The founder of the Burgerim chain has reemerged after more than two years to deny federal allegations that he violated federal franchising regulations.
Loni “emphatically denies any wrongdoing” in a response to a lawsuit the U.S. Federal Trade Commission filed in February against Burgerim accusing the company of overselling a franchise to veterans and inexperienced investors and then reneging on promised refunds.
It is Loni’s first response to the collapse of his chain, which sold some 1,500 franchises across the country—most of which never opened. It’s also the first time he has publicly appeared in any form since his disappearance in 2019 sent Burgerim and its franchisees into chaos.
The answer is coming from Loni himself and not Burgerim. The response also appears to place the blame for the problems both on federal regulators and likely with the franchisees who signed for the right to open one of the chain’s restaurants.
Loni alleges “that persons and/or parties other than answering defendant (Loni) were negligent, legally responsible and otherwise at fault for the damages, if any there were, alleged in the complaint,” the response says.
The response also says the “Plaintiff’s damages are attributable in whole or in part to his own acts, conduct or omissions.” It also suggests that the statute of limitations had passed for any lawsuit to be filed.
The filing adds a level of intrigue to the puzzling case over Burgerim, whose problems first emerged in December 2019 when the company told franchisees that the brand planned to file for bankruptcy and then shut down its email service. The message arrived after operators hadn’t heard from the brand in months and many employees left.
A Restaurant Business investigation subsequently revealed that the company sold hundreds of franchises, most of which could not open a store, while many of those that did struggled financially and closed. The company also promised to refund the franchise fees, up to $70,000, for those who could not open a store. Eventually, it stopped paying out those refunds. The company used aggressive sales tactics to convince investors to pay that fee.
The result left hundreds of franchisees out of tens of thousands of dollars with nothing to show for it while some ended up deep in debt or in bankruptcy.
(For more stories on Burgerim, check out The Fall of Burgerim.)
The state of California last year ordered Burgerim to refund franchise fees, believed to be up to $58 million, and levied a $4 million fine.
The state said the brand sold more than 1,500 franchises between 2015 and 2019.
In his response, Loni admitted to selling 1,500 franchises and that “hundreds sought to cancel their agreements.”
It’s uncertain what the response ultimately means for Burgerim and its operators. The company itself has not responded to the federal lawsuit. The company had offered franchisees the right to de-brand after California’s action but at the time suggested that any franchisees seeking refunds would get “pennies on the dollar.”
Neither Burgerim officials nor the attorney for Loni has responded to requests for comment.
The FTC’s lawsuit against the brand said the company targeted inexperienced franchisees, including veterans. The lawsuit argues that Burgerim undersold operators on the risks of the franchise and often made promises on how much revenue and profits they could earn—even though the company did not disclose that information in its franchise disclosure document.
The lawsuit also said that the company withheld information from its franchise documents and often contracted information sales representatives gave to prospective franchisees.
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