Court of Appeal of Illinois, First District, First Division
AVON HARDWARE COMPANY, d/b/a Avon Ace Hardware, Michael A. Clark, Beverly A. Clark, Yido, Inc., d/b/a Mr. Mike's Ace Hardware, Debbie Pasciak, and Michael Pasciak, Plaintiffs-Appellants,
ACE HARDWARE CORPORATION, Defendant-Appellee.
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Kenneth A. Wexler, Kara A. Elgersma, and Amy E. Keller, all of Wexler Wallace LLP, of Chicago, and Patrick R. Burns, of Lindquist & Vennum PLLP, and Gordon Rudd and David M. Cialkowski, both of Zimmerman Reed PLLP, both of Minneapolis, Minnesota, for appellants.
Norman M. Leon and John A. Hughes, both of DLA Piper LLP, of Chicago, for appellee.
Gary W. Leydig, of Riordan, Fulkerson, Hupert & Coleman, of Chicago, and Dady & Gardner PA (Ronald K. Gardner, John D. Holland, and Kristy L. Zastro, of counsel), of Minneapolis, Minnesota, for amicus curiae Coalition of Franchisee Associations, Inc.
Marc N. Blumenthal, of Law Offices of Marc N. Blumenthal, of Chicago, for amicus curiae American Franchise Association.
[376 Ill.Dec. 351] ¶ 1 The plaintiffs, Avon Hardware Company, doing business as Avon Ace Hardware, Michael A. Clark, Beverly A. Clark, Yido, Inc. (Yido), doing business as Mr. Mike's Ace Hardware, Debbie Pasciak, and Michael Pasciak, appeal from the circuit court order which dismissed their complaint alleging various claims of common-law and statutory fraud based on statements made bye the defendant, Ace Hardware Corporation (Ace), in connection with the parties' franchise agreement. We affirm.
¶ 2 On September 28, 2012, the plaintiffs filed an amended complaint, alleging the following facts and claims. In 2000, Ace created a concept store plan, known as " Vision 21," which consisted of large Ace stores aimed at competing with " big box" retailers, such as Home Depot and Lowe's. In 2006, the Pasciaks, through their corporation, Yido, entered into a franchise agreement with Ace to operate a Vision 21 store in Indianapolis. On September 15, 2006, Ace provided the Pasciaks a " pro forma" document, dated June 1, 2006, containing sales and cash flow forecasts. The Pasciaks allege that the pro forma document led them to believe their store would be successful. Ace also provided them, as regulated but not required by federal law, a Uniform Franchise Offering Circular (UFOC). See 16 C.F.R. § 436.1 et seq. (2006). According to the complaint, this document contained misleading historical financial data regarding the performance of existing Ace hardware stores. The complaint alleges that Ace sent the pro forma document to Wells Fargo in order to assist the Pasciaks in obtaining a loan to close the deal with Ace. After the pro forma document was submitted, Wells Fargo did not approve the loan. The complaint alleges that, following the initial loan denial and without input from the Pasciaks, Ace manipulated the numbers in the pro forma document in order to satisfy Wells Fargo's financing requirements.
[376 Ill.Dec. 352] ¶ 3 The Pasciaks' store, Mr. Mike's Ace Hardware, opened in February 2007 and never approached the forecasted sales and revenue provided in the pro forma document. The complaint alleges that Ace stated that Mr. Mike's would make $1,875,000 in sales in its first year and increasingly more in the following years; in fact, the store made $1,421,998 in its first year and eventually failed. The complaint also alleges that Ace knew the store would never make the $1,875,000 and used fraudulent and misleading historical sales and projected figures to entice the Pasciaks to open the store. ...