Sen. Feinstein Requests Federal Investigation Into Burgerim’s Alleged Deception

February 05, 2020 Admin 0 Comments

One hundred restaurants have already closed, and one Burgerim franchisee is now homeless

Senator Dianne Feinstein has asked the Federal Trade Commission to investigate California-based restaurant franchise Burgerim, an originally Israeli burger chain serving sliders with a side of alleged deceit. According to a damning three-part investigation in Restaurant Business, Burgerim raced to sign up inexperienced franchise operators, selling as many as 1,200 franchise licenses to operators in 40 states over just four years. 200 Burgerim locations are currently open, though the “vast majority” are not profitable, according to Restaurant Business. One hundred have already closed, and many more may never open.

As Feinstein writes in her letter, “a number of franchisees report that they were the victim of false or misleading sales tactics, including offers by Burgerim to refund franchise fees, on which Burgerim has failed to follow through.” While promising fast profits and offering money-back guarantees, Burgerim instead delivered high upstart costs and a confusing menu that reportedly led to food waste and lost revenue.

And, bizarrely, franchisees tell Restaurant Business that Burgerim never even collected royalties from them. Instead, it was mostly interested in selling new licenses. “Either by design or by accident, Burgerim operated much like a pyramid scheme,” Restaurant Business concluded.

Feinstein’s letter to the FTC arrives six weeks after Restaurant Business’ explosive investigation. Burgerim’s CEO, Oren Loni, fled the country in November, which is usually a bad sign for business, and Burgerim appointed a chief restructuring officer who has flirted with filing for bankruptcy. That could be a disaster for existing locations, Feinstein observes. “Many of the locations that have opened are struggling, and all would face severe consequences if Burgerim files for bankruptcy.”

Burgerim also faces 90 lawsuits, including one filed by Jonathan Cheban, an influencer and Kardashian hanger-on known as Foodgod, according to PageSix. Cheban once served as Burgerim’s spokesperson and gushed on Instagram about the chain’s burgers — but his lawyers now demand unspecified sums for non-payment and a cease-and-desist on using his likeness.

Other, more sympathetic Burgerim victims include franchise operators like Jeffrey Russell in Glendale, California. Russell, who had been laid off from a job at Tesla, sought a fresh start with Burgerim, and eventually sold his house to keep his location afloat, he tells Restaurant Business. Now, he’s homeless. More than 100 franchise operators took out small business administration loans, which require them to personally guarantee any debt.

But even as corporate reportedly ignores emails from desperate current franchise operators, Burgerim will happily sell more franchise agreements, Restaurant Business reports. Except in Maryland, that is: In January, the state became the first to suspend Burgerim’s franchise registration, though it likely won’t be the last

• Sen. Feinstein Asks FTC to Investigate Burgerim [Restaurant Business]
• The Burgerim Disaster [Restaurant Business]