Burgerim unit sales outstrip its openings
CEO Tom Meiron
Burgerim, of Encino, California, is one of the nation’s fastest-growing better burger chains, with 80 units open around the country and more than 600 franchises sold since the start of 2017. How a franchise could hit those numbers with no corporate stores or national ad campaign is only part of the mystery.
This much is clear. Burgerim was founded in Israel by a U.S.-trained chef, Donna Tuchner, and the name in Hebrew means “many burgers.” Instead of serving regular-sized hamburgers, Burgerim sells mini burgers, slightly larger than sliders, with a choice of 11 different patties—regular, Wagyu or spicy beef, plus turkey, chicken, lamb, salmon and several non-meat types.
Playing with the big chains
In 2011, Oren Loni, a serial franchisor, purchased the franchise rights from Tuchner and started selling Burgerim franchises in Israel. In 2014, he sold the Israeli franchise rights and about 50 open units to BBB Burgers and in June 2015 moved his family to Los Angeles to start developing the Burgerim brand here.
“My dream was always to make Burgerim No. 1 in the world,” Loni said in an interview, “and to be able to make it, you must play with the big chains in the U.S.” In April, 2018, he hired longtime restaurant executive (Pizza Hut, Papa John’s, Marriott Hotels) Tom Meiron as CEO.
“After decades in the restaurant business, this is really exciting,” Meiron said. “We are adding between 20 and 25 stores a month and should have 400 open by the end of next year.”
Loni said Burgerim is doing “everything in house. We don’t use franchise brokers. We do advertise on Facebook and Instagram, and get the majority of our leads, 200 to 300 inquiries a day, from social media.”
What do those leads see on the internet? For openers, there’s no mention of the sale of the Israeli units. Instead, the company website and Loni’s third-person blog posts claim that “Oren Loni is the current owner and president of Burgerim,” which has become a “global sensation with over 200 locations in 16 countries all around the world.” Those words are still repeated in new store opening press releases.
When Loni started posting those claims, BBB Burgers had 49 units in Israel and Loni’s master franchisee in Europe had opened two more, one in St. Petersburg, Russia, and the other in Bucharest, Romania.
Burgerim never built a corporate store here and their 2015 franchise disclosure document showed total assets of $117,437 and no franchise units sold. The 2016 FDD shows two stores open and 25 franchises sold but not open, plus refunds of $338,500 in franchise fees and $69,500 in reimbursed construction costs.
CEO Meiron said, “Some franchisees met our financial criteria, but could not find the right locations or financing. Rather than having franchisees who could say they’d been screwed by Burgerim, Loni gave them their money back.”
Burgerim opened 21 restaurants in 2017, ended the year with 312 more units sold but not opened, and predicted that 212 of those would open in 2018. Although stores are arriving quickly, it’s likely that at least 100 of those projected openings will carry over to 2019, swelling the sold but not open numbers to at least 500.
High numbers of unbuilt stores pose a danger to franchisees, said Jeff Lefler, CEO of FranchiseGrade.com in London, Ontario in Canada, a franchise research and consulting firm. “A franchise system can make money selling franchises and collecting franchise fees yet not open any units. This can be a significant risk for new franchisees who pay a franchise fee but cannot get their units built or opened,” Lefler warned.
John Gordon, a restaurant consultant and analyst with Pacific Management Consulting Group in San Diego, sees other dangers. According to CEO Meiron, Burgerim is looking for individuals, not experienced restaurant operators. “If you have the $50,000 franchise fee and are willing to come on board, we’ll take a chance on you,” Meiron 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,” Gordon said. “The better burger space is filled with competitors,” he added, “many of which have drive-thru windows and well known names. Burgerim is selling itself as a low-cost alternative and instead of developing logically, it is selling units all over the country. I worry that many will fail.”
The franchisees Loni suggested we talk to do have restaurant experience. Eric Marquez ran restaurants and nightclubs in Dallas before opening a Burgerim in an outlet mall in Allen, Texas. “We are extremely busy,” Marquez said, “partially because shoppers have few other options. I am already planning a second one in Irving, in a mixed use office park.”
Prag Gandhi, who opened the first Burgerim in Virginia, in Haymarket, used to be a Subway franchisee. “My partner was still in the military service and we wanted to open a restaurant together,” Gandhi said. “We Googled the cheapest burger franchise to get into and Burgerim came up. I flew out to L.A. to meet Oren and we decided to just go for it.
The first time my partner tried the food, it was in our own store. We now have a second one under construction and signed a lease for a third.”
The state of the chains
Back on the internet, another Loni blog post reminds readers that “Burgerim is not his only successful business. He is also the moving force behind the wildly popular Italian fast food chain Siciliano. He bought one restaurant and quickly turned it into a chain with 50 locations. He did the same thing with Schnitzeliya, a mid-class restaurant chain, and the YoYo Yogurtland franchise.” (All are located in Israel.)
With the help of an Israeli friend, we checked on the current status of those chains, which have all been sold to new owners. Siciliano now has 12 units open, with one more under construction; YoYo Yogurtland has five units open in Israel and one in Bulgaria. Schnitzeliya, a chain that serves breaded chicken breasts on baguettes, now has 15 locations.
The fate of another Israeli chain is more controversial. Bandora, a shawarma (Middle Eastern meat preparation) chain, filed for bankruptcy in 2015, leaving 30 individuals who had paid franchise fees in the lurch, according to an article in an Israeli newspaper. Loni claimed he was not an owner of that chain, only an employee.
Asked about the article, Meiron said, “Before I accepted this position, I did my research and found an article alleging things about one of Loni’s other businesses in Israel. In our first conversation we talked about this. There are always two sides to every story and Loni told me he never owned the business in question. He personally satisfied my curiosity.
My focus is on the dynamics of our brand.”
In another undated blog post, Loni cites his previous experience and says, “His newest chain, Bandora, has taken the market by storm with its stores packed to capacity with diners who are raving about its unique Shawarma which is cooked over hot coals.”
Finally, we found the following on a website that asks workers to rate their employers. It was posted August 8 by a “current employee.”
Question: What advice would you give the boss of Burgerim about how to improve it?
Answer: “Stop telling stories about your past successes as they are not true and easily found to be false.”