The Risky Dream of the Fast Food Franchise

Burgerim had all the ingredients for fast-food-franchise fame: a novel concept (sliders); a modern logo evocative of an emoji; and a celebrity connection, in the form of Kim Kardashian West’s confidante Jonathan Cheban, who legally changed his name to his Instagram handle, Foodgod.

By promising high returns on investment and ensuring that Americans would love its signature lamb sliders, Burgerim, which opened its first American location in 2016, enrolled nearly 1,200 new franchisees and oversaw the opening of more than 200 locations in just a few years. The company billed itself as America’s “fastest growing burger franchise” of 2019.

Then, last month, the trade magazine Restaurant Business detailed explosive allegations suggesting that the company just might be a Ponzi scheme. Burgerim sold franchises, pulling in tens of thousands of dollars from each would-be restaurant owner, but then, for reasons that remain unclear, did not collect ongoing royalties. This set up a nearly unprecedented and clearly unsustainable situation, the magazine reported. Burgerim needed to recruit ever more people to stay afloat, and the company’s alleged inconsistencies, false promises, and acceptance of inexperienced, cash-strapped franchisees caught up with it. “If this was a stock, everyone would be in jail,” Keith Miller, a fast-food-franchise consultant, told the trade publication. Dozens of franchisees lost their life savings. Others reportedly filed for bankruptcy. The company’s new CEO, Michel Buchbut, admitted mistakes but defended the company to Restaurant Business, saying, “I cannot call it a Ponzi … It was not exactly a Ponzi.” On Wednesday, Senator Diane Feinstein called on the Federal Trade Commission to investigate the chain.