News

Judge sides with Moe's Southwest Grill co-founder over franchisees

Moe’s franchisees alleged that Martin Sprock stole money through a deceptive kickback scheme connected to its supply chain. A federal judge has rejected their claims, saying evidence demonstrates that Sprock's negotiations actually saved franchisees money.

February 9, 2015

A federal judge has ruled that the co-founder of Moe's Southwest Grill and Raving Brands acted in the best interests of Moe's franchisees in negotiating purchasing options.

Richard W. Story, federal judge for the United States District Court of the Northern District of Georgia, has ruled in favor of Martin Sprock, the co-founder of Moe's Southwest Grill, and Raving Brands.

In the lawsuit, originally filed in 2007, 46 Moe’s franchisees alleged that the franchisor and Sprock were stealing money through a deceptive kickback scheme connected to its supply chain, with 17 franchisees proceeding to bring their cases to trial.  On Feb. 4, Judge Story rejected the claims after hearing evidence and reviewing franchise disclosures and contract terms.

"For the past eight years, this group of franchisees has attempted to discredit and undermine myself, Daryl Dollinger and the Moe’s brand,  and we feel redeemed by Judge Story’s ruling, which stated clearly how we saved Moe’s franchisees money with our robust purchasing program," said Martin Sprock, CEO of Raving Brands and co-founder of Moe’s Southwest Grill, in a press release. "For many brands, it may have been easier to settle with this small minority group of franchisees, but we are glad that we opted to fight these allegations and prove that we indeed provided a program that ended up saving franchisees money on food costs and supplies. We are extremely grateful to see so many current Moe’s franchisees support us throughout this lawsuit."

At the heart of the case was Sprock’s decision in 2001 to bring in outside brokers CRM and Tony LaGratta to negotiate contracts with food vendors and distributors to offer reasonable costs for franchisees. At a later time, Sprock obtained an ownership interest in a brokerage named SOS, which was formed later by LaGratta.  Throughout the case, franchisees testified that they were never made aware of these arrangements, and they asserted that commissions paid to CRM and SOS by food vendors and distributors increased their food costs. 

According to Judge Story’s written opinion, CRM and Mr. LaGratta brought value in the form of buying power that a small start-up franchise system would not otherwise have. The Court stated that the brokers offered a combined 40 to 50 years of experience in purchasing and that their services resulted in reasonable prices for franchisees. The Court concluded after reviewing the evidence that Moe’s franchisees, including the plaintiffs, saved on chicken costs an average $0.15 per pound over prevailing market rates.

Grill was founded in 2000 and eventually became a flagship concept for Raving Brands. It was sold in 2007 to Atlanta-based Focus Brands.