During the term of the Cream Franchise Agreement, can the franchisee own or provide services 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 the 2025 FDD, Cream franchisees face restrictions on owning or working for competitive businesses during the term of their Franchise Agreement. Cream requires that franchisees and their owners not have any direct or indirect interest in a Competitive Business, regardless of its location. The only exception is if the franchisee has equity ownership of less than 5% of a Competitive Business whose stock is publicly traded on a recognized United States stock exchange.
In addition to ownership restrictions, Cream franchisees and their owners are prohibited from performing services for a Competitive Business in any capacity, including as a director, officer, manager, employee, consultant, representative, or agent. They also cannot 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 any Jeni's Ice Creams Scoop Shop operated under a franchise agreement with Cream) that operates or grants franchises or licenses to others to operate a business where 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. This definition is important for prospective franchisees to understand, as it clarifies the scope of businesses that are considered competitive and therefore restricted.
These non-compete terms are typical in franchise agreements to protect the brand and market share of the franchisor. Prospective Cream franchisees should carefully consider these restrictions and ensure they do not have any conflicting business interests before entering into a Franchise Agreement. It is also important to note that these restrictions apply not only to the franchisee but also to their owners, immediate family members, and other related parties.