If I transfer my Cream Franchise Agreement to a wholly-owned entity, what obligations must that entity expressly assume?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If you do not originally sign this Agreement as an Entity, you may transfer this Agreement to an Entity; provided, that: (1) such Entity conducts no business other than your Shop and, if applicable, other Jeni's Ice Creams Scoop Shops; (2) you maintain management control of such Entity; (3) you own and control 100% of the economic interests, equity, and voting power of all issued and outstanding ownership interests in such Entity; (4) all of the assets of your Shop are owned, and the business of your Shop is conducted only by, that single Entity; (5) you satisfy all conditions applicable to a transfer described in Section 12.C, except that we will not require payment of a transfer fee as described in Section 12.C(10) (provided, that you reimburse us for any costs we incur in connection with documenting and otherwise processing such transfer, including reasonable legal fees) and our right of first refusal under Section 12.F will not apply; and (6) that Entity must expressly assume all of your obligations under this Agreement, your Lease, and otherwise satisfy the conditions under this Agreement, including delivery of insurance certificates to us. You agree to remain personally liable under this Agreement as if the transfer to the Entity did not occur, including by signing our then-current form of personal guaranty of the obligations of such Entity. You must also sign the form of consent to assignment and assignment satisfactory to us which may include a release of any and all claims (except for claims which cannot be released or waived pursuant to an applicable franchise statute) against us and our affiliates, and our and their owners, officers, directors, employees, and agents.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if you transfer your Franchise Agreement to a wholly-owned entity, that entity must expressly assume all of your obligations under the Franchise Agreement. If you are transferring your shop, the entity must also assume all obligations under your Lease. This means the new entity takes on all the responsibilities and duties you originally agreed to in both the Franchise Agreement and the Lease.
This requirement ensures that Cream maintains a consistent standard of operation and protects its interests even when the franchise ownership structure changes. The franchisor wants to make sure that the entity is legally bound to uphold all the original commitments, maintaining the integrity of the franchise system.
Additionally, even after transferring the agreement to a wholly-owned entity, you, as the original franchisee, remain personally liable under the agreement. You must also sign Cream's current form of personal guaranty, which further reinforces your commitment to ensuring the entity fulfills all obligations. This dual layer of responsibility—the entity's direct assumption and your personal guarantee—provides Cream with added security and recourse.
It is important to note that while a transfer fee is typically required for franchise transfers, Cream waives this fee when the transfer is to a wholly-owned entity. However, you are still responsible for reimbursing Cream for any direct costs they incur while documenting and processing the transfer, including reasonable legal fees. This is a common practice in franchising, as franchisors need to cover their administrative and legal expenses associated with the transfer process.