Amid pandemic, Moe’s operator looks on the bright side
Illustration by Jonathan Hankin
Florida Gov. Ron DeSantis closed restaurant dining rooms on March 20, just 10 days after franchisee Quality Fresca acquired 46 Moe’s Southwest Grills in the state from four different franchisees. The new franchisee now sold burritos curbside. Predictably, revenues slumped.
Bad timing? Not really, insisted Matthew Slaine, chief executive of Quality Restaurant Group, which financed the deal that also included 21 Moe’s in northern Virginia, Maryland and Charleston, South Carolina. Quality Fresca is a new division of QRG formed to operate Moe’s.
“Certainly no one likes to see their comp sales down, but at the same time you get a real true sense of who the franchisor is, who your leadership team is — and what it can do during a stressful time very quickly,” he explained.
In fact, he added, there was more than a silver lining to the apparently ill-timed transaction. Seasoned operator Chris Grooms and his staff had the opportunity “to test things out instead of taking a back seat,” and the pandemic gave “us a green light to see what we are capable of,” Slaine recalled.
Since May 15, Florida has allowed restaurants to open dining rooms at 50 percent capacity. About 90 percent of Moe’s employees returned to work and were following local, state and federal safety guidelines, said Grooms, vice president, who worked for Steak n’ Shake and Krystal before joining Quality Fresca. Franchised outposts are in coastal markets (Naples, Fort Myers, Tampa and Jacksonville), plus Gainesville and Tallahassee.
Slaine declined to reveal the extent to which sales volumes had recovered since reopening dining rooms, but said they were “not quite like a QSR with a drive-thru.” In March 2019, Franchise Times reported Moe’s average unit volumes were $1.01 million with four-wall EBITDA, or cash flow, averaging $160,692.
Slaine, though, was eager to describe the complicated acquisition. “Quality Fresca was in a unique situation. Four franchisees, all separate companies, decided they wanted to sell their businesses as a package. There are very few people who could have it done it on the timeline we did,” he said. “It was incredibly difficult to close four deals basically on the same day.”
The sellers’ investment banker had rolled the four entities into one. Slaine begged off revealing the transaction’s valuation. “But I will tell you we ran due diligence on four separate companies, all towards a simultaneous closing date,” he said. “We’ve not only been smart in finding deals but also putting them together and getting them done.”
QRG is backed by private investment firm GenRock Capital. Its investors have also funded the company’s acquisitions of 200 Pizza Hut and 27 Arby’s restaurants since 2017. QRG has also used bank financing to acquire restaurant properties.
I asked Slaine about the group’s growth strategy given that investment horizons must now be stretched. “Our long-term play is, let’s get through this and put pandemic crisis-handling behind us—and then look to grow our footprint and remain a significant player in the Moe’s system.”
“Now, my dad and I are burgers-and-fries type of guys. We’re not usually going to places like that,” admitted Spencer Turner.
By “that” he means Main Squeeze Juice Co., a 13-unit, New Orleans-based cold-pressed juice and smoothie franchise. Earlier this year Turner and his dad, Ronald, signed on to open 10 stores in Florida, chiefly in the Jacksonville market.
Though they want to open their first outlet in September, in May they had yet to sign a lease.
That was because they expected rents to fall in the area—from $35 a square foot to $30—as more space becomes available. “Through our broker we’ve learned there’s a 3 percent vacancy rate in Jacksonville, but by the end of the year it’s predicted to be around 14-15 percent,” he said.
The franchise disclosure document puts the cost of opening a single Main Squeeze Juice unit at $292,700 to $674,500, including a $35,000 franchisee fee. Store size is 1,200 to 1,800 square feet. It also notes overall average gross revenue for a 31-day month was $56,630 by December 31, 2019.
“We are looking at an area out toward Jacksonville Beach and down toward St. Augustine. That’s where the main growth is, and that’s where the Mayo Clinic is,” Spencer noted, in reference to the prestigious hospital’s outpost in Jacksonville. “It’s a young professional market and a high-traffic area. We like to focus our efforts around high-end gyms and hospitals.”
Ideally, the pair wants to lease space on the Mayo Clinic property, though the red tape involved pushes the timeline for the project out further, he said. They are considering an out-parcel at St. John’s Town Center, an open-air mall in southeast Jacksonville operated by Simon Property Group.
But despite predictions, it has been a slog to date.
“New projects have been delayed while some” tenants “got rent relief,” said Turner, referring to the federal Paycheck Protection Program. “We have three LOIs,” letters of intent, “out currently.” The Turners intend to self-finance their first three stores.
The pair initially wanted to operate a Tier 1 brand. “We started out looking to franchise a Taco Bell or McDonald’s,” he recalled. They were disabused of that notion by the owners of Border Foods, a large Taco Bell franchisee in Minnesota’s Twin Cities market, who are friends of Ronald Turner.
The experienced franchisees advised them to look for a cutting-edge brand that wasn’t in a saturated category.
“They said to keep your eye out for something that’s upcoming and in a newer market. They gave me a copy of Franchise Times,” Spencer said, “and in the back was an article about Main Squeeze.”
The Turners visited the franchisor in New Orleans early last year and came away impressed. “They built their company starting with their management information system. My dad was very impressed with how they did it—building the company from back to front and not with a focus on just getting a bunch of stores up and running,” he said.
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at email@example.com.