The Franchise Memorandum

An Illinois state appellate court upheld the waiver of consequential damages contained in a franchise agreement, and on that basis denied the franchisee’s appeal of a trial court’s grant of summary judgment in favor of the franchisor. United Investment Grp. v. Beggars Pizza Corp., 2017 IL App (1st) 162275-U (Ill. App. Ct. Nov. 22, 2017). Franchisee United Investment Group filed suit against franchisor Beggars Pizza Franchise Corporation claiming territorial infringement by the franchisor’s affiliates, in alleged violation of the parties’ franchise agreement. In deciding Beggars’ motion for summary judgment, the trial court held that United Investment had suffered no actual damages, and that the franchise agreement expressly precluded United Investment from recovering any consequential damages. Hence, the trial court found no basis for United Investment to recover. United Investment appealed.

The appellate court agreed with the trial court. It first noted that, because the agreement had been negotiated by two sophisticated corporate entities, a finding of unconscionability was unlikely. The appellate court then turned to the plain language of the agreement, which stated in part that “under no circumstances shall Franchisee be entitled to recover, and Beggars shall not be responsible to Franchisee for, any indirect, incidental, consequential or special damages . . . .” The appellate court found this provision unambiguous and noted that the damages waiver was clearly designated in the table of contents under an appropriate heading. Lastly, the appellate court declined to find that the provision was inordinately one-sided, after evaluating the entire agreement.