Burgerim holds a distinction no franchise wants: the highest SBA loan default rate in American franchising history. With 45 SBA loan defaults at a 78.9% default rate, nearly four out of every five Burgerim franchisees who took SBA loans defaulted. That number is not a failure rate — it is a collapse rate. And it was predictable.

This article is not just a post-mortem on Burgerim. It is a warning. At Lopes Law LLC, we have recovered over $83,000 for franchise owners without litigation, and we have reviewed dozens of franchise disclosure documents that contained the same red flags Burgerim displayed before its implosion. The goal of this guide is to help prospective franchise investors understand what went wrong, why the warning signs were visible from the beginning, and how to avoid making the same mistake with the next franchise concept that promises easy profits.

If you are currently invested in Burgerim and seeking recovery options, see our companion guide on Burgerim dispute recovery.

What Was Burgerim and What Happened to It?

Burgerim was a burger restaurant franchise concept founded in Israel by Oren Loni (also known as Oren Loni Levi). The concept centered on small, customizable burgers served in sets of three — a “build your own burger” model that was marketed as innovative and Instagram-friendly. Loni launched the US franchise operation in 2016 from a base in Los Angeles, California.

Between 2016 and 2019, Burgerim sold over 1,500 franchise licenses across the United States. That number is staggering — most established franchise brands with decades of history have fewer total locations. Burgerim achieved this volume through an unusually low $50,000 franchise fee, aggressive sales tactics, minimal franchisee qualification standards, and marketing that emphasized how “easy” it was to open a Burgerim location.

By 2019, the cracks were visible. Franchisees were reporting that their locations were underperforming projections by wide margins. Corporate support was virtually nonexistent. Supply chain issues plagued operators. And Oren Loni was becoming increasingly unreachable.

In 2020, the Federal Trade Commission took the extraordinary step of filing an enforcement action against Burgerim, alleging violations of the FTC Franchise Rule. Around the same time, Loni left the United States and returned to Israel, effectively abandoning the franchise system and the hundreds of franchisees who had invested their life savings.

How Did 78.9% of SBA-Funded Burgerim Franchises Default?

The 78.9% SBA default rate — 45 defaults out of 57 SBA-funded locations — is the most extreme franchise failure rate in SBA history. To put that number in context:

Franchise System	SBA Defaults	Default Rate
Burgerim	45	78.9%
Average QSR Franchise	Varies	15-25%
Average All Franchises	Varies	20-25%
Top-Performing Systems	Varies	Under 10%

Burgerim’s default rate is more than three times the industry average. This is not a case of a few unlucky operators in bad markets. A 78.9% failure rate represents systemic, structural failure — a business model that was fundamentally incapable of producing profitable franchisee operations at scale.

The question is not why did so many Burgerim franchises fail. The question is why was anyone allowed to invest in them in the first place.

What Were the Red Flags Every Investor Should Have Seen?

Looking back, the Burgerim FDD and franchise sales process contained virtually every red flag a franchise attorney looks for when reviewing a new concept. Here are the major warning signs, each of which should have stopped a prospective franchisee from signing.

Red Flag 1: The $50,000 Franchise Fee

A $50,000 franchise fee for a full-service restaurant concept is abnormally low. Most established QSR (Quick Service Restaurant) franchises charge $25,000 to $50,000 in franchise fees, but those fees are backed by decades of operational history, proven unit economics, established supply chains, and comprehensive training programs. Burgerim had none of that.

The low fee was not a sign of affordability — it was a sign that the franchisor was prioritizing franchise sales volume over franchisee success. When the franchise fee is the primary revenue source (rather than ongoing royalties from profitable franchisees), the incentive structure is fundamentally misaligned. The franchisor makes money by selling franchises, not by supporting them.

Red Flag 2: No Item 19 Financial Performance Representations

Item 19 of the Franchise Disclosure Document is where the franchisor discloses actual financial performance data for existing franchise locations. It is the single most important piece of information for evaluating whether a franchise investment will generate a return. Burgerim’s FDD contained no Item 19 disclosure.

A franchisor that refuses to provide Item 19 data is telling you something important: either the numbers are bad, or they do not have them. In Burgerim’s case, both were likely true. The absence of Item 19 should have been a dealbreaker for any sophisticated investor. At Lopes Law LLC, this is one of the first things we check in every FDD review.

Red Flag 3: No Exclusive Territory Protection

Burgerim franchise agreements provided little to no exclusive territory protection. This meant the franchisor could sell another franchise license in the same neighborhood, on the same street, or even in the same shopping center. Without territory protection, franchisees were competing not only with other burger restaurants but with other Burgerim locations.

