Does the non-competition clause in the Cream franchise agreement prevent franchisees from working as a consultant for 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 exchange will not be deemed to violate this subparagraph);
- (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating; or
- (3) divert or attempt to divert any actual or potential business or customer of any Jeni's Ice Creams Scoop Shop to a Competitive Business.
The term "Competitive Business" means any business (excluding any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with us) operating or granting franchises or licenses to others to operate any business for which ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, or similar products represents more than 10% of the total gross revenue.
B. NON-INTERFERENCE.
During and after 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, employees, representatives, affiliates, successors and assigns not to) solicit, interfere, or attempt to interfere with our or our affiliates' relationships with any customers, franchisees, licensees, lenders, suppliers, or consultants.
C.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the franchise agreement includes non-competition clauses that restrict a franchisee's activities during the term of the agreement and after termination or expiration. During the term, franchisees and their owners are prohibited from performing services as a consultant for a Competitive Business, wherever located or operating. A Competitive Business is defined as any business (excluding other Cream franchises) that operates or grants franchises or licenses to others for 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.
After the termination or expiration of the franchise agreement, the non-compete restrictions continue for two years. During this period, franchisees are restricted from performing services as a consultant for a Competitive Business if that business is located or operating within the Development Area or within a 5-mile radius of any Cream Scoop Shop. These restrictions also apply to the franchisee's owners, immediate family members, and other related parties.
These non-competition clauses have significant implications for prospective Cream franchisees. During the franchise term, franchisees are prevented from engaging in any consulting work for competing businesses, which could limit their ability to pursue other income-generating activities in the same industry. After the franchise agreement ends, the restrictions continue for two years within a defined geographic area, potentially limiting career options. Franchisees should carefully consider these restrictions and how they might affect their future business and employment opportunities.
Cream franchisees should be aware that these non-compete obligations extend not only to themselves but also to their owners, immediate family members, and other related parties. This broad reach means that franchisees must ensure that all relevant individuals are aware of and comply with these restrictions. The franchisor's right to enforce these covenants could significantly impact the franchisee's and related parties' ability to participate in the ice cream or frozen dessert industry, even after the franchise relationship concludes.