Does the Itan franchise agreement create a fiduciary relationship between Itan and the franchisee?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
If applicable Law implies into this Agreement a covenant of good faith and fair dealing, the covenant may not imply any right or obligation inconsistent with the express terms hereof.
This Agreement, and the relationship of the parties inherent in this Agreement, grants us discretion to make decisions, take actions or refrain from taking actions not inconsistent with our explicit rights and obligations under this Agreement that may favorably or adversely affect your interests.
We will use our judgment to exercise this discretion based on our assessment of our own interests and balancing our interests against the interests of our franchisees, but without considering the individual interests of you or any other franchisee.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to the 2025 Itan Franchise Disclosure Document, the franchise agreement does not establish a fiduciary relationship between Itan and its franchisees. Section 24.9, titled 'Good Faith Covenant,' clarifies the extent of any implied covenant. It states that if applicable law implies a covenant of good faith and fair dealing, this covenant cannot imply any right or obligation inconsistent with the express terms of the agreement.
Furthermore, the agreement explicitly grants Itan the discretion to make decisions and take actions that may affect a franchisee's interests, without requiring Itan to prioritize the individual interests of any specific franchisee. Itan will base its decisions on its own interests, balancing them against the collective interests of all franchisees. This clause emphasizes that Itan's interests can take precedence over an individual franchisee's interests.
This arrangement is typical in franchising, where the franchisor needs the flexibility to manage the brand and system for the benefit of the entire network. However, it also means that franchisees must be aware that Itan is not obligated to act solely in their best interests. Prospective franchisees should carefully consider this aspect and seek legal counsel to fully understand their rights and obligations under the franchise agreement.