What happens if a Cream franchisee fails to comply with the franchise agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
greement, or fail to reply to inquiries from us for more than fifteen (15) consecutive days; or (ii) fail to make progress towards your Development Schedule such that we determine, in our discretion, that satisfaction of your Development Schedule is impossible or impracticable;
(3) you or any of your owners are or have been convicted of or have pleaded no contest or guilty to a felony;
(4) you or any of your owners violate any of the covenants made in Section 3 of this Agreement;
(5) you or any of your owners make or attempt to make an unauthorized transfer under Section 4;
(6) you violate any law, ordinance, rule, or regulation of a governmental agency in connection with the exercise of your Development Rights, and fail to correct such violation within 72 hours after notice to you, whether from us or any other party;
(7) you fail to pay us or our affiliates any amounts due and do not correct the failure within 10 days after written notice to you;
(8) you (or any of your owners) (a) fail on three or more separate occasions within any 12 consecutive month period to comply with this Agreement, whether or not we notify you of the failures, and, if we do notify you of the failures, whether or not you correct the failures after our delivery of notice to you; or (b) fail on two or more separate occasions within any 12 consecutive month period to comply with the same obligation under this Agreement, whether or not we notify you of the failures, and, if we do notify you of the failures, whether or not you correct the failures after our delivery of notice to you;
(9) you or any of your owners fail to comply with any other provision of this Agreement, and do not correct the failure within 30 days' notice to you; or
(10) you or an affiliate fails to comply with any other agreement with us or our affiliate and do not correct such failure within the applicable cure period, if any.
D. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION.
Upon termination or expiration of this Agreement you and your owners must immediately: (1) cease conducting the business granted hereunder or holding yourself out to the public as being a developer of Jeni's Ice Creams Scoop Shops except as permitted under Franchise Agreements; (2) return to us or destroy (as we require) any and all Confidential Information (other than as used by you in connection with the operation of any Jeni's Ice Creams Scoop Shop under a Franchise Agreement with us); (3) comply with all other standards we establish from time to time (and all applicable laws) in connection with the wind-down of your business contemplated by this Agreement; and (4) without limiting any other rights or remedies to which we may be entitled, you must pay all amounts owing to us pursuant to this Agreement up to the date of termination.
E. 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; and/or (2) 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:
- (a) within the Development Area, or
- (b) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section 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, 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 will not deprive you of your personal goodwill or ability to earn a living.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, several consequences can arise if a franchisee fails to comply with the franchise agreement. The agreement can be terminated automatically under certain conditions, such as assigning assets for the benefit of creditors or filing for bankruptcy. Cream can also terminate the agreement if a franchisee violates laws related to their development rights and fails to correct the violation within 72 hours of notice, fails to pay amounts due to Cream or its affiliates within 10 days of written notice, or fails to comply with other provisions of the agreement and does not correct the failure within 30 days of notice.
Specifically, Cream can terminate the franchise agreement if a franchisee fails to comply with the agreement on three or more separate occasions within a 12-month period, regardless of whether Cream provides notice or whether the franchisee corrects the failures. Similarly, termination can occur if a franchisee fails to comply with the same obligation under the agreement on two or more separate occasions within a 12-month period, irrespective of notice or correction. These stipulations highlight the importance of consistent compliance with all aspects of the franchise agreement.
Upon termination or expiration of the franchise agreement, the franchisee must immediately cease conducting the business, stop representing themselves as a Cream developer (except as permitted under other franchise agreements), return or destroy confidential information, comply with wind-down standards, and pay all outstanding amounts owed to Cream. These obligations ensure an orderly transition and protect Cream's interests and brand reputation. Cream also retains the right to demand exact compliance with every term of the agreement and can declare any breach a default, leading to termination before the agreement's expiration. This underscores the franchisor's commitment to upholding the standards and requirements of the franchise system.