In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Moe’s Southwest Grill franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Moe’s Southwest Grill franchise, based on Item 7 of the company’s 2020 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Moe’s Southwest Grill franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned Moe’s Southwest Grill outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Moe’s Southwest Grill’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average gross sales, discounts, net sales, cost of goods sold, personnel expenses, advertising, operating expenses, occupancy expenses, general and administrative expenses, and EBITDA for the 258 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were open continuously during Moe’s fiscal year 2017, fiscal year 2018, and fiscal year 2019 (the “Three-Year Period”), and that provided Moe’s with complete financial information for the full fiscal year 2019 sufficient for it to complete the profit and loss statement
- 2019 average, median, lowest, and highest net sales for the top quartile, 2nd quartile, 3rd quartile, bottom quartile, and all 538 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were in operation throughout the Three-Year Period
- 2019 average, median, lowest, and highest net sales for the top quartile, 2nd quartile, 3rd quartile, bottom quartile, and all 602 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were in operation throughout the entire fiscal year 2019
Section I – Background Information
16 Things You Need to Know About the Moe’s Southwest Grill Franchise
Appoints New Brand President
1. At the beginning of September 2019, Moe’s Southwest Grill appointed Erik Hess as its new brand president. In his new role, Hess will oversee franchise and company operations, marketing, supply chain, and product innovation. According to Hess, “I am excited to lead the Moe’s Southwest Grill brand because it sits in one of the fastest growing segments in the restaurant industry. The brand has great food, an incredibly loyal fan base and very involved franchisees. We’re well positioned to accelerate growth.”
2. Previously, Hess spent 25 years at McDonald’s Corporation in a wide variety of senior leadership positions responsible for product development, innovating the customer experience, strategy and insights, restaurant development, among many other responsibilities. Hess has deep experience in the U.S., Asia, and globally. He brings a unique perspective to the brand with intimate knowledge of consumer behaviors while balancing the operational complexities present in a large franchised organization.
3. Additionally, Hess has a proven record of increasing sales and accelerating growth in both new and established markets worldwide. In addition to his role at McDonald’s Corporation, Hess has spent the past two years consulting several brands and financial service organizations on consumer strategy and restaurant opportunities.
Launches First All-Digital/Kiosk-Only Design
4. In late November 2019, Moe’s Southwest Grill announced that it would be the first brand in the Mexican fast-casual space to open an all-digital/kiosk-only location. The first two restaurants are slated to open in Pittsburgh, Pennsylvania and Charlottesville, Virginia, in the first quarter of 2020.
5. Each store will come equipped with four self-order kiosks and will feature Moe’s new brand design, which includes Moe’s new logo, colors, paint, furniture, and more. The self-order kiosks will accept cash, Apple Pay, and University credit card (for University of Pittsburgh students). One POS register will be available at each location. The Pittsburgh restaurant will seat approximately 15 people, while the Charlottesville restaurant will seat approximately 40 people.
6. The Pittsburgh location will be owned and operated by Moe’s multi-unit franchisee Mike Geiger, who has experienced recent success with his newest urban location, which added a separate section specifically for mobile/pickup orders only. With that move, online sales rose significantly year-over-year. Geiger and Angelo Dajon, owner of the Charlottesville location, are optimistic that they will be able to replicate similar results with these kiosk locations.
Launches Online Pop-Up Shop with Moe Monday Collection
7. At the end of January 2020, Moe’s Southwest Grill announced that it was launching an online pop-up shop to honor the brand’s favorite day of the week, Moe Monday. For most people, Monday is the most dreaded day of the week and according to a recent study by The Sleep Judge, “81% of people experience elevated anxiety on Sunday in anticipation of Monday, also known as the Sunday scaries.”
8. Moe Monday is famous for a reason: at every Moe’s restaurant across the country, the brand celebrates Mondays with deals starting at $5.99 for a burrito served with chips and salsa on the house.
9. For the first-time ever, Moe’s fans were able to purchase brand merch online. The Moe Monday Collection launched, naturally, on Monday, February 10 at 10 a.m. EST. The selection was very limited in quantity to offer Moe’s Homewrecker lovers and queso fanatics exclusive merch that not just anyone can get their hands on.
