BikeCaffe Settles with California Commissioner for Selling Unregistered Franchises
California's Commissioner of Business Oversight reached a settlement with Ralph Massetti and his franchise development firm, The Franchise Builders, for selling BikeCaffe franchises on the internet that were not registered or exempt according to state franchise regulations. Founder Will Shakesheff, chief franchise operations officer, was also named in the state's action against the franchisor.
Commissioner Jan Lynn Owen had filed a desist and refrain order against CEO/president Ralph Massetti and his companies in August 2016. Colorado-based BikeCaffe, comprised of various Colorado State business entities, was formed in 2009, and doing business in California. The franchisor conducts business by two telephone numbers and on the internet at www.bikecaffe.com, and uses email at Franchise@BikeCaffe.com. It is in the business of operating and selling commercial beverage franchises, namely, serving coffee from a console that is attached to the bicycle. Massetti operates his principal places of business in Englewood and Boulder.
While BikeCaffe Franchising, Inc. was initially registered in California on November 10, 2011, and approved for renewal from August 2012 to April 2013, the franchise company has remained unregistered with California Department of Business Oversight since then in order to legally offer and sell franchises. The desist order also states that in the first and second registrations Massetti disclosed in Item 2, Business Experience, in BikeCaffe's FDD (Franchise Disclosure Document) that he was the CEO and chief operating officer since 2009. The company made no other disclosures regarding any other officer, directors, trustees, general partners, or any other individuals who will have management responsibility relating to the sale or operation of franchises offered by BikeCaffe.
In addition to the unlawful offer and sale of franchises, violation of California Franchise Investment Law (CFIL), Corporate Code Section 3110, BikeCaffe also allegedly violated the statute by making untrue statement of a material fact, or omitting such fact in its application, notice or report with California's Commissioner. The desist order states that Massetti and his companies "required two consumers to execute a franchise agreement as part of BikeCaffe's franchise negotiation and purchase. Neither FDD included the agreement or its terms. The franchisor omitted material fact by not disclosing that Will Shakesheff and Dana D. Reineke were officers of BikeCaffe. The desist order states that Reineke held herself out to the buyers as the franchise operations officer, paralegal and as an officer of BikeCaffe, and Shakesheff held himself out to be chief franchise operations officer, officer and founder of the franchise company.
Another alleged violation by Massetti and BikeCaffe was regarding the "impound order" the Commissioner issued as a condition to the effectiveness of the company's first registration by requiring the prospective buyers to pay the franchise fee and initial fee before they received training, bicycle units, or ever being able to open for business. In asking for financial assurances from a franchise registration applicant, the Department may impose an impound condition alone or can impose an impound condition, in addition to giving the applicant other options such as a fee deferral or a surety bond, as a requirement to approve a franchise application.
The Commissioner also alleged that BikeCaffe represented to prospective buyers that in exchange for their payment of the initial fee and franchise fee they would receive their units and various pieced of equipment. To date, even though the prospects paid their fees, they have not received their units or equipment. And by not conforming to health department orders, BikeCaffe violated other regulations, and has not yet returned the buyers' money in the amount of $63,500.
The settlement hearing took place on September 21, 2017. Ralph Massetti, The Franchise Builders and BikeCaffe were represented by Matthew J. Kreutzer of Howard & Howard in Las Vegas, Nevada. The Department of Business Oversight was represented by senior counsel Sophia C. Kim, Enforcement Division in Los Angeles, who also filed the original action in the case. By signing the settlement agreement, Massetti and BikeCaffe neither admit nor deny any violation of the Franchise Investment Law. They were ordered to pay restitution to the prospective franchisees, and to pay to the California Department of Business Oversight an administrative penalty of $2,500 due in 30 days from the effective date of settlement.
Ralph Massetti's professional biography shows he is also an Arizona "Licensed RE Broker" and a 20-year franchise development executive, specializing exclusively in franchise unit re-marketing. Under The Franchise Builders Client Success Stories, Massetti lists his client profile including Junk Genius, La Salsa Fresh Mexican Grill, HobbyTown USA, Erickson Pools, Wild Birds Unlimited and BikeCaffe.
Massetti did not return a phone call or email to comment on his settlement agreement with the California Commissioner.