Can a Cream franchise be transferred to an entity or its owners who have an ownership interest in a Competitive Business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
ty shall on your behalf use, any written materials to advertise or promote the transfer of your Shop or of any ownership interest in you without our prior written approval.
C. CONDITIONS FOR APPROVAL OF TRANSFER.
You may not transfer this Agreement before your Shop has opened for business. Thereafter, we will approve a transfer if all of the following requirements are met:
- (1) you submit an application in writing requesting our consent and providing us all information or documents we request about the transferee and its owners that we request to evaluate their ability to satisfy their respective obligations under our then-current form of franchise agreement and any documents ancillary thereto, and each such person must have completed and satisfied all of our application and certification requirements, including the criteria that neither the transferee nor its owners (if the transferee is an Entity) or affiliates have an ownership interest in or perform services for a Competitive Business;
- (2) you and your owners have not violated any provision of this Agreement or any other agreement with us or our affiliates during both the 60-day period before you requested our consent to the transfer and the period between your request and the effective date of the transfer, including that you have paid all Royalties, Brand Fund Contributions, and other amounts owed to us, our affiliates, and third-party suppliers, and have submitted all required reports and statements;
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, Cream outlines specific conditions that must be met for a franchise transfer to be approved. One critical condition is that neither the transferee nor its owners (if the transferee is an entity) can have an ownership interest in or perform services for a Competitive Business. A Competitive Business is defined as any business (excluding other Cream franchises) that operates or franchises businesses where ice cream, ice cream-based desserts/drinks, or similar frozen products account for more than 10% of total gross revenue. This restriction applies to the transferee and their owners or affiliates.
This requirement means that if a prospective transferee or any of their owners have a stake in a competing ice cream business, Cream is unlikely to approve the transfer. The purpose of this condition is to protect Cream's brand and market position by preventing conflicts of interest and ensuring that franchisees are fully committed to the success of the Cream franchise.
For a potential franchisee, this implies that they need to ensure that any prospective buyers of their franchise meet this condition. Failure to do so could result in the denial of the transfer, potentially complicating the sale of the franchise. It is important to note that even if the ownership interest is indirect, it could still be a barrier to the transfer. However, an exception exists for equity ownership of less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange.