What section of the Cream Area Development Agreement discusses restrictions on transfer?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
s fulfillment of your Development Rights;
- (4) you (and your owners) and the transferee (and its owners) sign all of the documents we are then requiring in connection with a transfer, in a form satisfactory to us, including: (i) a release of any and all claims (except for claims which cannot be released or
waived pursuant to applicable law) against us and our affiliates and our and their owners, officers, directors, employees, and agents, and (ii) covenants that you and your transferring owners agree to satisfy all post-termination obligations under this Agreement;
- (5) if the transfer is of this Agreement or your Development Rights, you have satisfied all of the conditions to transfer all Franchise Agreements that you have executed in connection with this Agreement (and you understand that you may not transfer this Agreement or your Development Rights, without concurrently transferring all associated Franchise Agreements executed pursuant to the terms hereof, and the operations of any associated Jeni's Ice Creams Scoop Shops);
- (6) the transferee must (if the transfer is of this Agreement or your Development Rights) sign our then-current form of area development agreement and related documents, any and all of the provisions of which may differ materially from any and all of those contained in this Agreement; provided, that the term of the new area development agreement signed will equal the then-remaining Term and Development Schedule;
- (7) you pay us a transfer fee in the amount of $25,000, provided, that no transfer fee is due for the transfer from a deceased owner to such owner's surviving spouse, provided that such transfer is otherwise subject to the terms and conditions of this Section 4 (provided further, that you reimburse us for any direct costs we incur in connection with documenting and otherwise processing such transfer, including reasonable legal fees); and
- (8) the transferee(s) must (if the transfer is any beneficial or ownership interest in you), sign our then-current form of guaranty undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between you and us, and an updated Attachment D;
- (9) you provide us the evidence we request to show that appropriate measures have been taken to effect the transfer as it relates to the fulfillment of your Development Rights, including, transferring all necessary business licenses, and material agreements, or obtaining new business licenses and material agreements.
We may review all information regarding your Development Rights that you give the transferee, correct any information that we believe is inaccurate, and give the transferee copies of any reports that you have given us or we have made regarding your Development Rights.
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, Section 4.C of Item 23 outlines the conditions for transfer of the Area Development Agreement or Development Rights. Specifically, if a Cream franchisee wishes to transfer their rights, they must fulfill several requirements. These include satisfying all conditions to transfer any Franchise Agreements associated with the Area Development Agreement, ensuring the transferee signs Cream's current area development agreement, and paying a transfer fee of $25,000. The transferee must also sign a guaranty undertaking, and the franchisee must provide evidence that appropriate measures have been taken to fulfill the Development Rights transfer.
There are some exceptions to the transfer fee. For example, no transfer fee is due if a deceased owner transfers to their surviving spouse, although this transfer is still subject to the other terms and conditions. Additionally, the transferee must sign Cream's current form of guaranty, agreeing to be bound by the Area Development Agreement and any related agreements. An updated Attachment D must also be signed. Cream retains the right to review all information provided to the transferee, correct any inaccuracies, and provide the transferee with copies of any relevant reports.
Cream also has the right to review information given to the transferee and correct inaccuracies. It is important to note that Cream's consent to a transfer does not represent a guarantee of success for the franchisee or the transferee, nor does it waive any claims Cream may have against the franchisee. Furthermore, Section 4.E discusses Cream's right of first refusal.
These transfer conditions are typical in franchising, as franchisors want to ensure that any new area developer meets their standards and is capable of fulfilling the development obligations. The transfer fee compensates Cream for the administrative costs and efforts involved in approving and processing the transfer. The right of first refusal allows Cream to maintain control over who enters their system and to potentially acquire the development rights themselves.