Does the non-competition clause in the Cream franchise agreement restrict franchisees from diverting potential customers to 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 exc
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 a non-competition clause that restricts franchisees from diverting potential customers. During the term of the agreement, franchisees and their owners must not divert or attempt to divert any actual or potential business or customer of any Jeni's Ice Creams Scoop Shop to a Competitive Business.
A "Competitive Business" is defined as any business (excluding any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with Cream) that operates or grants franchises or licenses to others to operate a business where 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.
This restriction means that as a Cream franchisee, you are obligated to actively avoid actions that could lead customers away from Cream and towards competing businesses. This obligation extends not only to the franchisee but also to their owners and requires them to use their best efforts to ensure that their spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns also comply with this restriction. This is a fairly standard clause in franchise agreements to protect the brand's customer base and market share.