10. For years, Moe’s has been known to give away witty t-shirts for Cinco de Moe’s, Free Queso Day. It was a natural next step to launch a pop-up shop where fans could finally purchase brand merch. The Moe Monday Collection included items for the whole family including t-shirts, hoodies, koozies, hats, and a few other surprise items.
11. Jenny Williams, marketing director of Moe’s Southwest Grill, said, “At Moe’s, we use social media as a two-way communication channel to get real-time, raw feedback from our fans. This candor helps guide our customer strategy to deliver a restaurant experience that exceeds consumer’s expectations. When we gauged interest in brand merch on Twitter, the response included over 500 likes and more than 300 comments giving us ideas on what to create. We took that feedback to heart and knew we needed to deliver what our guests were craving from our brand.”
12. Moe’s Southwest Grill was founded in 2000 by Raving Brands, Inc. – which was started by Martin Sprock and his business partner Daryl Dollinger – in Atlanta, Georgia. Sprock and Dollinger are also the founders of Planet Smoothie.
13. The name Moe’s originated as an acronym for “Musicians, Outlaws and Entertainers,” and this theme led to the music-related artwork found in the restaurants. Sprock and Dollinger wanted Moe’s to be an elevated version of Mexican-style fast food.
14. A year after the first Moe’s opened, the brand started franchising and grew to 100 locations by 2004. After a few more years of growth around the U.S., Moe’s Southwest Grill was acquired by FOCUS Brands, an affiliate of private equity firm Roark Capital Group. FOCUS Brands also owns Schlotzsky’s, Carvel, Cinnabon, McAlister’s Deli, and Auntie Anne’s.
15. Over the next decade, Moe’s continued to expand rapidly and the brand celebrated the opening of its 600th location in 2015. Today, there are Moe’s Southwest Grill restaurants all across the U.S. and in a handful of international locations.
Entrepreneur’s Franchise 500
16. Moe’s Southwest Grill ranked No. 362 on Entrepreneur’s 2020 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Moe’s Southwest Grill franchise costs, based on Item 7 of the company’s 2020 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Moe’s Southwest Grill’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 675
- Outlets at the End of the Year: 701
- Net Change: +26
- Outlets at the Start of the Year: 701
- Outlets at the End of the Year: 714
- Net Change: +13
- Outlets at the Start of the Year: 714
- Outlets at the End of the Year: 719
- Net Change: +5
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 4
- Net Change: -1
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 3
- Net Change: -2
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
Part 1 – Profit and Loss Statement for Three-Year Group of Franchised Restaurants for Fiscal Year 2019
- This financial performance representation reflects the average 2019 Gross Sales, Cost of Goods Sold, Personnel Expenses, Advertising, Operating Expenses, Occupancy Expenses, General and Administrative Expenses, and EBITDA, during Moe’s fiscal year ended December 29, 2019 (“fiscal year 2019”) for franchised Restaurants located in traditional locations that were open continuously during Moe’s fiscal year 2017, fiscal year 2018, and fiscal year 2019 (the period from December 26, 2016 to December 29, 2019) (the “Three-Year Period”) and that provided Moe’s with complete financial information for the full fiscal year 2019 sufficient for it to complete this profit and loss statement (“P&L Statement”) (the “Three-Year Group”).
- Moe’s did not use any reports that were incomplete or for which the information was presented in a manner that prohibited it from applying the information to one of the categories in the P&L Statement.
- As of December 29, 2019, there were 719 franchised Restaurants in operation. Of these 719 franchised Restaurants, 538 franchised Restaurants located in traditional retail venues were in operation throughout the Three-Year Period. Of these 538 franchised Restaurants, Moe’s received complete financial information for the 2019 fiscal year from 258 Restaurants (representing 48% of the 538), which are the Restaurants included in the Three-Year Group.
- The Three-Year Group does not include 86 franchised Restaurants that were located in non-traditional locations, 95 franchised Restaurants located in traditional retail venues that were not in operation throughout the entire Three-Year Period, and 280 franchised Restaurants that were in operation throughout the Three-Year Period but did not report complete financial information for fiscal year 2019.
- One of the franchised Restaurants reflected in the Three-Year Group had a Carvel Express Shoppe that operated within the Restaurant for the Three-Year Period.