Industry News | April 2, 2007

Lawsuit Alleges Raving Brands is Selling Moe’s

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By Fred Minnick

Moe’s Southwest Grill operators filed a lawsuit March 30 in the U.S. District Court of Atlanta, seeking punitive and other damages.

The suit alleges racketeering, undisclosed kickbacks, and failure to donate certain franchisee transactions to charity as advertised. But perhaps the most-significant allegation is that Raving Brands plans to sell Moe’s.

“We believe there may be a pending sale of assets of Moe’s,” says plaintiff lawyer Bob Casey, Casey Gilson Leibel P.C. “A lot of discussions are going around that [Martin] Sprock [Raving Brands founder] may have finally decided that it’s time to bail.”

Casey says his clients believe the buyer is Roark Capital, which owns McAlister’s Deli, Carvel, and Schlotzsky’s. Roark officials could not immediately be reached for comment. In a prepared statement, Matt Andrew, brand leader and vice president of Moe’s, said the suit is without merit, but did not specifically mention a potential sale. “Our policy is not to comment on pending litigation,” the statement said.

In case of a sale, the lawsuit requests a temporary receiver be appointed to protect franchisees assets and moneys owed to them.

For its “Cinco De Moe’s” event, the suit says, Moe’s operators were led to believe partial sales were being donated to the National Center for Missing and Exploited Children. But Moe’s has not paid all sums owed to the charity, the suit claims.

“Franchisees are asking the franchisor to account for these funds,” Casey says. “The franchisee community is taking it upon themselves to make certain that the public, and their customers, are not defrauded or misled.”

The National Center for Missing and Exploited Children would not confirm or deny the allegations.

The suit also says Raving Brands violated the Georgia R.I.C.O. Statute by committing at least two racketeering acts, including several variations of theft and fraud.

Casey says the guts of the lawsuit involves a kickback scheme not disclosed on the franchise agreement or the Uniform Franchise Offer Circular. Franchisees believe they are paying more for food, supplies, and equipment because of this kickback arrangement.

“There were undisclosed rebates paid ultimately to Sprock as a part owner to SOS, which was involved in the supply chain,” Casey says. “And his lawyers have acknowledged that.”

Casey says his clients did not want to go the litigation route, but they had no other choice. “We tried for a year to get answers,” Casey says. “My clients feel they had improper monies taken from them.”

There are 23 plaintiffs. Named as defendants are Moe’s, Moe’s Southwest Grill Holdings, Raving Brands Holdings Inc., Sprock, and several John Does.

Fred Minnick is a professional writer based in Louisville, Kentucky. Contact him at editor@FredWrite.com.