During the term of the agreement, what are the owners of a Cream franchise prohibited from doing regarding competitive businesses?
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.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, during the term of the franchise agreement, franchisees and their owners are restricted from engaging in activities that could be considered competitive to the Cream business. Cream has granted rights to the franchisee based on the agreement that the franchisee will deal exclusively with them.
Specifically, franchisees and their owners cannot have any direct or indirect ownership interest in a Competitive Business, regardless of its location. The only exception to this is if the equity ownership is less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange. They are also prohibited from performing services for a Competitive Business in any capacity, including as a director, officer, manager, employee, consultant, representative, or agent.
Furthermore, franchisees and their owners are not allowed to divert or attempt to divert any actual or potential business or customers of any Jeni's Ice Creams Scoop Shop to a Competitive Business. A "Competitive Business" is defined as any business (excluding other Jeni's Ice Creams Scoop Shops operating under a franchise agreement with Cream) that operates or grants franchises or licenses to others for businesses where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, represent more than 10% of the total gross revenue.