Can a Cream franchisee's owners provide services to a Competitive Business during the term of the Area Development Agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | 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 | Franchise Agreement | We may purchase any or all of the assets of your Shop (including |
| option to | – Section 15.D | the Premises, if it is owned by you or one of your owners or |
| purchase | affiliates) upon the termination or expiration of the Franchise | |
| franchisee’s | Agreement. The purchase price will be based upon the net | |
| business | 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. | |
| Area Development Agreement | Not Applicable | |
| (p) Death or | Franchise Agreement | Upon death or disability of you or your owners, the estate of such |
| disability of | – Section 12.D | person must transfer all interest in your Shop to a party we |
| franchisee | 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. | |
| Area Development | Neither the Area Development Agreement nor any ownership | |
| Agreement – Section | interests in you may be transferred without our prior written | |
| 5.C | consent. | |
| (q) Non- | Franchise Agreement | You and your owners agree may not directly or indirect own |
| competition | – Section 7.A | and/or provide services to a Competitive Business, and/or divert |
| covenants | any customers to a Competitive Business, during the term of the | |
| during the | Franchise Agreement, in any location worldwide. |
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 table in Item 17 outlines non-competition covenants during the term of the franchise agreement, stating that franchisees and their owners may not directly or indirectly 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. However, the table indicates that these non-competition covenants do not apply to the Area Development Agreement.
This means that while the Franchise Agreement has restrictions preventing owners from engaging with competitive businesses, the Area Development Agreement does not have the same restrictions. This implies that during the term of the Area Development Agreement, Cream's franchisee owners may be able to provide services to a Competitive Business.
Prospective Cream franchisees should carefully consider this distinction between the Franchise Agreement and the Area Development Agreement. While the Franchise Agreement restricts involvement with competitive businesses, the Area Development Agreement does not appear to have the same limitations. Franchisees should seek clarification from Cream regarding the extent to which they or their owners can engage in other business ventures, especially those that might be considered competitive, during the Area Development Agreement term.