee's owners both during the term of the agreement and for a period of time after termination or expiration. Specifically, for two years after the agreement ends, the franchisee and their owners are restricted from engaging in or having an interest in a Competitive Business. This includes being an owner, director, officer, manager, employee, consultant, representative, or agent of a Competitive Business.
The restrictions apply if the Competitive Business is located or operating within the Development Area or within a 5-mile radius of any other Cream Scoop Shop. The term 'Competitive Business' refers to any business (excluding other Cream franchises) where ice cream, ice cream-based desserts/drinks, or similar frozen products constitute more than 10% of the total gross revenue.
Cream's FDD also states that if any individual bound by these restrictions fails to comply upon termination or expiration, the two-year restricted period begins when they start complying with the terms. This may be the date a court order is issued to enforce the provision. The document emphasizes that the franchisee and their owners possess general skills and abilities and have other opportunities to earn a living, so enforcing these covenants will not deprive them of their personal goodwill or ability to earn a living.
Furthermore, these non-compete restrictions also apply to the transferor and its owners for two years following any transfer of the franchise, as if the agreement had been terminated for those parties on the transfer date. The obligations related to non-competition continue even after the agreement expires or terminates, until they are fully satisfied or naturally expire.