Page 41 - Calculating Lost Profits

 Are industry averages skewed by any large companies in the industry?

 Is the plaintiff’s business large enough to skew industry averages?

 Are industry data available for the geographic region of the plaintiff?

 Does the yardstick have a similar marketing strategy to that of plaintiff’s business at issue?

 Does plaintiff’s business at issue have historical financial results, or is it still considered a "start-
up"?

 Does the plaintiff's business or a yardstick business rely on intellectual property to create reve-
nue or profits?

Like other before-and-after method’s concerns about comparability of the "before" period with the "af-
ter" period, the practitioner should consider other factors that could cause the plaintiff's performance to
differ from the yardstick selected, and how those factors have been accounted for in the damages model.
In this context, it may be appropriate to adjust yardstick data to account for differences between the
yardstick and the affected business or to disregard the yardstick.

Using the American Kitchen example, one potential yardstick could be the results achieved by a compet-
ing restaurant on the same college campus (if the information is available). An alternative yardstick
could also be a nearby restaurant owned by the plaintiff, or another American Kitchen location, if the lo-
cation was not affected by the wrongful actions of the defendant or defendants. In both scenarios, the
practitioner would seek to obtain financial information reflecting the results of the yardstick.

For example, in some instances, a yardstick company can provide a growth rate that would apply to an
affected company’s actual sales from the "before" period to estimate but-for revenues.

Measurement Based on the Terms of the Contract

In some instances, the lost revenues estimate is made in relation to a specific contract. In this instance,
many of the elements of the lost profits measurement may be set forth in the contract document or in
other communications between the parties, including

 the number of units to be sold,

 the unit prices charged,

 inflationary factors to apply to the unit price,

 the loss period,

 the minimum or maximum number of units that can be purchased,

 the minimum or maximum amount that can be billed,

 quantity discounts,

 any limitations on damages, and

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