What is the 'business judgment rule' as it applies to the Brueggers Bagels franchise agreement?
Brueggers_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding any contrary provisions contained in this Agreement, Franchisor and Franchisee acknowledge and agree that (a) this Agreement (and the relationship of the parties which arises from this Agreement) grants Franchisor the discretion to make decisions, take actions and/or refrain from taking actions not inconsistent with Franchisee's explicit rights and obligations hereunder that may affect favorably or adversely Franchisee's interests; (b) Franchisor shall use its business judgment in exercising such discretion based on its assessment of its own interests and balancing those interests against the interests of the owners of Bakeries generally (including Franchisor and its affiliates and other franchisees), and specifically without considering Franchisee's individual interests or the individual interests of any other particular franchisee; (c) Franchisor shall have no liability to Franchisee for the exercise of its discretion in this manner; and (d) even if Franchisor has numerous motives for a particular action or decision, so long as at least one motive is a reasonable business justification no trier of fact in any legal action shall substitute its judgment for Franchisor's judgment so exercised, and such action or decision shall not be subject to challenge for abuse of discretion**.
IF FRANCHISOR TAKES ANY ACTION OR CHOOSES NOT TO TAKE ANY ACTION IN ITS DISCRETION WITH REGARD TO ANY MATTER RELATED TO THIS AGREEMENT AND SUCH ACTION OR INACTION IS CHALLENGED FOR ANY REASON, THE PARTIES SHALL AGREE TO EXPRESSLY DIRECT THE TRIER OF FACT, IN ANY PLEADING FILED OR LEGAL PROCEEDING RESULTING THERETO, THAT FRANCHISOR'S RELIANCE ON A BUSINESS REASON IN THE EXERCISE OF ITS DISCRETION UNDER THE BUSINESS JUDGMENT RULE IS TO BE VIEWED AS A REASONABLE AND PROPER EXERCISE OF ITS DISCRETION, WITHOUT REGARD TO WHETHER OTHER REASONS FOR ITS DECISION MAY EXIST AND WITHOUT REGARD TO WHETHER THE TRIER OF FACT WOULD INDEPENDENTLY ACCORD THE SAME WEIGHT TO THE BUSINESS REASON.**
Source: Item 22 — CONTRACTS (FDD page 61)
What This Means (2025 FDD)
According to Brueggers Bagels's 2025 Franchise Disclosure Document, the business judgment rule grants Brueggers Bagels the discretion to make decisions that may affect a franchisee's interests, either favorably or adversely. Brueggers Bagels will use its business judgment based on its assessment of its own interests and balancing those interests against the interests of the owners of Bakeries generally, without specifically considering any franchisee's individual interests.
Brueggers Bagels will not be liable to the franchisee for exercising its discretion in this manner. Even if Brueggers Bagels has numerous motives for a particular action or decision, as long as at least one motive is a reasonable business justification, no trier of fact in any legal action shall substitute its judgment for Brueggers Bagels's judgment so exercised, and such action or decision shall not be subject to challenge for abuse of discretion.
If Brueggers Bagels takes any action or chooses not to take any action in its discretion with regard to any matter related to the agreement and such action or inaction is challenged for any reason, the parties shall agree to expressly direct the trier of fact, in any pleading filed or legal proceeding resulting thereto, that Brueggers Bagels's reliance on a business reason in the exercise of its discretion under the business judgment rule is to be viewed as a reasonable and proper exercise of its discretion, without regard to whether other reasons for its decision may exist and without regard to whether the trier of fact would independently accord the same weight to the business reason. This clause significantly limits a franchisee's ability to challenge decisions made by Brueggers Bagels, provided there is a reasonable business justification behind the decision.