Hoffman v. Red Owl Stores

Facts

Joseph Hoffman and his wife (collectively “the Hoffmans”) (plaintiffs) owned and operated a bakery. Red Owl Stores, Inc. (“Red Owl”) (co-defendant) owned and operated grocery stores and also extended franchises to agency grocery stores. Hoffman was interested in establishing a Red Owl franchise store. Lukowitz (co-defendant), an agent of Red Owl, acted as Red Owl’s representative in negotiating a deal with the Hoffmans. Hoffman had $18,000 in capital to invest and was repeatedly assured that the money was sufficient to set up a Red Owl store. In order to first gain experience, Hoffman—who was advised to do so by Lukowtiz—bought a small grocery store prior to operating a Red Owl store. After three months of operating the small grocery store, Lukowtiz found that the store was operating at a profit and encouraged Hoffman to sell the business because Red Owl would find a larger store for him to operate elsewhere. Hoffman, although reluctant to sell the small grocery store, did so based on Lukowtiz’s assurances. The Hoffmans also sold their bakery and put a down payment for a lot for the Red Owl Store again based on Lukowtiz’s assurances. In addition, the Hoffmans relocated to the area where the new Red Owl store would be built. Red Owl later informed Hoffman that he needed to invest $34,000 in order to own and operate a Red Owl store. Negotiations between the Hoffmans and Red Owl broke off. The Hoffmans sued Red Owl for damages.