What is the relevance of state laws to the financial performance representations made by Cream?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
for the Item 19 Shops is divided into quartiles based on annual Net Profit (defined below) for the 2024 calendar year.
| Section in | |
|---|---|
| Summary | |
| Agreement | wide basis, consolidated with any other proceeding, or brought on your behalf by an association or agent. |
| Franchise Agreement | Subject to state law and your obligation to arbitrate, you must |
| – Section 17.H | commence actions in the court nearest to our or, as applicable, our successor’s or assign’s then-current principal place of business (currently, Columbus, Ohio). |
| Area Development | Subject to state law and your obligation to arbitrate, you must |
| Agreement – Section | commence actions in the court nearest to our or, as applicable, our |
| 7.G | successor’s or assign’s then-current principal place of business (currently, Columbus, Ohio). |
| Franchise Agreement | Except for the Federal Arbitration Act and other federal law, the |
| – Section 17.G | laws of the state of Ohio govern, without regard to its conflict of laws rules, except that any state law regulating the offer or sale of franchises or governing the relationship of a franchisor and its franchisee will not apply unless its jurisdictional requirements are met independently from the Franchise Agreement’s terms (subject to state law). |
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 51–57)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, state laws play a role in governing the relationship between Cream and its franchisees, but they do not automatically apply to the franchise or area development agreements. Specifically, state laws regulating the offer or sale of franchises or governing the franchisor-franchisee relationship will only apply if their jurisdictional requirements are met independently of the terms outlined in Cream's Franchise Agreement or Area Development Agreement. This means that a state law must have its own basis for applying, separate from the agreements themselves.
This condition is noted as being "subject to state law," indicating that while the agreements are primarily governed by Ohio law, the applicability of specific state franchise laws is not entirely superseded. This is a fairly standard practice in franchising, as federal law allows states to enact their own franchise-specific regulations to protect franchisees. These laws can cover various aspects of the franchise relationship, including registration requirements, disclosure obligations, and termination rights.
For a prospective Cream franchisee, this means that the laws of the state in which they operate their franchise may provide additional protections or impose additional obligations on Cream beyond what is stipulated in the franchise agreement. It is crucial for franchisees to understand the franchise laws in their specific state and how they interact with the terms of the franchise agreement. Consulting with a franchise attorney in their state is advisable to ensure full compliance and to understand their rights and obligations under both the franchise agreement and applicable state laws.
In practical terms, a Cream franchisee should not assume that the franchise agreement is the only source of legal obligations and rights. State laws can supplement or modify the terms of the agreement, particularly in areas where state law is more protective of franchisees. Therefore, understanding the interplay between the franchise agreement and state law is essential for a successful and legally compliant franchise operation.