“Qargo Coffee – Washington D.C.” by Tony Webster is licensed under CC BY 2.0.
The United States Federal Trade Commission (FTC) last week accused the owners of the Miami-based coffee franchise Qargo Coffee of violating a rarely cited franchise law while racking up $1.25 million in fees from 59 franchisees in multiple states.
The FTC’s complaint, filed last week in the U.S. District Court of Southern Florida following an investigation, cited a violation of the Franchise Rule.
Specifically, it said that Qargo Coffee and its owners failed to provide prospective franchisees with critical information in its required franchise disclosure document, known as an FDD. The agency further accused the company of calling California franchisees “licensees,” while failing to provide any FDD.
Founded in May 2020, Qargo Coffee has expanded rapidly with dozens of locations in at least 10 U.S. markets.
DCN’s attempts to reach the Qargo owners were not successful. An attorney representing the company did not respond to DCN’s request for comment.
In the FTC complaint, the coffee business was also accused of failing to disclose one of the owners’ previous ties to another franchise business, BurgerIM, which was banned from selling franchises after an FTC investigation found that it defrauded more than 1,500 people.
One of Qargo’s three owners, Mark Bastorous, was BurgerIM’s area developer in Florida, a detail that was not disclosed to Qargo franchisees, according to the FTC complaint.
The FTC proposed a $1.25 million judgement against Qargo owners, Mark and Bernadette Bastorous and Samir Shenouda. Citing their inability to pay that amount, the approved order calls for a $30,000 fine, with the remaining amount suspended.
The order also requires Qargo and its founders to provide written notice to its franchisees and licensees, informing them of their right to rescind their contracts without penalty.
According to the Qargo Coffee website, the coffee chain serves coffee from Italian wholesale giant Lavazza alongside breakfast items, baked goods, teas, juices and grab-and-go items. Qargo Coffee store formats include traditional coffee shops with indoor seating, as well as small-format stores and drive-throughs.
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