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Moe’s has ‘exemplary’ Item 19



In 2007, Focus Brands of Atlanta purchased Moe’s Southwest Grill from Raving Brands, headed by Martin Sprock who also founded Planet Smoothie, for an undisclosed sum. Sprock is known for his offbeat humor—his moniker for a vegetarian taco at Moe’s was The Ugly Naked Guy—and unabashed enthusiasm for new concepts. The fast casual Mexican concept joined Cinnabon, Carvel, McAlister’s Deli, Schlotzsky’s and Auntie Anne’s in the Focus Brands portfolio of private equity firm Roark Capital Group in Atlanta.  


Focus Brands’ executives operate all six brands and most of them joined the company in the last two years, including the CEO, CFO and general counsel. Moe’s president, Bruce Schroder, arrived in January 2015.


Moe’s discloses the company and its affiliates “have the right to receive payments and other consideration” from approved suppliers for their sales to franchisees. In fiscal year 2015, the company received payments totaling $4,670,761. According to Item 8, all those payments were deposited into the ad fund “for the entire brand’s benefit.”


Although franchisors are not required to include ad fund audits in their FDDs, Moe’s provides an extensive breakdown on how monies were spent in 2015. Moe’s does not have a franchisee advertising council, but does have a marketing committee of franchisees elected by their peers that “provides suggestions on advertising issues.” New franchisees of Moe’s traditional restaurants must spend at least $25,000 on grand opening advertising promotion, or $35,000 if the store is the first to open in a designated market area. Franchisees opening stores in “captive audience locations” (airports, sports arenas, etc.) are not required to advertise their openings.


Item 11 uses the term “roadies” for restaurant workers, proving that Moe’s is still an irreverent brand, said President Bruce Schroder. “When I joined Moe’s more than a year ago, we wanted to extend the music positioning within our brand to the folks who serve our customers, so we renamed our valued crew members roadies.”


Moe’s financial performance representation is exemplary. It takes a deep dive into the financials of 194 traditional restaurants open for three years or more that reported complete financial information to the company.  A 2015 profit-and-loss statement of this cohort shows average and median sales; cost of goods sold; personnel expenses; advertising; operating expenses; occupancy expenses; general and administrative expenses, and EBITDA (earnings before interest, taxes, depreciation and amortization).  Those average $191,760, or 15.3 percent of total gross sales, and 40 percent of the franchisees in the group exceeded the average. 

Julie Bennett

Veteran franchise reporter Julie Bennett examines a franchisor’s financial disclosure documents, and writes about strengths and potential red flags. Reach Julie at  juliebennettlefkow@gmail.com.


Moe’s opened 68 new restaurants in 2015, closed 11 and one more was reacquired by the franchisor, for a low turnover rate of 0.5. But another table shows Moe’s ended 2015 with a total of 555 franchises sold but not open, one of the highest in restaurant franchising. At their current rate, this means Moe’s has an eight-year backlog of stores to be opened. The reason is “for the most part, because most of our deals include multi-year development obligations,” Schroder said. A survey of the list of franchisees that signed franchise agreements but have not yet opened units includes one multi-unit franchisee group that signed on to over 40 Moe’s in Arizona and other large groups that planned to open a dozen units or more each.


Focus Brands provides consolidated financials from all six of their brands in the Moe’s FDD. While this shows that Focus Brands is profitable, it does not provide any information about Moe’s individual financial situation.

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