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FDD Talk 2019: Moe’s Southwest Grill Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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Moe's Southwest Grill ExteriorMoe's Southwest Grill Exterior

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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
  • Section V – Presentation and analysis of Moe’s Southwest Grill’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
  • 2018 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 245 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were open continuously during Moe’s fiscal year 2016, fiscal year 2017, and fiscal year 2018 (the “Three-Year Period”), and that provided Moe’s with complete financial information for the full fiscal year 2018 sufficient for it to complete the profit and loss statement
  • 2018 average, median, lowest, and highest net sales for the top quartile, 2nd quartile, 3rd quartile, bottom quartile, and all 495 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were in operation throughout the Three-Year Period
  • 2018 average, median, lowest, and highest net sales for the top quartile, 2nd quartile, 3rd quartile, bottom quartile, and all 578 franchised Moe’s Southwest Grill Restaurants located in traditional retail venues that were in operation throughout the entire fiscal year 2018

Section I – Background Information

19 Things You Need to Know About the Moe’s Southwest Grill Franchise

Unveils New Prototype and Test Restaurant

1.  In early November 2018, Moe’s Southwest Grill opened its newest test kitchen and prototype, The Oasis, near the brand’s headquarters in Atlanta, Georgia. At this new location, local customers can experience the updated design and menu items that Moe’s is currently testing. At the time of the announcement, Moe’s said that new menu items will begin to roll out system-wide starting in 2019.

2.  According to Bruce Schroder, president of Moe’s Southwest Grill, “Over the past 18 months, we’ve taken a comprehensive look at our brand and intently listened to our fans in the process. As a result, we have updated the restaurant design and expanded the menu – both of which deliver on the brand’s new positioning, ‘Untamed Southwest.’ By fully activating our middle name and putting our own distinctive spin on the meaning of Southwest, our goal is to maintain cultural relevance and truly set ourselves apart in the fast casual restaurant industry.”

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3.  According to the brand, Moe’s isn’t going to change what makes Moe’s special and will be amplifying fan favorites including the “Welcome to Moe’s!” greeting, free chips and salsa, and the brand’s famous queso. The Untamed Southwest positioning will continue to highlight Moe’s free-spirited attitude and its family-friendly environment; plus, Moe’s will continue to serve the menu staples that made it famous, like burritos, bowls, stacks, and quesadillas.

4.  With new dietary habits like keto, paleo, and vegan becoming more prevalent, combined with the on-demand economy where consumers have a proliferation of choice and scarcity of time, Moe’s wanted to create a fast-casual dining experience that suits the individual needs of the entire family and besties alike. Moe’s is now testing an elevated menu to include new proteins, entree platforms, and shareables.

5.  New menu highlights include:

  • Avocado Caesar Salad: Yucatan shrimp, shredded romaine lettuce, sliced Hass avocado, cilantro, cotija cheese, crispy tortillas, avocado Caesar dressing;
  • Quinoa Power Bowl: Mojo Chicken, quinoa and brown rice mix, frijoles, shredded romaine lettuce, corn pico, sliced Hass avocado, cilantro, queso fresco, salsa verde;
  • Street Taco: crunchy avocado, soft blue corn tortilla, diced onion, queso fresco, cilantro, lime, chipotle ranch;
  • Torta: applewood smoked brisket, bolillo bread, frijoles, chihuahua cheese, mayo, sliced tomato, shredded romaine lettuce, cilantro, ancho BBQ sauce; and
  • Shareables: street corn, crunchy avocado, charro beans, mac ‘n queso, and bunuelos.

6.  Ciarán Duffy, executive chef for Moe’s Southwest Grill, said, “When you think of the Southwest region in the U.S., you generally think of the four corners – Arizona, New Mexico, Colorado, and Utah. We started there and then pulled in elements from other areas in California and Texas – these locations combined provided the culinary inspiration for the bold menu items that we are testing. Spices and ingredients like adobo, poblano peppers and hatch chiles are featured throughout the menu at The Oasis in addition to classic Moe’s concoctions served with our delicious queso and variety of salsas on the Salsa Bar.”

7.  Beyond culinary innovation, The Oasis features new design elements based on in-depth research and interviews with new and loyal customers. Expanding on the classic Moe’s design palette, the brand has added new colors and textures reflective of the diverse culture and breathtaking landscape of the Southwest.

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8.  The Window to the Southwest, a brand hallmark, is a video played in the restaurant; it is an authentic way to give customers an inside peek into what the Southwest means to Moe’s and how it encourages the brand’s attitude, food, and culture.

9.  In addition, the operational enhancements developed for the prototype design ensure convenient service from engaged team members. Examples include a second production line and specific pick-up station for customers who use delivery and online ordering. Moe’s remains a go-to spot for busy families and large groups; therefore, the prototype design includes a variety of seating options including booths, banquet, and communal tables.

