After termination of the Cream Franchise Agreement, what is the geographic scope of the non-competition covenant regarding other Jeni's Ice Creams Scoop Shops?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
C. 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.
D. NON -INTERFERENCE.
During and after 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, employees, representatives, affiliates, successors and assigns not to) solicit, interfere, or attempt to interfere with our or our affiliates' relationships with any customers, franchisees, lenders, vendors, or consultants.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
Based on the 2025 FDD, the provided excerpts do not specify the geographic scope of the non-competition covenant after the termination of the Cream Franchise Agreement regarding other Jeni's Ice Creams Scoop Shops. The FDD excerpts discuss non-competition during the term of the agreement, but not after termination. The excerpts do mention restrictions on interference with Cream's relationships with customers, franchisees, etc., both during and after the term, but this is distinct from a non-competition covenant.
Item 23 details restrictive covenants, including non-competition during the term of the agreement and non-interference during and after the term. However, the non-competition clause applies only during the term of the agreement. The non-interference clause restricts franchisees from soliciting or interfering with Cream's relationships, but it does not prevent them from operating a competing business.
To fully understand the restrictions that apply after the termination of the Cream Franchise Agreement, a prospective franchisee should carefully review the complete Franchise Agreement, specifically the sections addressing termination and post-termination obligations. It would be prudent to consult with a legal professional to interpret these clauses and understand their implications. A prospective franchisee should ask Cream for clarification on the geographic scope and duration of any post-termination non-competition obligations.