In Indiana, can Dog Haus obtain benefits from a franchisee's business dealings without accounting for and transmitting the benefit to the franchisee?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
- 18.12.2 In granting its approval of the Franchised Locations, designating suppliers, setting standards and the like, Franchisor shall exercise its Business Judgment.
However, in the exercise of its Business Judgment, Franchisor shall not be liable to Area Developer or the Owners or anyone else, if Franchisor's exercise of its Business Judgment results in a business loss or if the products or services provided fail to meet the expectations of Franchisor, Area Developer, the Owners or other parties.
Franchisor disclaims all warranties and liability for the acts or omissions of any contractors, vendors, suppliers, products or employees which Area Developer uses, purchases, retains or hires pursuant to Franchisor's exercise of its Business Judgment.
- 18.12.3.
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)
Based on the 2025 Dog Haus Franchise Disclosure Document, the franchisor's discretion in business decisions and its relationship with area developers are outlined. Dog Haus retains the right to make decisions and take actions that may affect an area developer's interests, without considering individual interests.
Dog Haus will use its judgment based on its own interests and those of its area developers generally. The agreement specifies that Dog Haus will not be liable to the area developer for exercising its discretion, provided it is not done in bad faith. This means that Dog Haus can make decisions that benefit the brand as a whole, even if those decisions adversely affect an individual franchisee, as long as the decisions are made in good faith.
The document also states that if applicable law implies a covenant of good faith and fair dealing, it should not imply rights or obligations inconsistent with the agreement's terms. This further reinforces Dog Haus's ability to act in its best interest and the interest of the collective group of franchisees, even if it means an individual franchisee does not directly benefit or even experiences a loss.
However, the FDD excerpt does not explicitly address whether Dog Haus can obtain benefits from a franchisee's business dealings without accounting for and transmitting the benefit to the franchisee in Indiana. To fully understand the specific regulations and legal limitations regarding this issue in Indiana, a prospective franchisee should seek clarification from Dog Haus and consult with a legal professional experienced in franchise law.