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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

  • 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 Company 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 Company, however, breaches the contract and refuses to award her a franchise.
  • She sues, claiming lost profits for her aborted business.

At trial, Ann shows that:

  1. Only about 5% of BQ franchises lose money;
  2. The average annual profit of a franchise is $250,000;
  3. Ann would be expected to own the franchise for at least 10 years, and therefore:
  4. Ann estimates that the total profits she lost on the transaction are $2.3 million.

BQ Company argues:

  1. This is wholly speculative since Ann has never run this kind of business before.
  2. BQ Company also introduces evidence that Ann had also explored the possibility of a Wallyburger franchiseWallyburger is BQ's chief competitor in the fast-food burger marketand Ann could have placed the Wallyburger on the same location.
  3. A Wallyburger representative testifies 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.
  4. Because a Wallyburger franchise yields annual profits nearly as high as that of BQ, BQ Company argues that Ann failed to mitigate her damages by buying a competing franchise.

Using one of the three big money damages, how much of Ann's $2.3 million in expected profits, if any, do you think Ann would probably be able to recover, and why?

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