🍟 2/14/2022 – The Biggest Franchise Lawsuit In Over A Decade
BurgerIM Sued, Founder Fled the Country
BurgerIM and its founder, Oren Loni, were officially sued last week by the Federal Trade Commission, the regulating body for franchises in the United States.
The lawsuit alleges that BurgerIM oversold franchises to operators with little experience and didn’t disperse refunds as it pledged it would do.
Founder Oren Loni fled back to Israel as of January 2020.
The Wolf’s Take
This is about as bad an act as any franchise can commit against prospective franchisees:
They sold 1,500 locations to aspiring + under-capitalized buyers, collected substantial franchise fees, then didn’t refund the owners after their financing fell through – effectively stealing tens of millions of dollars since 2017 when they started selling franchises.
The founder fled to Israel in 2020 when trouble started brewing, and it remains to be seen if he will be extradited. I share this to provide a cautionary tale in franchising – there are many good actors in the ecosystem, but there are certainly brands you should stay away from, and BurgerIM has proved to be the worst in recent memory.
Hopefully for the hundreds of buyers whose credit has been destroyed and left them in financial ruin, the FTC can make amends via this case.
Shaq’s Big Chicken Signs 12-Unit Deal
The big fella’s brand is starting to gain steam with development nationwide
FRANCHISE OF THE WEEK
- Founded: 1956
- Units Open: 1,973
- Investment Range: $144,668 – $786,233
- Average Revenue per Location: $1,336,281
Did You Know?
Every Jersey Mike’s store that opens, starts by partnering with a local community charity. The Jersey Mike’s “culture of giving” has led to the brand raising more than $28M for charities since 2010.
Is there a brand you’re curious to know the financials of? Reply to this email with the name and I may include it in a future newsletter!
Fetch! Pet Care
- Founded in 2002, franchising since 2004
- Based in Michigan; 107 locations open as of 2021
- A dog walking & pet sitting franchise that be opened in ~2 weeks after signing a franchise agreement
Fees + Investment
- Royalty: 7% of gross sales
- Brand Fund: 2% of gross sales
- Franchise Fee: $62,500
- Initial investment: $74,967 – $80,667
- The below information contains performance data is from 56 franchisees operating in 2019
The Wolf’s Take
I’ve talked in previous editions about the tailwinds the pet industry is benefiting from, and will continue to benefit from for the next decade plus.
Given these tailwinds, businesses in the pet industry will benefit from a “rising tide lifts all boats” scenario until pet services can satisfy the demand from the sheer volume of pets the US population owns.
Fetch! has the benefit of being a low cost franchise that’s currently in the sweet-spot for new franchisees looking to enter. At 100 units open & operating, that’s pretty thorough proof of concept, but still early enough that many territories have yet to be occupied.
The financials vary depending on the quintile, but average revenue still sits at ~2.3x the initial investment. I’d also guess that there is a subset of owners who treat this as part-time work, whether it be while owning another pet business, or a stay-at home parent who operates Fetch as an official side hustle.
Either way – this is another brand to explore if you’re curious about businesses in the pet industry.
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