FTC Accuses Qargo Coffee Of Violating Franchise Rules – CoffeeTalk

The U.S. Federal Trade Commission (FTC) has filed a complaint against Miami-based coffee shop chain Qargo, accusing it of violating franchise rules by failing to provide prospective franchisees with proper information before they signed on to open a store. The FTC is proposing a $1.3 million judgment against Qargo and its officers, Mark and Bernadette Bastorous and Samir Shenouda, but the FTC is proposing a suspended judgment with a reduced fine of $30,000. This is the second complaint the FTC has filed against a company for violating federal franchise rules in 17 years, following Burgerim’s lawsuit in 2022 for defrauding 1,500 franchisees of millions in franchise fees.

Qargo allegedly sold 59 franchises across the country starting in 2021. The FTC said that the company sold franchises in California without providing franchisees with a franchise disclosure document (FDD), a compilation of various information about the offering required of all such franchises. In other states, Qargo did not provide certain information in the FDDs it did provide operators, notably the founders’ history of filing for bankruptcy. Those documents also omitted Mark Bastorous’s role in Burgerim, the franchise’s area developer in Florida.

The commission’s proposed order requires Qargo and its founders to provide written notice to franchisees informing them of their ability to rescind their contracts, prohibits the company from threatening to enforce any noncompete agreement, and requires Qargo to comply with the federal franchise rule.

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