Under the Cream franchise agreement, are franchisees allowed to divert potential customers to a Competitive Business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
to do all other lawfully permitted acts to further the purposes of this Section with the same legal force and effect as if executed by you.
7. RESTRICTIVE COVENANTS.
A. 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 exc
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, Cream franchisees are prohibited from diverting business to competitors. During the term of the franchise agreement, franchisees and their owners must not divert or attempt to divert any actual or potential 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) that operates or franchises businesses where ice cream, ice cream-based desserts or drinks, and/or other frozen desserts or drinks, represent more than 10% of the total gross revenue. This restriction is in place because Cream has granted the franchisee rights under the agreement based on the understanding that the franchisee will deal exclusively with them.
This non-compete clause ensures that franchisees focus solely on growing their Cream business and do not use their position to benefit competing businesses. This restriction extends not only to the franchisee but also to their owners, current and former spouses, immediate family members, owners, officers, directors, representatives, affiliates, successors, and assigns, requiring them to actively prevent any diversion of business to competitors. The clause applies to any Competitive Business, regardless of its location or operation.
For a prospective Cream franchisee, this means a complete commitment to the Cream brand during the term of the agreement. It prevents franchisees from simultaneously operating or promoting competing ice cream businesses, ensuring their full dedication to Cream. Failure to comply with this restriction could result in a breach of the franchise agreement, potentially leading to termination and other legal consequences. This is a fairly standard restriction in franchising, as franchisors want to protect their brand and market share.