State Regulator Has Not Found Substantial Assets to Enforce Compliance
The California Department of Financial Protection and Innovation (DFPI) has confirmed it has not received a hearing request on the Burgerim Citations issued on Feb. 16, 2021. The time for Burgerim to request a hearing has passed, and the groundbreaking DFPI citations fining Burgerim for more that 1,500 violations of the California Franchise Investment Law, including $4 million dollars in fines, is now final.
The Citations also require Burgerim to disgorge millions of dollars back to franchisees, and to offer recission to more than 1500 franchise owners, amounting to millions of dollars of refunds and restitution. You can read the full citation order here.
A DFPI representative confirmed they have not found substantial assets to enforce compliance with the Citations but will continue to monitor the situation.
David Levaton, the attorney for the Independent Association of Burgerim Franchisees, believes corporate is not collecting royalties (so no harm to franchisees still under the brand), and corporate is no longer exerting any control over the franchisees. Burgerim would have a hard time taking any action against any franchisee to enforce the Franchise Agreement (FA) given the Citation, so Burgerim is in essence powerless.
Looking to the future, Burgerim franchisees need to make some important decisions. According to Levaton, “If the franchisees want to attempt to control their destiny or potentially have a say in how the brand operates, then pushing Burgerim into bankruptcy will likely be the best avenue to secure the future of the brand in a way that it palatable to the franchisees.”
Levaton said Burgerim is past the point of being able to contest the Citations, and they have not offered franchisees rescission so everything’s in limbo, which does not assist the franchisees in any way. The time is ripe for franchisees to take control and move things to a conclusion.