After termination of the Cream Franchise Agreement, what is the geographic scope of the non-competition covenant?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
E. COVENANT NOT TO COMPETE.
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, after the termination or expiration of the Franchise Agreement, the non-compete covenant extends for two years. During this period, the franchisee and their owners are restricted from having any direct or indirect interest in a Competitive Business or performing services for one.
The geographic scope of this restriction includes two specific areas. First, it applies within the Development Area that was assigned to the franchisee. Second, it extends to a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. This means that even if a franchisee's Development Area is smaller than 5 miles from another Cream location, the non-compete still applies to that 5-mile radius around other shops.
It's important to note that the start date of the two-year restricted period may be delayed if the franchisee does not immediately comply with the non-compete obligations upon termination or expiration. In such cases, the restricted period begins when the franchisee actually starts complying with the terms, potentially extending the overall duration of the restriction. These restrictions also apply to the transferor after any transfer for a period of two years beginning on the effective date of the transfer.