Who is subject to the non-compete agreement for Cream besides the franchisee?
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 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the non-compete agreement extends beyond just the franchisee. Specifically, the agreement applies to the franchisee and their owners, as well as their current and former spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns. This means Cream aims to prevent a wide range of individuals and entities connected to the franchisee from engaging in competitive activities that could harm the franchise.
The non-compete restrictions prevent these individuals and entities from having a direct or indirect interest in a Competitive Business, performing services for a Competitive Business, or diverting business from 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) 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.
However, there is an exception: 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 a violation. This allows for minor investments in publicly traded companies that might technically be considered competitors. This broad scope is fairly typical in franchising to protect the brand and market share, but potential franchisees should carefully consider the implications for themselves and those closely related to them.
Cream franchisees should be aware that they must actively ensure that all listed parties adhere to these non-compete terms. The franchisee is responsible for using their best efforts to prevent these related parties from engaging in activities that violate the non-compete agreement. This could involve communicating the terms of the agreement to family members and business associates and taking steps to prevent them from becoming involved in competitive businesses.