Hoffman v. Red Owl Stores, Inc.

Red Owl Stores, Inc. (Red Owl) (defendant) owned and operated large grocery stores and also extended franchises to stores operated by individuals. Joseph Hoffman and his wife (plaintiffs) owned a bakery in Wautoma, Wisconsin; they hoped to enter the grocery business and eventually operate a Red Owl store. Hoffman entered discussions with Lukowitz, Red Owl’s agent. Lukowitz told Hoffman that he only needed $18,000 capital to franchise a Red Owl store. Lukowitz said that if Hoffman would invest this money, buy a lot, and relocate to the town of Chilton, Red Owl would set him up with his own store. Lukowitz also advised Hoffman to get some experience by purchasing a smaller independent grocery store and operating it before buying a Red Owl store, and Hoffman did so. Lukowitz suggested that Hoffman could also work in a Red Owl store in the Fox River Valley to prepare him for his own Red Owl store. Hoffman thus moved his family to the town of Neenah instead of Chilton. However, as Lukowitz suggested, Hoffman did pay $1,000 for an option to buy a vacant lot in Chilton for the eventual location of the Red Owl franchise. After Hoffman had operated the independent grocery store successfully for a few months, Lukowitz advised Hoffman to sell the small grocery store and the bakery in preparation for buying the larger franchise store. Hoffman did as Lukowitz suggested. Negotiations continued, and Lukowitz drew up a financial proposal for Hoffman. Instead of the $18,000 originally required, the final proposal required Hoffman to invest nearly $34,000 of his own funds in the project. This proposal was unacceptable to Hoffman, and negotiations terminated between the parties. Hoffman and his wife brought suit against Red Owl and Lukowitz for damages based on their reliance on the company’s representations. At trial, the jury found for Hoffman and his wife and assessed damages. The trial court ordered a new trial on the issue of the damages for losses, if any, related to the sale of Hoffman’s independent grocery store, fixtures, and inventory. Both parties appealed to the Wisconsin Supreme Court.