How is 'Applicable Law' defined within the Dog Haus franchise agreement?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
If Applicable Law implies a covenant of good faith and fair dealing in this Agreement, the Parties agree that the covenant shall not imply any rights or obligations that are inconsistent with a fair construction of the terms of this Agreement.
Additionally, if Applicable Law shall imply the covenant, Area Developer agrees that: (i) this Agreement (and the relationship of the Parties that is inherent in this Agreement) grants Franchisor the discretion to make decisions, take actions and/or refrain from taking actions not inconsistent with Franchisor's explicit rights and obligations under this Agreement that may affect favorably or adversely Area Developer's interests; (ii) Franchisor will use its judgment in exercising the discretion based on Franchisor's assessment of its own interests and balancing those interests against the interests of the Dog Haus Area Developers generally (including Franchisor and its Affiliates if applicable), and specifically without considering Area Developer's individual interests or the individual interests of any other particular Dog Haus Area Developer; (iii) Franchisor will have no liability to Area Developer for the exercise of Franchisor's discretion in this manner, so long as the discretion is not exercised in bad faith; and (iv) in the absence of bad faith, no trier of fact in any arbitration or litigation shall substitute its judgment for Franchisor's judgment so exercised.
Source: Item 23 — RECEIPTS (FDD pages 87–328)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, the term 'Applicable Law' is referenced within the context of good faith and fair dealing. Specifically, if Applicable Law implies a covenant of good faith and fair dealing in the franchise agreement, the parties agree that this covenant should not imply any rights or obligations inconsistent with a fair construction of the agreement's terms. This means that while there's an understanding of fair practice, it won't override the explicitly stated terms of the agreement.
Furthermore, if Applicable Law implies the covenant, the Area Developer acknowledges that Dog Haus has the discretion to make decisions and take actions that may affect the Area Developer's interests, based on Dog Haus's assessment of its own interests and the interests of its Area Developers generally. This highlights that Dog Haus will consider the broader network of franchisees rather than individual interests when making decisions.
Dog Haus will not be liable to the Area Developer for exercising its discretion, as long as it's not done in bad faith. Additionally, in the absence of bad faith, no third party can substitute their judgment for Dog Haus's judgment. This clause emphasizes the importance of the written agreement and limits the franchisee's ability to claim bad faith unless there is clear evidence to support it, providing Dog Haus with significant decision-making latitude.