After termination of the Cream Area Development Agreement, what actions are prohibited by the non-competition covenant?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
For two years beginning on the date of termination or expiration of this Agreement, 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, employees, 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; and/or (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, in each case, if such Competitive Business is located or operating:
- (a) within the Development Area, or
- (b) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section fails to comply with these obligations as of the date of termination or expiration, the two-year restricted period for that person will commence on the date the person begins to comply with this Section, which may be the date a court order is entered enforcing
this provision. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills. Consequently, our enforcing the covenants made in this Section will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section will also apply after any transfer, to the transferor and its owners, for a period of two years beginning on the effective date of the transfer, with the force and effect as though this Agreement had been terminated for such parties as of such date.
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, for two years after the termination or expiration of the Area Development Agreement, the franchisee and their owners must not engage in certain competitive activities. Specifically, they cannot have any direct or indirect ownership interest in a Competitive Business. They are also prohibited from performing services for a Competitive Business as a director, officer, manager, employee, consultant, representative, or agent.
These restrictions apply if the Competitive Business is located or operating within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. The franchisee is also responsible for ensuring that their current and former spouses, immediate family members, owners, officers, directors, employees, representatives, affiliates, successors, and assigns also adhere to these restrictions.
The agreement specifies that if any person restricted by this section fails to comply with these obligations, the two-year restricted period for that person will commence on the date they begin to comply. Cream states that enforcing these covenants will not deprive the franchisee of their personal goodwill or ability to earn a living, as they possess general skills and abilities and have other opportunities. These restrictions also apply to the transferor and its owners for two years after any transfer, as if the agreement had been terminated for such parties as of the transfer date.