Colorado Coffee Bean, LLC v. Peaberry Coffee Inc

In Colorado Coffee Bean, LLC v. Peaberry Coffee Inc. (Colo.App. 2010) 251 P.3d 9, the plaintiff bought a retail coffee shop franchise after receiving the defendant's uniform franchise offering circular (UFOC), which disclosed the gross sales of existing stores, but stated that it contained no data regarding profits and no guarantee of profitability, and advised prospective franchisees to conduct their own financial analyses. (Colorado Coffee Bean, supra, 251 P.3d at p. 15, 18.) The franchise agreement itself was integrated, and contained general exculpatory clauses disclaiming reliance on representations not found in the agreement. (Id. at pp. 20-21.) The plaintiff asserted a claim for fraudulent nondisclosure based on two theories, namely, that the franchisor had concealed (1) losses at existing stores and (2) the franchisor's own losses. (Id. at p. 18.) Following a discussion of Colorado decisions and other authority, the appellate court determined that suitably "'clear and specific language'" in the UFOC or the franchise agreement could prove the absence of reasonable reliance on the purported omissions. (Colorado Coffee Bean, supra, 251 P.3d at pp. 19-20, quoting Keller, supra, 819 P.2d at pp. 73-74.) Applying this determination, the court concluded that the statements in the UFOC precluded reasonable reliance under the first theory, but that the UFOC and franchise agreement contained no terms sufficient to nullify reasonable reliance under the second theory. (Colorado Coffee Bean, supra, at pp. 19-22.)