Burgerim

More than 1,500 franchise buyers, most of whom never opened

The FTC sued the fast-food chain Burgerim and its owner Oren Loni over the sale of franchises to more than 1,500 consumers. Buyers typically paid between $50,000 and $70,000 in franchise fees.

The pitch, according to the complaint, was “a business in a box” requiring little to no business experience, which downplayed what running a restaurant actually involves. The company ran discount programs aimed at veterans. Although Burgerim took in tens of millions of dollars in fees, the complaint alleges the majority of people who paid were never able to open a restaurant.

The refund promise

Burgerim assured prospective franchisees that if they could not open, the company would refund the franchise fee. The complaint says those refunds often proved illusory, with some franchisees unable to obtain one after months of asking, leaving them facing losses or debt of tens of thousands of dollars each.

The Franchise Rule

The Franchise Rule requires a franchisor to give prospective buyers a Franchise Disclosure Document covering the franchisor, the business, and the terms of the agreement. The complaint alleges Burgerim and Loni failed to provide accurate information about whether franchise fees were refundable, and the required information about current and former franchisees.

The complaint asks the court to stop the violations, order monetary and other relief, and impose civil penalties. The Rule carries a potential penalty of up to $46,517 per violation.

What is not established

The complaint was filed by the Department of Justice on the FTC’s behalf and states allegations only. The supplied documents do not report a judgment, settlement, or penalty amount, and the case is to be decided by the court.