Page 31 - Calculating Lost Profits

 The date at which the 11th location can be expected to be "up to speed" and to have normal and
stabilized sales

 The original 2019 end date of the franchise agreement

 The 2024 renewal end date, assuming one 5-year renewal of the franchise agreement

Also relevant is if the practitioner used a loss period assuming a renewal of the franchise agreement, the
practitioner would likely need to consider the key financial and quality performance metrics set forth in
the franchise agreement because these were a consideration in determining if the franchise agreement
would be renewed.

Expanding on the American Kitchen example, assume that the supply chain sources required to be used
per the franchise agreement were unable to fulfill their contractual obligations, and Franchisee filed suit
for breach of contract. In this situation, the loss period may begin immediately upon the supplier being
unable to completely fulfill the contract. The loss period may then continue through a variety of differ-
ent dates, depending upon the facts and circumstances of the matter, including considerations such as the
following:

 If the supplier had a notice provision, the loss period may be based on the amount of notice re-
quired per the agreement.

 The supply agreement may include provisions for determining the appropriate loss period in the
event of default.

 Under the franchise agreement, if Franchisee is allowed and able to find an alternative supplier,
the loss period may end once the alternative supplier fully replaces the original supplier (before
considering any pricing or terms differences), and Franchisee has caught back up with the ex-
pected level of performance (for example, regained or replaced lost customers).

Torts

As described previously, business torts relate to events, other than a breach of contract, that harm a busi-
ness (for example, a fraud, intellectual property infringement, or defamation). In tort actions, the loss pe-
riod usually extends from the date of the wrongful act until the date operations return to "normal." The
date operations return to "normal" is the date on which the business either has been restored or can be
expected to be restored to a position to make profits at the same level as would have been experienced
absent the tort.

Expanding upon the American Kitchen example, a possible tort could be the actions of a key individual,
such as a business partner who was responsible for managing the kitchens across all locations, joining a
competitor, and wrongfully convincing a key supplier to stop supplying American Kitchen (for example,
by lying about American Kitchen management or the company’s financial condition), which led to an
increase in costs. The loss period’s start and end dates for this tort could vary greatly, depending on the
specific facts and circumstances of the matter. Consider the following:

 When did the supplier in question stop supplying American Kitchen?

 When was a replacement supplier found?

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