The absence of territory protection in a restaurant franchise is a serious red flag because the entire value proposition of the franchise — brand recognition driving local traffic — is undermined when multiple locations cannibalize each other’s customer base. For a deeper analysis of what franchise agreements should contain, see our guide on franchise agreement red flags.

Red Flag 4: Aggressive Development Schedules

Burgerim pushed franchisees to open locations on accelerated timelines. The pressure to “get open fast” meant many franchisees did not have adequate time to find optimal locations, negotiate favorable lease terms, complete proper buildout, hire and train qualified staff, or build pre-opening marketing momentum.

Rushed openings lead to underprepared operators, which leads to poor customer experiences, which leads to financial failure. This pattern is well-documented in franchise law, and it is a hallmark of franchise systems that prioritize expansion metrics over operational quality.

Red Flag 5: Unproven Concept with Limited US History

Burgerim had minimal operating history in the United States when it began aggressively selling franchises. The concept had not been tested across diverse US markets, consumer preferences, or cost structures. Selling 1,500 franchise licenses for a concept that had not proven it could generate sustainable profit at even a handful of corporate-owned locations is reckless at best and fraudulent at worst.

Why Did the FTC Take Action Against Burgerim?

The Federal Trade Commission rarely brings enforcement actions against individual franchise systems. The FTC’s franchise enforcement resources are limited, and the agency typically focuses on cases that involve the most egregious conduct and affect the largest number of victims. The fact that the FTC targeted Burgerim reflects the severity of the situation.

The FTC’s 2020 action alleged that Burgerim violated the FTC Franchise Rule (16 C.F.R. Part 436) in multiple ways:

• Failure to provide required disclosures: The FTC alleged that Burgerim sold franchise licenses without providing the required Franchise Disclosure Document in the timeframes mandated by the Rule, or in some cases, without providing an FDD at all.
• Misleading earnings claims: The FTC alleged that Burgerim representatives made financial performance representations to prospective franchisees outside of Item 19 of the FDD — a direct violation of the Franchise Rule. These informal earnings claims allegedly painted a picture of profitability that bore no resemblance to actual franchisee performance.
• Deceptive trade practices: The broader allegation was that the entire Burgerim franchise sales program was designed to extract franchise fees from investors rather than build a sustainable franchise system.

The FTC action was important, but it came too late for most investors. By the time the FTC filed, hundreds of franchisees had already invested, opened, and in many cases, closed their locations. The FTC cannot un-ring the bell — it can only try to prevent future harm and, in some cases, obtain monetary relief for victims.

What Happened When the Founder Fled to Israel?

Perhaps the most extraordinary aspect of the Burgerim story is that founder Oren Loni left the United States and returned to Israel, effectively placing himself beyond the practical reach of most US civil and regulatory enforcement mechanisms.

When a franchisor’s principal leaves the country, the consequences for franchisees are severe. There is no one to operate the franchise system. There is no supply chain. There is no brand management. There is no one to answer the phone when franchisees call corporate for support. And there is often no one to name as a defendant in a lawsuit who can actually satisfy a judgment.

This situation raises important legal questions about personal liability, corporate veil piercing, international enforcement of judgments, and the obligations of franchise brokers and sales agents who sold Burgerim franchises. For investors who were sold Burgerim franchises by third-party brokers or franchise consultants, there may be claims against those intermediaries that are more practically enforceable than claims against the franchisor itself.

How Much Did Burgerim Franchisees Lose?

The financial devastation of the Burgerim collapse is difficult to overstate. Individual losses varied based on location, lease terms, and the amount of personal investment, but the typical Burgerim franchisee lost between $200,000 and $500,000. That figure includes:

• Franchise fee: $50,000 (non-refundable under the franchise agreement)
• Buildout and equipment: $100,000 to $300,000 depending on the market
• Initial inventory and supplies: $15,000 to $25,000
• Working capital burned during operations: $50,000 to $100,000+
• Personal guarantee exposure on SBA loans: Full loan balance (often $200,000 to $400,000)
• Lease obligations: Remaining lease payments (often 5 to 10 years of liability)

With 45 SBA loan defaults, the total documented SBA loan losses exceed $10 million. But that figure captures only a fraction of the total investor losses, because many Burgerim franchisees financed their investments with personal savings, home equity, retirement funds, or non-SBA loans that are not captured in SBA default data.

