You may have heard about the huge downfall of a burger chain that made headlines in the restaurant business community in 2019. If you haven’t, well, now is the time to learn all about them so as not to fall victim to franchise scams like the one that appears to have been pulled off here.
Of course, we’re talking about the infamous Burgerim franchise scandal. How did the company convince 1,200 people to join the business opportunity? Is the company still in business? Read on to find out the answers to these complex questions.
- Did Burgerim go out of business?
- Did Burgerim change their name?
- How many Burgerim locations are there?
- Is Burgerim Black-Owned?
- How much does Burgerim make?
Did Burgerim go out of business?
There are still a few Burgerim units in operation. But the full answer requires a much more detailed explanation and comes with a number of unexpected twists and turns. Here’s what happened to the burger chain.
The Start of Burgerim
Burgerim was founded by Donna Tuchner in Tel Aviv, Israel back in 2008. The concept was all about selling sliders with different types of patties such as beef, lamb, chicken, falafel and more. The concept caught the eye of Oren Loni who then bought Burgerim and all its rights. He began to franchise the chain in Israel and then a few years later opened in the United States.
The Franchise Offers
Burgerim had only one United States location in 2016 and grew to 200 locations in 3 years. 1,200 franchise agreements were also signed by the end of 2019. So what were the franchise offers that had Burgerim landing a spot on the Future 50 list of emerging chains by Restaurant Business?
According to the Burgerim ads on Instagram and Facebook, they claimed that there was “no experience necessary” in order to franchise with them. In addition, they also do not require a net worth or liquid capital but only $ 50,000 to open the restaurant. They also had a money-back guarantee wherein if franchisees weren’t able to find a location for their Burgerim within six months, their franchise agreements were allowed to be canceled and they’ll be refunded in six to nine months.
All these may be considered reasons to doubt the credibility of a business franchise. But those who were not experienced in dealing with franchising may only have seen this as a perfect opportunity for a low-cost and hassle-free business. Though things were quite okay at the start, enough for Burgerim to report $ 45 million revenue in 2016 to 2018, things began to plummet right after that.
One important factor for franchised businesses to thrive is royalty fees. And though Burgerim supposedly included a charge of 5% in royalty fees and 2% in ad fund contributions, the company never collected them from their franchisees.
There was also the problem with franchisees facing large expenses than the ones they were estimated to prepare for. Franchisees expected the buildout of their Burgerim location would cost around $ 300,000 to $350,000 as what was told of them. But one franchisee ended up with expenses over $ 550,000. Many other franchisees also took out loans to cover the expenses.
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The problems continued on even when the stores opened. The inexperienced franchisees along with their crew were also unable to cope with the extensive burger menu. The burger patty options which were also plenty led to waste since most orders requested only beef or chicken rather than lamb. On top of all that, labor costs were also turning out to be heavy.
On December 2019, Burgerim released an announcement that they were undergoing reorganization and will be filing a petition for Chapter 11 Bankruptcy. Their Chief Restructuring Officer was stated to be Michael Buchbot. The statement also included email addresses where concerns can be sent to. However, emails sent to this address kept bouncing back and Michael Buchbot was apparently only an alias.
Did Burgerim go out of business?
In a way, it eventually did. Oren Loni, the one who started all of it is nowhere to be found and has allegedly fled the country. The whole operation was akin to a pyramid scheme. The lawsuits are still ongoing. With most of the businesses closing down or individual franchising opting to change their name and concept just to stay in business, most Burgerim businesses don’t look like they are in business any longer.
But if you visited their website, it’s still up. Some Burgerim locations claim to still be operational. But whether or not they truly are open and with all the issues caused, it’s best to look at other credible burger chains for now if you’re looking for a burger franchise to own. Take our franchise quiz to find a reputable opportunity with a long-standing track record of success.
Did Burgerim change their name?
It is not known if all Burgerim locations have closed down. The Burgerim website shows that some of their locations are operating on different schedules but at this point, it’s best not to trust what their website says at the moment.
But several Burgerim locations have decided to change their names and operate with a different concept since they weren’t getting any support and answers from the mother company anyway. One franchisee, Abdul Popal, rebranded two of his Burgerim stores into iniBurger. Popal’s renamed store still sells burgers but with a less complex menu. He claims that his restaurant has turned out to be a success.
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There are also others that went to more more stable burger brand. Joey McCulloughs’s Burgerim franchise in Norfolk, Virginia joined Fatburger.
So it’s not that Burgerim officially changed their name. It’s just that other Burgerim locations that want to continue the business did so by doing a rebrand.
How many Burgerim locations are there?
It is estimated that by the end of 2019, there were 200 Burgerim locations around the United States. There were also 1,200 franchise agreements signed by the end of that year. But as to the exact count of Burgerim locations operating at present is not known.
Is Burgerim Black-Owned?
As mentioned above, Burgerim is owned by Oren Loni who is from Israel. An article by Medium posted in February of 2018 stated that Oren Loni relocated to the United States and is living with his family in Los Angeles. But recent reports have said that after all the allegations, he has fled the country and his whereabouts are currently unknown.
Oren Loni’s Twitter profile states that he is a businessman. But according to Cheryl Robinson, someone who worked with Burgerim’s franchisees for financing, says that Oren Loni was a salesperson instead. And that doesn’t come as a surprise with the way he is able to convince a lot of people to franchise Burgerim with such limited financial requirements.
How much does Burgerim make?
Burgerim’s revenue in 2016 was recorded to be $2,107,786 with a net income of $29,084. When it grew popular around 2017, they had revenues of $22,169,346 and a net income of $9,818,044. In 2018, the burger franchise recorded revenues of $20,731,874 and a net income of $293,447. Burgerim claimed they brought in $45 million in revenue between 2016 and 2018. Then the shoe dropped in 2019.
Burgerim was considered one of the biggest scams in the franchise industry. It impacted the lives of many franchisees wherein many of them even filed for personal bankruptcy. Some chose to move on and rebrand to gain back what they lost. But that’s not the case for others who no longer chose to continue the business because they ran out of funds.
With this kind of scam comes with different lessons to learn, especially when you’re a first timer in the franchising industry. If an offer always sounds too good to be true and very affordable, it’s best to take a step back and analyze why. This is especially true if the claims are coming from a brand that you’ve never heard of before. Hire a legal advisor to look over things and read the fine print. Study the company’s financial records. Take time to go over the franchise agreements before signing anything.
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Do a little background research and become a detective of sorts. Study the company’s origins beyond what’s provided in the marketing materials. Is the business or service something you have experience with and understand? Burgerim was able to catch the attention of many with their “no experience needed” claims. If you have no experience running a business, does the company you’re franchising offer any kind of training and support?
Look for signs that the business is credible. This means checking out how long the business has been operating and how many locations they have. Ask fellow franchisees their experience in running the business. Were the initial investments correct or did they spend more? Is the company responsive to their needs?
What happened with Burgerim’s franchisees is something we all hope never happen to anyone again. With that in mind, know that franchising a business is a huge risk that involves a lot of decision-making and huge expenses. But this industry can also be fun and rewarding if both parties have shared values and positive intent. May the Burgerim story serve as a cautionary tale to complete due diligence before joining any franchise.