Burgerim has 45 SBA loan defaults and a 78.9% default rate, making it the single worst franchise brand in the history of SBA franchise lending. Out of 57 SBA loans issued to Burgerim franchisees, 45 borrowers defaulted. That is not a typo. Nearly 4 out of every 5 Burgerim franchisees who financed their investment through an SBA loan could not repay it. At Lopes Law LLC, we track SBA loan default data across the franchise industry, and no other brand comes close to this level of systemic failure.

This article explains the Burgerim story from its rapid expansion to its collapse, breaks down what the SBA default data actually reveals, and outlines the legal options available to franchisees who lost their investment. If you are a Burgerim franchisee or former franchisee still dealing with the fallout, this guide was written for you.

What Is the SBA Loan Default Rate and Why Does Burgerim’s 78.9% Rate Matter?

The Small Business Administration (SBA) guarantees loans to small business owners through approved lenders. When a borrower cannot repay, the SBA covers a portion of the loss, and the loan is classified as a default. The SBA tracks these defaults by franchise brand, which creates a public record of franchise failure that is independent of anything the franchisor discloses.

The national average SBA loan default rate across all business types is approximately 15% to 20%. For franchise businesses specifically, the average default rate hovers around 20% to 25%, depending on the industry and the time period measured. A default rate above 30% is considered alarming. A rate above 50% signals a fundamentally broken business model.

Burgerim’s 78.9% default rate is in a category of its own. To put that number in perspective, here is how it compares to other franchise brands that have appeared on franchise failure watchlists:

Brand	SBA Loans	Defaults	Default Rate
Burgerim	57	45	78.9%
Industry Average (QSR)	Varies	Varies	~20-25%
National Average (All SBA)	Varies	Varies	~15-20%

The gap between Burgerim and the industry average is not a matter of degree. It represents a categorically different outcome. When nearly 80% of franchisees who took out government-backed loans to open a Burgerim location default on those loans, the failure is not attributable to individual operator error. It is systemic.

The Burgerim Story: Rapid Expansion, Collapse, and the Founder Who Left the Country

Burgerim was an Israeli-based burger concept that entered the United States franchise market in 2016. The brand positioned itself as a premium customizable burger restaurant, offering multiple protein options and a casual dining experience. What made Burgerim unusual from the start was its franchise sales model.

Most established franchise brands charge initial franchise fees ranging from $25,000 to $50,000 and require franchisees to meet net worth and liquidity requirements. Burgerim sold franchise licenses for as little as $10,000 to $15,000, with the promise of a low-cost entry into restaurant ownership. The company ran aggressive “buy one, get one free” promotions on franchise licenses, selling area development rights and multi-unit packages at prices that seemed too good to be true.

They were.

Between 2016 and 2019, Burgerim sold hundreds of franchise licenses across the United States. The company claimed to have sold over 1,500 licenses at its peak. But the number of locations that actually opened was a fraction of the licenses sold. Many franchisees paid their fees and never received the support, training, or operational infrastructure needed to open a restaurant. Those who did open often struggled with supply chain problems, inadequate training, and a business model that did not produce sustainable unit economics.

The Founder Leaves the Country

In 2019, as the scope of Burgerim’s problems became impossible to ignore, the company’s founder and CEO, Oren Loni, left the United States. Reports indicated that Loni returned to Israel while franchisees across the country were struggling to open locations, dealing with supply chain failures, or watching their investments evaporate entirely.

The departure of the founder was not a quiet retirement. It was the effective abandonment of hundreds of franchisees who had paid for franchise licenses and, in many cases, signed leases, built out restaurant spaces, and taken on SBA loans to fund their businesses. With the company’s leadership gone and operational support nonexistent, the collapse accelerated.

FTC Enforcement Action

In 2020, the Federal Trade Commission (FTC) took action against Burgerim Group USA, Inc. The FTC alleged that Burgerim violated the FTC Franchise Rule (16 C.F.R. Part 436) by selling franchise licenses without providing prospective franchisees with a compliant Franchise Disclosure Document (FDD) and by making deceptive earnings claims. The FTC obtained a court order halting Burgerim’s franchise sales operations in the United States.

The FTC’s action confirmed what franchisees had been experiencing on the ground: the company had been selling franchises without the legally required disclosures, meaning many buyers never received the financial and operational information they were entitled to under federal law before making their investment decision.

