The owner of two Roasting Plant coffee shop franchises in metro Detroit is suing the New York-based company and its founder, claiming they committed fraud by misrepresenting the profit potential for new locations.
The lawsuit, filed this week in U.S. District Court in Detroit, says that franchisee Mike Shehadi of Dearborn Heights has spent more than $3.1 million opening the two locations. He argues that financial performance at the shops — in Ann Arbor and Dearborn Heights — is well below the rosy scenarios that the company and founder used to convince him to invest.
Shehadi’s investment included $600,000 to buy three of Roasting Plant’s trademark “Javabots,” which are computerized systems of pneumatic tubes that transport raw coffee beans over customers’ heads to the grinders and brewing machines behind the barista counter.
In 2016, Roasting Plant founder and CEO Mike Caswell sent Shehadi a spreadsheet showing all of the then-existing Roasting Plant locations doing about $1.1 million in yearly revenue, with strong profits, the lawsuit says. Another spreadsheet projected that an Ann Arbor coffee shop, once open, would do $1.4 million in revenue with above-average profits.
But all of those figures and projections turned out to be false, the lawsuit claims, which accuses the company and founder of fraud. The lawsuit is seeking $9.5 million – the cost of Shehadi’s investment plus damages.
The lawsuit doesn’t disclose how the Roasting Plant coffee shops have performed compared to the company’s projections. Shehadi’s lawyer, Jordan Bolton of Clark Hill, declined to discuss the shops’ financials.
An attorney for Roasting Plant, company founder Caswell and company Chief Sales and Marketing Officer Thomas Hartocollis, who is also named in the lawsuit, denied all the franchisee’s allegations.
“These claims are frivolous and without merit, and Roasting Plant, Mr. Caswell and Mr. Hartcollis will vigorously defend themselves against this lawsuit,” attorney Alan Kessler of law firm Duane Morris said in a statement.
Roasting Plant was started a decade ago in Manhattan’s lower east side and opened its first location outside New York City in early 2013 inside the First National Building near Campus Martius in downtown Detroit.
At the time, the Detroit franchise’s original owner told the Free Press that businessman Dan Gilbert was personally responsible for bringing Roasting Plant to the city after watching a video of the “Javabot” system in action. Gilbert’s real estate company owns the First National Building.
The original franchisee went on to sue Roasting Plant and Caswell in 2015, seeking repayment for more than $1 million in loans. That lawsuit ended with a confidential settlement.
According to the latest lawsuit, Shehadi had a 2016 deal with Roasting Plant to license several new locations.
But Shehadi would never have done the deal if he had known the financial performance and projections that the company showed him were false.
Actor Hill Harper, known for his roles in “CSI: New York” and “Homeland,” last summer bought the Detroit Roasting Plant shop. He is not mentioned in the lawsuit.
Roasting Plant is currently up to eight locations nationwide, including three in Michigan, according to the company’s website.
Shehadi has two of the three Michigan shops. He also owns limited liability companies for locations that don’t currently exist, including “Roasting Plant of Dearborn” and “Roasting Plant of Southfield.”