What is prohibited in legal actions or arbitration proceedings regarding Noodles & Company's judgment?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
grants us the discretion to make decisions, take actions and/or refrain from taking actions not inconsistent with your explicit rights and obligations hereunder that may affect favorably or adversely your interests; (b) we will use our judgment in exercising such discretion based on our assessment of our own interests and balancing those interests against the interests of the owners of Noodles & Company Restaurants generally (including ourselves, and our Affiliate and other Area Operators), and specifically without considering your individual interests or the individual interests of any other particular Area Operator; (c) we will have no liability to you for the exercise of our discretion in this manner so long as such discretion is not exercised in bad faith toward you; and (d) in the absence of such bad faith, no trier of fact in any legal action or arbitration proceeding shall substitute its judgment for our judgment so exercised.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to the 2025 Noodles & Company FDD, in any legal action or arbitration proceeding, no trier of fact shall substitute its judgment for Noodles & Company's judgment, provided that Noodles & Company's discretion was not exercised in bad faith. This means that if Noodles & Company makes a decision that affects a franchisee's interests, a court or arbitrator cannot second-guess that decision as long as Noodles & Company acted in good faith.
This clause is significant for prospective Noodles & Company franchisees because it limits their ability to challenge Noodles & Company's decisions in court or arbitration. Even if a franchisee believes that Noodles & Company made a poor decision, they will not be able to overturn it unless they can prove that Noodles & Company acted in bad faith. Bad faith is a high legal standard, generally requiring evidence of malicious intent or deliberate misconduct.
This type of clause is not uncommon in franchise agreements, as franchisors often seek to protect their business judgment and maintain consistency across the franchise system. However, franchisees should be aware of this limitation and carefully consider the potential implications before signing the franchise agreement. It is important to understand what constitutes "bad faith" in the relevant jurisdiction and to assess the potential risks associated with this provision.