The Associated Press recently reported that more than 50 franchisees and their financial backers are now suing Tex-Mex chain Moe's Southwest Grill LLC and its former parent company over allegations of fraud and breach of contract.
Among other things, the franchisees allege in the lawsuits that the chain improperly took advertising dollars from them and failed to give money to a charity that the chain collected. The lawsuits accuse Moe’s and its Atlanta-based parent company, Raving Brands Inc., of fraud, breach of contract, racketeering and other offenses. They seek unspecified damages, and no trial dates have been set.
Privately held Moe’s, which specializes in hand-rolled burritos, tacos and fajitas, and has relied solely on franchising for its growth, was sold to Atlanta-based Focus Brands, operator of Carvel and Cinnabon shops, in August. At that time, there were roughly 360 Moe’s locations in 34 states and the District of Columbia, including a restaurant in Statesboro.
This past week, I had the opportunity to visit with Jack Slaton, owner of the local Moe's. I asked Slaton if he was part of the group that was suing Raving Brands (Moe's former parent company).
"Most of the franchise owners that are suing are near and around Atlanta," Slaton said. "They worked with Moe's corporate day in and day out, and were very familiar with their operation. They are the ones that questioned the way that things were being done. My wife, Mert, and I really did not have any knowledge of what they were doing."
Slaton said he thinks that the whole affair may develop into a class action lawsuit against the former owners at some point.
"If that happens, I would imagine that we would certainly be a passive participant in that process, but as it stands now, we are just on the sidelines."
Moe’s charges franchisees an initial fee and gets a percentage of each restaurant’s annual net sales. The franchisees also contribute to a pool used for advertising; in exchange, corporate officials help scout out restaurant locations. The lawsuits allege the chain wrongfully debited plaintiffs’ bank accounts for ‘‘local advertising fees’’ and ‘‘co-op fees.’’ The plaintiffs also claim they overpaid for food, supplies and equipment because of a ‘‘kickback’’ arrangement the defendants had with their exclusive suppliers.
Slaton said he is concentrating on the future and the relationship that his franchise has with Focus Brands.
"I can only control what happens here in my restaurant, so that is what I am going to do," he said. "I love the new brand owners, and they have been very attentive. The menu has been simplified, and they have listened to all of our suggestions."
Slaton said they are even in the process of scheduling a new grand opening during the first quarter of next year.
"Focus Brands wants to reintroduce Moe's to Statesboro, and I think it is a great idea," he said. "We have a great product, and we want to move past the bad publicity that has been generated as a result of the former brand owner's actions. Business is very good, and things are just fine. We are moving forward."