(b) That's right. It is a universal term in all contracts that the parties must to act in accordance with the dictates of good faith. This means that they will exercise their contractual powers honestly and reasonably, and not capriciously or for extraneous (outside) purposes.
In the example, to terminate the franchise for a very minor breach, and for the extraneous purposes that motivate B's decision, is likely to be contrary to the requirements of a duty of good faith.