Are Cream franchisees allowed to divert potential customers to a Competitive Business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
to do all other lawfully permitted acts to further the purposes of this Section with the same legal force and effect as if executed by you.
7. RESTRICTIVE COVENANTS.
A. NON-COMPETITION DURING TERM.
We have granted you the rights in this Agreement in consideration of and reliance upon your agreement to deal exclusively with us. You therefore agree that, during the Term, 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, 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 (defined below), wherever located or operating (except that equity ownership of less than 5% of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exc
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, franchisees are explicitly prohibited from diverting or attempting to divert customers to a competitive business during the term of the franchise agreement. This restriction is part of the non-competition agreement that Cream franchisees must adhere to. This obligation extends not only to the franchisee but also to their owners, immediate family members, and other related parties.
A "Competitive Business" is defined as any business (excluding other Cream locations) that operates or franchises businesses where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, represent more than 10% of the total gross revenue. This definition is important for franchisees to understand, as it clarifies the scope of businesses they cannot be involved with during their franchise term.
This restriction ensures that franchisees remain committed to the Cream brand and do not use their position to benefit competing businesses. It protects Cream's market share and customer base. Franchisees should be aware that violating this clause could result in legal action or termination of the franchise agreement. This non-compete agreement is a standard practice in franchising to protect the brand and the investment of both the franchisor and other franchisees.