In Burgerim Saga, an Unfortunate Set of Predictions
Burgerim's franchise page is still active as of January 22.
The attorney who contacted Franchise Times in the fall of 2018 about Burgerim told us that a franchisor in California was selling franchises without the usual validation—no corporate stores, no executives with experience in the U.S. franchise industry, no extensive franchise disclosure documents, and no earnings reports. What Burgerim did have was its president, Oren Loni, an Israeli citizen who claimed to have extensive experience in launching "highly successful" restaurant franchises in Israel and other European countries.
But when the attorney checked with franchise contacts in Israel, she learned that Loni's franchise ventures there had never flourished. In fact, he had collected franchise fees for a new restaurant concept, then left the country. Those very fees, paid by trusting franchisees in Israel, probably funded the launch of Burgerim in the United States, she speculated. Just wait a couple of years, she warned. Loni will collect franchise fees here, then disappear with them again.
The article we published in November 2018, “Burgerim unit sales outstrip its growth,” quoted industry experts on the dangers of selling food franchises to inexperienced buyers, and matched Loni's boasts about his successes abroad with what really happened and questioned Burgerim's financial stability. But we never suggested that Loni would pocket millions in fees from trusting U.S. franchisees and vanish. That was too preposterous—until it happened.
No one is sure when Loni disappeared, because the Burgerim office went dark for a few weeks this winter, with no one answering the phones or returning emails. At first, there was speculation that the company would file for bankruptcy, but on January 14 franchisees received a letter introducing a new executive board that promised to support franchisees that are open and to help those with stores still under construction. The company has new offices, a new phone number and even a slightly new name, Burgerim Group USA.
But Loni's whereabouts is not the only mystery. No one knows how many Burgerim stores are open, how many opened, then closed, and how many franchisees never opened at all. The latest FDD, filed in spring of 2019, lists 109 open at the end of 2018 and 452 sold but not open. Keith Miller, a principal at Franchise Advocacy Consulting, speculates Loni kept selling new franchises even when his original franchisees were broke and closing their stores, and after attorneys filed lawsuits demanding refunds for clients that had never opened at all.
In the coming weeks Franchise Times will explore how Loni, a serial franchisor from another country with a questionable background, was allowed to operate so blatantly here. Stay tuned.