Does the Cream non-compete covenant after termination apply to the franchisee's owners?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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. The restrictions in this Section will also apply after any transfer, to the transferor and its owners, for a period of two years beginning on the effective date of the transfer, with the force and effect as though this Agreement had been terminated for such parties as of such date.
F. CONTINUING OBLIGATIONS.
All of our and your (and your owners') obligations which expressly or by their nature survive this Agreement's expiration or termination will continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire, including all obligations relating to non-disparagement, non-competition, non-interference, confidentiality, information security, Innovations, and indemnification.
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 non-compete covenant extends to the franchisee's owners after termination or expiration of the franchise agreement. Specifically, for two years after the agreement ends, both the franchisee and their owners are restricted from engaging in or having an interest in a competitive business. This restriction applies within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
This means that if a franchisee leaves the Cream system, the owner(s) cannot immediately open a similar ice cream business or work for a competitor in the specified geographic area. This provision is designed to protect Cream's market share and brand reputation by preventing former franchisees and their owners from using their knowledge of the Cream system to compete against it.
The FDD also states that the restricted period for any person failing to comply with the non-compete obligations begins on the date they start complying with the section, which may be the date a court order is entered enforcing the provision. Cream emphasizes that franchisees and their owners possess general skills and abilities and have other opportunities to earn a living, so enforcing the non-compete will not deprive them of their personal goodwill or ability to earn a living. The restrictions also apply to the transferor and its owners after any transfer for two years, as if the agreement had been terminated for those parties.
Furthermore, the FDD clarifies that all obligations that survive the agreement's expiration or termination, including those related to non-competition, continue in full force and effect until they are fully satisfied or naturally expire. This ensures that the non-compete obligations remain enforceable even after the franchise agreement has ended.