Los Angeles, California - The Department of Justice, together with the Federal Trade Commission (FTC), announced the filing of a civil enforcement action against two companies and their founder for allegedly selling fast-casual burger franchises using false representations.
According to a complaint filed in the U.S. District Court for the Central District of California, defendants Burgerim Group USA Inc., Burgerim Group Inc. and founder Oren Loni made false representations to prospective franchisees to induce them to sign a franchise agreement and pay a franchise fee of between $50,000 and $70,000. Specifically, the government alleges that the defendants failed to refund those fees under certain conditions, including as promised by defendants, and failed to disclose material information. The complaint alleges violations of the Franchise Rule, which requires franchisors to provide prospective purchasers of franchises with the material information they need in order to weigh the risks and benefits of purchasing a franchise. The complaint also alleges violations of the FTC Act, which prohibits unfair and deceptive conduct. The complaint seeks civil penalties and equitable monetary and injunctive relief to stop the defendants from continuing to make deceptive claims in connection with the sale of franchises.
“The FTC’s Franchise Rule is designed to stop franchisors from taking advantage of prospective franchisees who are considering opening their own businesses,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “The Consumer Protection Branch will vigorously pursue those who violate the law by using misrepresentations to sell franchises.”
“Burgerim promised consumers, including veterans, the American dream, only to leave them in a nightmare of debt and deceit,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “For other franchisees facing predatory practices, we are making it easier for them to tell us about what happened. Visit ReportFraud.FTC.gov and file a report to help us root out deception and other illegal conduct in the franchise industry.”
This matter is being handled by Trial Attorney Marcus P. Smith of the Civil Division’s Consumer Protection Branch. Attorneys Christine M. Todaro and Christopher E. Brown represent the FTC.