FTC Files Lawsuit Against Burgerim Franchise Over False Business Claims

The Federal Trade Commission (FTC) has filed a lawsuit against hamburger franchise Burgerim, saying it falsely represented itself to those who wanted to own a franchise location, according to a Tuesday (Feb. 8) FTC blog post.

According to the complaint, Bugerim and its CEO Oren Loni pitched their franchise as a “business in a box,” which would let franchisees become “thriving business owners.” Burgerim said the company’s training and other protocols were designed for people to operate them successfully in their own stores and communities.

However, according to the FTC, Burgerim’s Franchise Disclosure Document left out several pieces of key data like contact information for franchisees — which would allow potential franchisees to learn about others’ experiences.

The complaint from the FTC also alleges that Burgerim made financial performance claims to prospective franchisees but didn’t put those statements in their financial disclosure document, which is required by the rules for franchises. Allegedly, there were also some inaccurate statements included in the document.

Burgerim franchises cost around $50,000, but the report says that doesn’t come with the usual costs of opening a restaurant like getting a location, building out the facility and other things — all told, it could cost a franchisee over $600,000.

The report also alleges that Burgerim violated the FTC Act through falsely representing that they’d refund the franchise fee for those who weren’t able to get financing or a location — the majority of the 1,500 franchisees sold “never got off the ground.” Hundreds wanted to cancel, but that request was allegedly not honored by Burgerim.

The FTC also recently warned about social media-based fraud, in which Americans last year lost around $770 million last year — an 18-fold increase from 2017.

Related: FTC Warns Social Media Users About Advertising Scams

The report said the losses came out to around a quarter of all losses reported for fraud last year. The losses increased as the age groups increased, but consumers ages 18 to 39 were over twice as likely as older people to report losing money to scams in 2021.