Reference no: EM133267911

Question: Ann signs a contract to acquire a franchise to build a new Burger Queen fast-food restaurant on the corner of 12th and Vine Streets. Ann is a marketing executive who has never previously run a restaurant. She chose BQ because it is a popular and well-run franchise system that usually provides solid profits for franchise owners.

The projected site has been approved by the BQ real estate department as having suitable traffic for a franchise, the land is properly zoned, and Ann has an option on the property and the necessary capital to build and run the franchise. BQ, however, breaches the contract and refuses to award her a franchise. She sues, claiming lost profits for her aborted business. At trial, Ann will show that (1) only about 5 percent of BQ franchises lose money; (2) the average annual profit of a franchise is $250,000, (3) she would be expected to own the franchise for at least 10 years, and therefore (4) she estimates that the total profits she lost on the transaction are $2.3 million. BQ argues that this is wholly speculative since Ann has never run this kind of business before. It also introduces evidence that Ann had also explored the possibility of a Wallyburger franchise-Wallyburger is BQ's chief competitor in the fast-food burger market-and could have been placed on the same spot.

A Wallyburger representative will testify that Ann had been approved for a Wallyburger franchise, and the company would have been happy to have one of its restaurants on that site.

Because a Wallyburger franchise yields annual profits nearly as high as that of BG, the company argues that Ann failed to mitigate her damages by buying a competing franchise. How much of her $2.3 million in expected profits should Ann get?