Launches Quinoa Power Bowl Nationwide

10.  In mid-February 2019, Moe’s Southwest Grill rolled out a new menu offering for those looking for more health conscious options – the Quinoa Power Bowl. The bowl packs all of the Southwest flavor that Moe’s is known for with higher protein and fiber, and lower carbohydrates. The new bowl launched nationwide across the Moe’s portfolio of more than 700 restaurants, making Moe’s restaurants the first to launch a quinoa bowl in the Mexican fast-casual segment.

11.  The Quinoa Power Bowl is the first menu innovation to be rolled out from The Oasis, the brand’s Atlanta-based test kitchen and new prototype. The product launch will be followed by other culinary creations in the coming year as part of the brand’s deeper dive into Southwest flavors.

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12.  The Quinoa Power Bowl is made with Mojo Chicken (all-natural white meat chicken breast), quinoa blend (quinoa, brown rice, sweet potato, and zucchini), frijoles, shredded romaine lettuce, corn pico, guacamole, cilantro, and queso fresco. Customers can also have the quinoa blend as a side or an addition to other menu items.

13.  Ciarán Duffy, executive chef for Moe’s Southwest Grill, said, “Our new Quinoa Power Bowl combines big southwest flavor with more health-forward ingredients. The best part about the new bowl is that you can completely customize your experience according to your lifestyle – fans can go all plant-based by adding tofu or indulge by adding our famous queso.”

14.  With the addition of the Quinoa Power Bowl, Moe’s restaurants are a one-stop source for groups, even those with special diets. Whether group members are in search of vegan, vegetarian, keto, or gluten-friendly meals, everyone can look forward to the special “Welcome to Moe’s!” treatment along with the brand’s variety of menu options.

Company History

15.  Moe’s Southwest Grill was founded by Raving Brands, Inc., which was started by Martin Sprock and his business partner Daryl Dollinger. Raving Brands is also the founder of Planet Smoothie. Following the success of Planet Smoothie, Sprock wanted to open a new restaurant concept and decided on high-quality quick-service Mexican food.

16.  The name of the restaurant was not inspired by a person named Moe, but it actually stands for “Musicians, Outlaws, and Entertainers,” which has inspired the theme of the brand’s décor, fresh ingredients, and the names of its menu items.

17.  Raving Brands began franchising the Moe’s Southwest Grill concept in 2001 and by 2004, there were 100 locations open across the United States. As Moe’s continued to grow, Raving Brands sold the company to FOCUS Brands, an affiliate of private equity firm Roark Capital Group in 2007. FOCUS Brands is also the parent company of Schlotzsky’s, Carvel, Cinnabon, McAlister’s Deli, and Auntie Anne’s.

18.  Today, there are Moe’s Southwest Grill restaurants in the United States, Russia, and Turkey.

Entrepreneur’s Franchise 500

19.  Moe’s Southwest Grill ranked No. 149 on Entrepreneur’s 2019 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 2019 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 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

  • Outlets at the Start of the Year:  633
  • Outlets at the End of the Year:  675
  • Net Change:  +42

2017

  • Outlets at the Start of the Year:  675
  • Outlets at the End of the Year:  701
  • Net Change:  +26

2018

  • Outlets at the Start of the Year:  701
  • Outlets at the End of the Year:  714
  • Net Change:  +13

Company-Owned

2016

  • Outlets at the Start of the Year:  5
  • Outlets at the End of the Year:  5
  • Net Change:  0

2017

  • Outlets at the Start of the Year:  5
  • Outlets at the End of the Year:  4
  • Net Change:  -1

2018

  • Outlets at the Start of the Year:  4
  • Outlets at the End of the Year:  5
  • Net Change:  +1

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

Part 1 – Profit and Loss Statement for Three-Year Group of Franchised Restaurants for Fiscal Year 2018

  • This financial performance representation reflects the average 2018 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 30, 2018 (“fiscal year 2018”) for franchised Restaurants open continuously during Moe’s fiscal year 2016, fiscal year 2017, and fiscal year 2018 (the period from December 28, 2015 to December 30, 2018) (the “Three-Year Period”) and that provided Moe’s with complete financial information for the full fiscal year 2018 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 Statements.
  • As of December 30, 2018, there were 714 franchised Restaurants in operation. Of these 714 franchised Restaurants, 495 franchised Restaurants located in traditional retail venues were in operation throughout the Three-Year Period. Of these 495 franchised Restaurants, Moe’s received complete financial information for the 2018 fiscal year from 245 Restaurants (representing 49% of the 495), which are the Restaurants included in the Three-Year Group.
  • The Three-Year Group does not include 124 franchised Restaurants located in traditional retail venues that were not in operation throughout the entire Three-Year Period, 95 franchised Restaurants that were excluded because they were located in non-traditional locations, and 250 franchised Restaurants that did not report complete financial information for fiscal year 2018.
  • 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.

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