Burgerim

While some franchisees reported that they were "extremely busy", others failed to open at all. One consultant said, "It’s shocking that a system this complicated, with 11 different patties and a variety of sides, will take someone with no restaurant experience,"^[1]

In January 2020, Restaurant Business magazine reported in a three-part series that Burgerim was considering filing bankruptcy and was facing insolvency.^[5] According to the magazine's reporting, Burgerim CEO Oren Loni was a "salesperson" but "not a businessperson" who "could sell a ketchup popsicle to a woman in a white suit",^[5] in the words of one ex-Burgerim employee. Loni, and Burgerim salespeople under his direction, allegedly made extravagant and unrealistic promises to prospective franchisees, including "verbal assurances that they would definitely make profit" even though the vast majority of franchise locations were not profitable as of 2019. Burgerim also offered a money-back guarantee on franchisees' initial $50,000 startup fee that they paid to Burgerim, if they could not find a suitable location for the franchise within six months, but the company soon stopped paying these promised refunds as it neared insolvency.^{[citation needed]}

Current and former franchisees who were interviewed claimed that Burgerim focused only on selling additional franchises as quickly as possible, and severely underrepresented the costs of building out and operating the restaurants. Many franchisees were forced to take out additional loans, mortgages, or even sell their homes, only to close their Burgerim locations months after opening due to soaring costs. Some subsequently declared personal bankruptcy or became homeless.^[6]

Since the vast majority of Burgerim franchises were unprofitable, it became difficult for the Burgerim corporate brand to collect ongoing franchise fees, which were its sole source of income aside from the initial startup fee that it collected from franchisees. Burgerim thus "operated much like a pyramid scheme", in which it was forced to open yet more and more new franchises indefinitely, in order to merely stay afloat, by collecting the initial startup fee.^[5]

In late 2019, Burgerim sent one of its franchisees a notification that it had hired insolvency counsel, appointed a “Chief Restructuring Officer,” and was considering filing for bankruptcy.^[7] At the same time, Loni dismissed his staff and closed the doors to the California headquarters.^{[citation needed]}

California regulators issued a desist and refrain order in 2021 and the Federal Trade Commission (FTC) filed suit in 2022. The FTC said in 2024 that Burgerim had sold 1500 franchises, but only 112 were still operating.^[8] In that year, Loni settled the suit by agreeing to a lifetime ban on selling franchises in the US. He also agreed to a $5 million civil penalty, along with $38.8 million for “consumer redress”, but with only $1,000 paid in cash as a condition of the settlement.^[9]