Does the non-competition covenant during the term of the Cream agreement apply worldwide?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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-competition covenant during the term of the agreement has a worldwide scope. Cream explicitly states that franchisees and their owners agree not to have any direct or indirect interest in a Competitive Business, wherever it is located or operating. This restriction applies to ownership, services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, and diverting business from any Jeni's Ice Creams Scoop Shop to a Competitive Business. The only exception is for equity ownership of less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange.
This means that during the term of the franchise agreement, a Cream franchisee is restricted from being involved in any competitive ice cream business anywhere in the world, whether through ownership or employment. The definition of a "Competitive Business" includes any business (excluding other Cream franchises) 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.
For a prospective franchisee, this is a significant restriction. It means that while operating a Cream franchise, they cannot invest in or work for any other ice cream-related business globally. This could limit their investment options and career choices during the franchise term. Franchisees should carefully consider this restriction and how it might impact their future plans before entering into a franchise agreement with Cream.