Washington state securities officials revoked Burgerim’s right to sell franchises last month, citing the chain’s notice in December that it was considering filing for bankruptcy and had hired a chief restructuring officer.
Meanwhile, the state of Maryland officially revoked Burgerim’s franchise rights in that state last week, noting that the company has not responded to the suspension the state issued in late December.
But these aren’t the only two states where Burgerim, now based in Calabasas, Calif., cannot sell franchises. The company’s franchise registration has expired in two states, Virginia and Michigan, officials in those states told Restaurant Business. Virginia’s registration expired in January and Michigan’s last August.
Burgerim’s registration was withdrawn in Minnesota in 2018 after the company didn’t respond to the state’s requests for changes to the company’s franchise disclosure document.
Meanwhile, Yelp has started putting alerts on Burgerim’s review sites over an apparent attempt by the company to solicit positive reviews.
Yelp obtained a letter from Burgerim corporate to social media influencers offering them a free combo meal in exchange for a five-star Yelp review, along with an Instagram story and other posts.
The consumer alert message appears on the review section of Burgerim’s page, noting that “We caught someone offering up cash, discounts, gift certificates or other incentives in exchange for reviews about this business.” The alert links visitors to a PDF with the Burgerim letter.
All of these moves come amid a state of continued uncertainty at the company, which shut down in December after its owner, Oren Loni, fled the country, revealing a company that sold at least 1,200 licenses, many to operators with little experience or money. Restaurant Businessdetailed the problems last month, and U.S. Sen. Dianne Feinstein has since asked the Federal Trade Commission to look into the matter.
The chain operates more than 200 locations, with as many as 100 having closed, and others still coming online. That includes a location in the Kansas City area that plans to open and another one in Katy, Texas.
Thirteen states require franchises to register there to be able to sell franchises, and those states also require the documents be kept up to date.
Companies that do not register their federally required franchise disclosure document (FDD) with those states are not allowed to sell franchises to investors there. Operators can continue to run their businesses in those states, and Burgerim has locations in Virginia, Michigan, Maryland and Washington. It does not have any locations in Minnesota.
Burgerim’s problems emerged after the company told franchisees it was considering a bankruptcy filing and had hired a chief restructuring officer, Michel Buchbut. The company has yet to file for bankruptcy and most recently told franchisees it was considering other liquidation options.
But that acknowledgement led to the suspension of the Maryland franchise registration, which was then revoked last week. The state said the company did not update its FDD to include the hiring of a restructuring officer or its financial problems and cited other problems with the company’s document.
Washington state’s securities division issued its stop order to Burgerim on Jan. 14, citing the lack of an update on the possible bankruptcy and the chief restructuring officer. The division said that the document “as registered with the securities division would work or tend to work as a fraud upon purchasers.”
As for Yelp, the review site has published consumer alerts since 2012 to alert consumers when it sees “brazen attempts to manipulate ratings and reviews,” according to a Yelp spokesman. The site has issued 1,500 such alerts since then.