What is the Cream franchisee entity required to do to maintain its good standing?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, or partnership (each, an "Entity"), you represent that you have the authority to execute, deliver, and perform your obligations under this Agreement and all related agreements and are duly organized or formed. You agree to remain validly existing and in good standing under the laws of the state of your formation throughout the Term. You agree to maintain organizational documents, including your operating agreement or partnership agreement, as applicable, that reflect the restrictions on issuance and transfer of any ownership interests
in you described in this Agreement, and all certificates and other documents representing ownership interests in you will bear a legend referring to this Agreement's restrictions.
You agree and represent that Attachment A to this Agreement completely and accurately describes all of your owners and their interests in you as of the Effective Date. Each of your owners with a 10% or greater ownership interest in your Entity must execute a guarantee in the form we prescribe undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between you and us. Our current form of guarantee is attached herein as Attachment D. Subject to our rights and your obligations under Section 12, you and your owners agree to sign and deliver to us revised Attachment A to reflect any permitted changes in the information that Attachment A now contains.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, if a Cream franchisee is a corporation, limited liability company, or partnership (referred to as an "Entity"), it must meet specific requirements to maintain good standing. The Entity must be duly organized or formed and have the authority to fulfill its obligations under the Franchise Agreement and related agreements. Throughout the term of the agreement, the Entity must remain validly existing and in good standing under the laws of the state where it was formed.
Cream requires the franchisee to maintain organizational documents, such as operating or partnership agreements, that reflect restrictions on the issuance and transfer of ownership interests as outlined in the Franchise Agreement. All certificates and documents representing ownership interests must include a reference to these restrictions. Attachment A to the Franchise Agreement must accurately describe all owners and their interests in the Entity as of the effective date. Owners with a 10% or greater ownership interest must execute a personal guarantee, binding them jointly and severally to the agreement's provisions.
Cream also requires franchisees to update Attachment A to reflect any permitted changes in ownership. These stipulations ensure that Cream maintains control over who its franchisees are and that the financial obligations are secured by the owners. This is a common practice in franchising to protect the brand and ensure compliance with the franchise agreement. Failure to maintain good standing could lead to termination of the franchise agreement or prevent renewal.