The true total loss across the Burgerim system — including all franchisees, not just those with SBA loans — is likely in the range of $50 million to $100 million or more.

Why Was the 78.9% Failure Rate Predictable?

This is the question that matters most for future franchise investors. The Burgerim failure was not a black swan event. It was entirely predictable based on publicly available information. Here is why:

1. The unit economics did not work. A small-format burger restaurant with a low average ticket price, high food costs, and high labor costs has razor-thin margins even in the best circumstances. Without proven unit economics (which Burgerim refused to disclose in Item 19), there was no evidence that a single location could generate enough profit to service the debt required to open it.
2. The franchise sales model was the product. When a franchisor sells 1,500 franchise licenses in three years for a concept with minimal operating history, the franchise fee is the revenue model — not the ongoing royalties from successful franchisees. This is a hallmark of predatory franchise sales.
3. The support infrastructure did not exist. Operating 1,500 restaurant locations requires massive corporate infrastructure — field support teams, supply chain management, quality control, marketing programs, technology platforms. Burgerim had none of this at scale.
4. The franchisor had no skin in the game. Burgerim operated very few corporate locations. When a franchisor does not operate its own locations, it has no direct financial exposure to the same operational challenges its franchisees face. The incentive to fix systemic problems is dramatically lower.
5. The FDD said so. Every one of these risk factors was either directly disclosed or inferable from the Burgerim FDD. An experienced franchise attorney reviewing the document would have identified all of them.

At Lopes Law LLC, we have recovered over $83,000 for franchise owners without litigation. But the most valuable service we provide is the FDD Validation Review — the $3,000 analysis that prevents investors from making catastrophic mistakes in the first place. For a full breakdown of what that review includes, see our guide on what to expect from an FDD review.

How to Spot the Next Burgerim: A Franchise Investor’s Checklist

The franchise industry will produce another Burgerim. The next one might be a different cuisine, a different industry, or a different business model — but the red flags will be the same. Here is the checklist every prospective franchise investor should use before signing anything or writing any checks:

• Check SBA default rates. This is publicly available data. If a franchise system has an SBA default rate above 25%, proceed with extreme caution. Above 40%, do not invest.
• Demand Item 19 data. If the franchisor does not provide financial performance representations, ask why. A franchisor with a successful system has every incentive to share its numbers. A franchisor that refuses is hiding something.
• Verify territory protection in writing. Verbal promises about territory are legally worthless. If the franchise agreement does not provide an exclusive territory, assume you will have competition from other franchisees of the same brand.
• Count the operating years. Be skeptical of franchise systems with fewer than 5 years of US operating history. A concept that has not proven itself across multiple markets and economic cycles is a speculative investment, not a franchise.
• Call existing franchisees. Item 20 of the FDD lists current and former franchisees. Call at least 10 of them. Ask about profitability, corporate support, territory issues, and whether they would make the investment again. If fewer than 7 out of 10 say yes, walk away.
• Hire a franchise attorney. An FDD Validation Review costs $3,000 at Lopes Law LLC. That is less than 2% of the typical franchise investment. It is the single most cost-effective protection available to a franchise investor.

What Should Current and Former Burgerim Investors Do Now?

If you invested in Burgerim and lost money, you are not without options. The specific recovery strategies depend on your circumstances, but here are the immediate steps you should take:

1. Preserve all documents. Every piece of paper and every electronic communication related to your Burgerim investment is potential evidence. This includes the FDD, franchise agreement, all emails and texts with Burgerim corporate, financial records, SBA loan documents, and lease agreements.
2. Consult a franchise attorney. Your claims may include fraud, misrepresentation, breach of contract, violations of the FTC Franchise Rule, and violations of state franchise disclosure laws. Some of these claims have statutes of limitations that are running — the longer you wait, the more claims you may lose.
3. Evaluate claims against third parties. If a franchise broker, franchise consultant, or franchise development company sold you the Burgerim franchise, you may have claims against them — and those claims may be more practically enforceable than claims against Burgerim itself.
4. Address your SBA loan. If you have an SBA loan in default, contact a franchise attorney immediately to coordinate your franchise claims with your SBA loan workout strategy. Franchise claims can provide leverage in loan negotiations.

For a detailed walkthrough of recovery options, see our companion guide on Burgerim dispute recovery for defrauded franchisees. For a broader overview of the dispute process and costs, see our guide on how much a franchise lawyer costs.

Frequently Asked Questions About the Burgerim Franchise Failure

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Last updated: March 10, 2026