Burgerim founder Oren Loni, who led the burger chain as it sold franchises to more than 1,500 people, is banned from ever again selling franchises in the United States. That’s according to a default judgment and final order issued in January by a federal court in California.
Judge Dolly M. Gee handed down the default judgement, which is also against Burgerim Group Inc., after the company didn’t respond to the government’s lawsuit. The defendants “are permanently restrained and enjoined from advertising, marketing, promoting, offering for sale, or selling, or assisting others in the advertising, marketing, promoting, offering for sale, or selling, of any franchise” in the U.S., read the order. It includes $56 million in civil penalties and consumer payments.
Most of the Burgerim’s 1,500-plus units sold never opened; the company’s website lists 112 open restaurants, while another 119 are “closed” or “temporarily closed.” Franchise Times in 2018 first reported Burgerim’s unit sales were vastly outpacing its actual openings.
The U.S. Federal Trade Commission sued Burgerim and Loni in 2022, accusing them of enticing more than 1,500 people to purchase franchises “using false promises while withholding information required by its Franchise Rule.” The complaint said the people paid Burgerim between $50,000 and $70,000 in franchise fees, and alleged “that although Burgerim pocketed tens of millions of dollars in such fees, the majority of the people who paid them were never able to open restaurants.”
Loni settled the lawsuit separately in November and in that judgment agreed to a $5 million civil penalty, along with $38.8 million for “consumer redress.” He’s required to pay just $1,000 of that, however, with the remaining penalties suspended unless a court finds he failed to disclose material assets or misled the court about his financials.
A slider concept that originated in Israel, Burgerim was brought to the U.S. in 2014 by Loni and it sold more than 1,000 franchises within five years. But it didn’t come close to the 23 percent operating profits Loni promised, franchisee Robert Jameson told Franchise Times in 2020. Instead, their food costs were running above 40 percent, and they were losing money.
Related: How Burgerim’s Red Flags Got Missed
In February 2021, regulators in California slapped Burgerim with a desist and refrain order and said the burger franchise must offer rescission, meaning cancel contracts, to all franchisees, refund fees collected and “financially place the franchisees in the position they were in before they entered into the franchise agreement.” That order noted between 2017 and 2019, “at least 287 franchisees canceled their franchise agreement. Burgerim paid at least $8 million in refunds during this time,” or an average 15.79 percent of franchise fees collected.
Burgerim’s website said the company is no longer accepting franchise applications, but a form is still available that allows the submission of contact information and selection of how much money a person has to invest.