Why Did 78.9% of Burgerim SBA Loans Default?

A default rate this extreme does not happen because of bad luck. It happens because of compounding failures across multiple dimensions of the franchise system. Based on public records, FTC filings, and the patterns we observe in franchise disputes, the key factors behind Burgerim’s catastrophic default rate include the following.

• No viable unit economics: The underlying restaurant business model did not generate sufficient revenue to cover operating costs, debt service on SBA loans, and provide a reasonable return to the operator. When the business itself cannot produce enough cash flow to service the debt, defaults are inevitable.
• Insufficient franchisor support: Franchisees reported receiving inadequate training, no supply chain infrastructure, and limited or no operational support. A franchise system works only when the franchisor provides the systems, training, and supply chain that enable individual operators to succeed. Burgerim did not deliver these.
• FDD violations: Many franchisees were not provided with a compliant FDD before purchasing. This means they did not receive the financial disclosures, litigation history, franchisee contact lists, or audited financial statements that would have allowed them to conduct proper due diligence.
• Deceptive earnings claims: The FTC alleged that Burgerim made misleading financial representations to prospective buyers. When investment decisions are based on inflated revenue projections, the resulting businesses are capitalized for a level of performance that never materializes.
• Oversaturation through license sales: By selling far more licenses than the market could support, Burgerim created a situation where franchisees were competing with each other in overlapping territories. The volume of license sales was driven by the franchisor’s need for franchise fee revenue, not by market demand for the product.

At Lopes Law LLC, we have recovered over $83,000 for franchise owners without litigation, and we see these same patterns in other distressed franchise systems. The difference with Burgerim is the scale and the severity. A 78.9% default rate is not a yellow flag. It is a five-alarm fire.

What Does a Burgerim SBA Loan Default Mean for You Personally?

Most SBA loans require the borrower to sign a personal guarantee. This means that when the Burgerim franchise fails and the business cannot repay the loan, the lender can pursue the borrower’s personal assets. The personal guarantee survives the business failure.

Here is what that looks like in practice for a Burgerim franchisee with a defaulted SBA loan:

• Personal liability for the full loan balance: If you signed a personal guarantee, you are responsible for the outstanding loan amount, including accrued interest and collection costs. SBA 7(a) loans for franchise businesses typically ranged from $150,000 to $500,000, and the personal exposure is the full remaining balance.
• Collection activity: The SBA or the lender may pursue collection through wage garnishment, bank levies, or liens on personal property, including your home. The federal government has broad collection powers for SBA-guaranteed debt.
• Credit impact: An SBA loan default is reported to credit bureaus and will remain on your credit report for seven years. This affects your ability to obtain future financing for business or personal purposes.
• Tax consequences: If any portion of the debt is forgiven through negotiation or settlement, the forgiven amount may be treated as taxable income under IRS rules. A $200,000 loan forgiven for $100,000 could result in a $100,000 income inclusion on your tax return.

The personal guarantee is the element that transforms a business failure into a personal financial crisis. Many Burgerim franchisees invested their savings, leveraged their homes, and put their families’ financial security on the line based on representations that turned out to be false. Understanding the scope of your personal exposure is the first step toward developing a recovery strategy.

What Legal Options Do Burgerim Franchisees Have?

Despite the severity of the situation, Burgerim franchisees are not without options. Several legal avenues exist for pursuing recovery, reducing personal liability, and holding responsible parties accountable.

FTC Complaint and Victim Claim

The FTC has already taken enforcement action against Burgerim. Franchisees who were harmed by Burgerim’s practices can file a complaint with the FTC and may be eligible for restitution if the enforcement action results in a monetary judgment or settlement. Filing a complaint also ensures that your losses are documented in the federal record, which can support future claims.

State Attorney General Complaint

Many states have franchise registration and disclosure laws that provide protections beyond the federal FTC Franchise Rule. In franchise registration states such as California, Illinois, Maryland, Minnesota, and New York, franchisors must register their FDD with the state before selling franchises. If Burgerim sold franchises in these states without proper registration, the state attorney general may pursue additional enforcement action, and affected franchisees may have state-law claims for rescission of the franchise agreement, meaning the right to get your money back.

