Qargo Coffee Logo

Qargo Coffee

Qargo Coffee, Inc.
https://www.qargocoffee.com
1-786-913-9991
701 Brickell Avenue, Suite 1550, Miami, FL 33131
FDD Version:

Initial Investment Range

$155,400 to $628,500

Franchise Fee

$50,000 to $110,000

The franchise offered is a traditional quick-service coffee shop serving freshly made hot and cold beverages with a variety of select food menu items.

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Qargo Coffee May 24, 2024 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
1
6

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor explicitly warns that its financial condition "calls into question" its ability to provide support. Audited financials in Exhibit D confirm this, showing a net loss and negative equity for 2023. This is a significant risk as it may impair the franchisor's ability to meet its obligations to you, fund system growth, and provide ongoing support. Some states have imposed fee deferrals due to this condition.

Potential Mitigations

  • Your accountant must meticulously review the audited financials and all footnotes to assess the franchisor's solvency and sustainability.
  • A thorough discussion with your attorney is crucial to understand the protections offered by state-mandated fee deferrals or bonds.
  • Engaging a business advisor to question the franchisor about their capitalization and plans to address these financial weaknesses is essential.
Citations: Item 21, "Special Risks to Consider About This Franchise", Exhibit D, Exhibit G (Illinois and Virginia Addenda)

High Franchisee Turnover

Low Risk

Explanation

High franchisee turnover, evidenced in Item 20, can be a major red flag indicating systemic problems. However, this risk was not identified in the FDD package. The data for the last three years shows a very small number of outlets with no terminations, non-renewals, or closures reported. This suggests stability, though in a very young and small system.

Potential Mitigations

  • Your business advisor can help you calculate turnover rates from Item 20 data in any FDD to spot potential issues.
  • It is crucial to have your attorney assist in framing questions for current and former franchisees about their experiences.
  • An accountant should analyze the relationship between turnover rates and the franchisor's financial health.
Citations: Not applicable

Rapid System Growth

High Risk

Explanation

The franchisor projects extremely rapid growth, planning to add 117 outlets in the next fiscal year from a base of only two operating units. This ambitious expansion, especially when combined with the company's disclosed financial weaknesses, creates a significant risk that the support infrastructure for training, site selection, and operations could be overwhelmed. This may lead to inadequate assistance for you and other new franchisees.

Potential Mitigations

  • Engaging a business advisor to question the franchisor's management about their specific plans to scale support systems is vital.
  • It's important to have your accountant analyze whether the franchisor's financial statements support the capacity for such growth.
  • Speaking with the most recently opened franchisees about the quality and timeliness of support they received is highly recommended.
Citations: Item 20, Item 21

New/Unproven Franchise System

High Risk

Explanation

Qargo Coffee, Inc. (Qargo) began franchising in May 2020 and had only two operating franchised outlets by year-end 2023. This limited history means you are investing in a relatively new and unproven system. The brand recognition, operational support, and business model have not yet demonstrated long-term success or viability at scale, which increases your investment risk, especially considering the franchisor's disclosed financial weakness.

Potential Mitigations

  • A business advisor should help you conduct extensive due diligence on the backgrounds and industry experience of the management team listed in Item 2.
  • It is critical to speak with the few existing franchisees about their experiences with the system's support and profitability.
  • Your accountant should carefully assess the franchisor's capitalization and business plan for long-term viability.
Citations: Item 1, Item 2, Item 20, Item 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified. The franchise is a quick-service coffee shop, a well-established industry with sustained consumer demand, not typically considered a fad. A fad business, tied to a fleeting trend, can pose a risk as your long-term contractual obligations would outlast waning consumer interest. This business model appears to be based on a staple consumer product.

Potential Mitigations

  • To assess any business concept, it's wise to have a business advisor help you research the long-term market trends for the product or service.
  • Your attorney can review the franchise term to ensure it aligns with a realistic business lifecycle.
  • Consulting with an accountant can help model the financial impact of potential shifts in consumer preferences.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

Item 2 details the backgrounds of the management team. While they possess experience in business and the food/beverage industry, specific high-level experience in managing a franchise system of this projected scale appears limited. For a new system planning rapid growth, this could present challenges in providing the specialized support, strategic direction, and operational systems that a mature franchise network requires, potentially increasing your risk.

Potential Mitigations

  • A thorough discussion with your business advisor about the management team's specific franchising credentials is very important.
  • Speaking with current franchisees about the quality and effectiveness of management's support and strategic leadership is crucial.
  • Your attorney can help you frame questions to the franchisor about how they plan to supplement their team's experience.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk, where a franchise is owned by a private equity firm that might prioritize short-term returns over franchisee health, was not identified in the FDD. Item 1 indicates the franchisor is a corporation without a disclosed parent entity, and the management listed in Item 2 appears to consist of the founders.

Potential Mitigations

  • When evaluating a franchise, a business advisor can help research the ownership structure, particularly if a private equity firm is involved.
  • It is wise to have your attorney review any assignment clauses in the franchise agreement that allow the franchisor to sell the system.
  • Speaking with franchisees of other systems owned by the same PE firm can provide valuable insight.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

The FDD does not indicate that Qargo has a parent company. This risk arises when a franchisor is a subsidiary of another company, and the parent's information is necessary for a full risk assessment but is not provided. That situation does not appear to apply here.

Potential Mitigations

  • In any FDD, your attorney should verify the corporate structure disclosed in Item 1 to ensure any parent companies are properly identified.
  • If a parent company exists and provides guarantees or is a key supplier, your accountant should confirm that its financial statements are included if required.
  • A business advisor can help assess the parent's influence on the franchise system.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This FDD states in Item 1 that the franchisor has no predecessors. This risk occurs when a franchisor has acquired a system from a prior entity, and the history of that predecessor, which could include issues like litigation or franchisee failures, is not fully disclosed. This does not appear to be a concern in this case.

Potential Mitigations

  • Your attorney should always review Item 1 carefully for any mention of predecessors.
  • If a predecessor is identified, a business advisor can assist with researching its history for any red flags.
  • It would be prudent to ask long-term franchisees about their experience under any previous ownership.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

Item 3 of the FDD indicates no disclosable litigation involving the franchisor, its predecessors, or key personnel. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or by the franchisor against franchisees, can be a serious warning sign of systemic issues. The absence of such litigation is a positive factor for this franchise.

Potential Mitigations

  • An experienced franchise attorney should always be engaged to carefully review any litigation disclosed in Item 3.
  • If litigation is present, your attorney can help research the case files for more detail.
  • Speaking with franchisees involved in any lawsuits can provide critical context for your business advisor.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
2
1
12

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
2
7
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

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4

Legal & Contract Risks

Total: 16
3
6
7

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
3
2
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
4
3
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
2
2
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
2
7
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
7
7
4

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 1
1
0
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.