During the term of the Cream Franchise Agreement, can the franchisee divert customers to a Competitive Business?
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 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, franchisees are prohibited from diverting customers to a competitive business during the term of the Franchise Agreement. The agreement specifies that franchisees and their owners must not divert or attempt to divert any actual or potential business or customer 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, or similar products represent more than 10% of the total gross revenue.
This restriction is in place to protect Cream's market share and customer base. It ensures that franchisees focus on growing their Cream business and do not use their position to benefit competing businesses. This type of clause is standard in franchise agreements to maintain brand integrity and prevent conflicts of interest.