Private Litigation

Individual or group lawsuits against Burgerim, its officers, and any third parties who facilitated the franchise sales (such as franchise brokers or sales organizations) may be viable. Common legal theories include fraud, negligent misrepresentation, violation of the FTC Franchise Rule, violation of state franchise disclosure laws, and breach of the franchise agreement. The practical challenge is that Burgerim as a corporate entity may have limited assets. However, claims against individual officers or third-party sales organizations may offer better recovery prospects.

SBA Loan Negotiation

Depending on the circumstances, it may be possible to negotiate with the SBA or the lender regarding the terms of the default. Options may include an Offer in Compromise (settling the debt for less than the full amount), a structured repayment plan, or a hardship-based deferral. Having legal representation during these negotiations is important because the terms you agree to will affect your financial obligations for years. For more on the dispute resolution process, see our franchise dispute resolution guide.

Class Action Participation

Given the number of affected franchisees, class action lawsuits have been filed or may be in progress. Participating in a class action can reduce individual legal costs while leveraging the collective strength of hundreds of affected franchisees. The trade-off is that class action settlements typically result in lower per-franchisee recovery than individual litigation. Review any class action notices carefully and consult with a franchise attorney before opting in or out.

How to Preserve Your Evidence and Document Your Losses

Regardless of which legal path you pursue, preserving evidence is critical. Once documents are lost, emails are deleted, or witnesses become unavailable, your ability to prove your claims diminishes significantly. If you are a Burgerim franchisee, take the following steps immediately.

• Preserve all written communications: Save every email, text message, letter, and marketing material you received from Burgerim, its sales representatives, or any franchise broker who was involved in the sale. These communications may contain representations that form the basis of fraud or misrepresentation claims.
• Keep your FDD and franchise agreement: If you received a Franchise Disclosure Document or signed a franchise agreement, these are essential legal documents. If you did not receive an FDD, document that fact, because the failure to provide one is itself a violation of the FTC Franchise Rule.
• Document all financial losses: Create a detailed accounting of every dollar you spent on the Burgerim franchise, including the franchise fee, buildout costs, equipment purchases, lease deposits, operating losses, SBA loan payments, interest, and any personal funds invested. Include bank statements, receipts, invoices, and credit card records.
• Preserve SBA loan documents: Keep copies of your loan application, promissory note, personal guarantee, and all correspondence with the lender or the SBA regarding the default.
• Record your timeline: Write a chronological narrative of your experience with Burgerim, from the first contact through the present. Include dates, names of individuals you dealt with, promises that were made, and the point at which you realized the business was failing. This narrative will be valuable for any attorney evaluating your case.

What Lessons Does Burgerim Teach Franchise Investors?

The Burgerim disaster is a case study in every franchise due diligence failure that a prospective buyer can make. Every red flag was present before the franchise sales began. The tragedy is that most buyers either did not know to look for them or were persuaded to ignore them.

• An unusually low franchise fee is a warning, not a bargain. Franchise fees exist to cover the franchisor’s cost of training, site selection support, and initial setup. When a franchisor offers franchise licenses at $10,000 to $15,000, the question is not “what a great deal.” The question is: what are you not getting? The answer, in Burgerim’s case, was virtually everything.
• “Buy one, get one free” franchise promotions are inherently suspicious. A legitimate franchisor does not need to run discount promotions on franchise licenses. If the business model works, there is demand for the franchise at its stated price. Discounting franchise licenses signals that the franchisor’s revenue model depends on selling licenses, not on the success of operating units.
• The FDD is your first line of defense. If a franchisor does not provide you with a Franchise Disclosure Document at least 14 days before you pay any money or sign any agreement, that is a violation of federal law. Walk away. No exceptions. For a complete guide to what the FDD contains, see our article on what a Franchise Disclosure Document is.
• Franchise validation with existing operators is non-negotiable. Item 20 of the FDD lists current and former franchisees. Calling those operators and asking about their experience, their revenue, their support from the franchisor, and whether they would do it again is the single most important due diligence step. If the franchisor discourages you from contacting existing franchisees, that is another red flag. Learn more about this process in our franchise validation guide.
• SBA loan approval does not validate the franchise. The SBA approves loans based on the borrower’s creditworthiness and the loan application, not on the viability of the franchise system. The fact that a bank will lend you money for a franchise does not mean the franchise is a good investment. Burgerim’s 45 defaults demonstrate this with devastating clarity.

Frequently Asked Questions About Burgerim SBA Loan Defaults

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Last updated: March 10, 2026