Does Cream prohibit owners from having a direct or indirect interest in a Competitive Business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: RECEIPTS]
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. [Item 23: RECEIPTS]
E. COVENANT NOT TO COMPETE.
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.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, Cream restricts owners from having a direct or indirect interest in a Competitive Business during the term of the agreement. Specifically, during the term, franchisees and their owners must not have any direct or indirect ownership interest in a Competitive Business, regardless of its location. An exception exists for owning less than 5% of a Competitive Business if its stock is publicly traded on a recognized United States stock exchange.
Cream defines a "Competitive Business" as any business (excluding other Cream franchises) that operates or franchises businesses where ice cream, ice cream-based desserts/drinks, or similar frozen products account for more than 10% of total gross revenue. This restriction extends not only to the franchisee but also to their spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns.
Following the termination or expiration of the franchise agreement, a similar restriction applies for two years. During this period, franchisees and their owners cannot have a direct or indirect interest in a Competitive Business or perform services for one if that business is located within the Development Area or within a 5-mile radius of any Cream Scoop Shop. This post-term covenant not to compete is common in franchising to protect the brand's market share and confidential information.
These restrictions are designed to protect Cream's market position and prevent franchisees from using the brand's knowledge and resources to benefit a competing business. Prospective franchisees should carefully consider these limitations, especially if they have existing business interests or plan to engage in related ventures after the franchise agreement ends. Understanding the definition of "Competitive Business" and the geographic scope of the restrictions is crucial for compliance.