Under what conditions can HR exercise its reserved rights or discretion in the Hardees franchise agreement, even if it potentially impacts the franchisee negatively?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
its right and/or discretion on the basis of its judgment of what is in its best interests. This also applies if HR is deemed to have a right and/or discretion. HR's judgment of what is in the best interests of the System, at the time its decision is made or its right or discretion is exercised, can be made without regard to whether: (1) other reasonable alternative decisions or actions, or even arguably preferable alternative decisions or actions, could have been made by HR; (2) HR's decision or the action taken promotes its financial or other individual interest; (3) HR's decision or the action taken applies differently to Franchisee and one or more other franchisees or HR company-operated or affiliate-operated operations; or (4) HR's decision or the action taken is adverse to Franchisee's interests. HR will have no liability to Franchisee for any such decision or action. HR and Franchisee intend that the exercise of HR's right or discretion will not be subject to limitation or review. If applicable law implies a covenant of good faith and fair dealing in this Agreement, HR and Franchisee agree that such covenant will not imply any rights or obligations that are inconsistent with a fair construction of the terms of this Agreement and that this Agreement grants HR the right to make decisions, take actions and/or refrain from taking actions not inconsistent with Franchisee's rights and obligations under this Agreement.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, HR (the franchisor) retains significant rights and discretion that can impact franchisees, even if those actions are adverse to the franchisee's interests. HR can make decisions based on its judgment of what is in the best interests of the Hardees system as a whole. This allows Hardees to act in ways that may not be optimal for every individual franchisee.
Specifically, Hardees's decisions do not need to prioritize the franchisee's financial interests or treat all franchisees equally. Hardees is not obligated to choose the most reasonable or preferable course of action from the franchisee's perspective. This means Hardees can implement changes or policies that benefit the overall brand or other franchisees, even if those changes negatively affect a particular franchisee's business. The franchise agreement explicitly states that Hardees will not be liable to the franchisee for any such decisions or actions.
The agreement emphasizes that Hardees's exercise of its rights and discretion will generally not be subject to limitation or review. Even if applicable law implies a covenant of good faith and fair dealing, this covenant will not override Hardees's right to make decisions consistent with the terms of the franchise agreement. This clause reinforces Hardees's broad authority and limits the franchisee's ability to challenge Hardees's decisions, even if those decisions have negative consequences for the franchisee's business. Prospective franchisees should carefully consider the implications of these terms and seek legal counsel to fully understand their rights and obligations under the franchise agreement.