News

UPDATE: Focus welcomes Moe's to the family

Raving Brands bids adieu to its flagship Moe's Southwest Grill.

April 11, 2007

Maybe it was the food, maybe it was the "Welcome to Moe's" greeting, but whatever it was it is now in the hands of Atlanta-based Focus Brands Inc.

Focus, a subsidiary of Rourk Capital Group, signed an agreement to acquire the fast-casual Fresh-Mex chain Moe's Southwest Grill from Atlanta-based Raving Brands.

Terms of the deal were not disclosed, but the transaction is expected to close sometime this summer.

Focus Brands chief executive officer, Steve Romaniello, said the acquisition of Moe's falls within the company's strategy of having five successful brands, totaling 5,000 units. That goal began with the Carvel and Cinnabon concepts, and has expanded to include Seattle's Best Coffee, Schlotzsky's Deli and now Moe's.

"We had great treat concepts that were category leaders ... But we wanted the next series to be center-of-plate concepts to round out the portfolio," said Romaniello of the Schlotzsky's and Moe's chains. "Moe's was particularly attractive because, at first, we fell in love with the concept as a consumer. We believe in the Moe's brand and we believe Moe's is well-positioned in its category as opposed to the competition."

Once the sale is complete, Focus will have five franchise brands generating more than $1 billion in annual system-wide revenues through at least 10,000 outlets in 50 states and in 33 countries.

For the time being, Moe's operations will stay as is, with full Focus Brands integration slated to occur by early next year.

"We don't see a lot of major changes," said Romaniello. "We believe in what they're doing and want to continue along those same lines for the most part."

Raving Brands president and chief operating officer Steve LaMastra said the sale was organized in Moe's best interest.

"All of our franchisees have something to gain," he said. "Our franchisees recognize the Moe's team is staying in tact. They know the strategy will be kept in place.

Louisville, Ky., franchisee Bob Keto said he was happy to hear the news.

Keto sits on the Moe's franchisee advisory council and said members reacted positively to the news.

"From a local standpoint, being part of a much larger organization is going to give us the quantum that we need to get better pricing, and more advertising and media expenditures," he said. "They've got the expertise to where for Moe's itself is going to be a plus. We're very positive and I probably speak for most individuals on the advisory council board."

One area where Focus Brands can really push the Moe's concept: international expansion. With franchises in 33 countries, Romaniello said Focus Brands has the experience necessary to further boost Moe's international presence.

But what about those lawsuits?

On March 30, several Moe's franchisees filed suit against Raving Brands claiming, among other things, that they are forced to buy food and supplies through a company-owned distributor at above-market prices. The suit also alleges racketeering, undisclosed kickbacks, and a failure to donate certain franchisee transactions to charities.

Romaniello said Focus Brands will not be involved in or inherit the lawsuits, which were filed just as the two companies were finalizing the Moe's deal.

LaMastra said the suits also were not material to the company's thinking.

With Moe's out of the picture, where will that leave Raving Brands other concepts?

"We work everyday on our other brands," said LaMastra. "We will stick to the plan and strategy with our other concepts. I'll continue on as president of Raving Brands and we'll work in the same capacity."