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Log In / Register | Apr 21, 2014

Franchisees Say Moe's Southwest Secretly Being Sold, Want Protection

Charge Raving Brands with Racketeering and Secret Kickbacks

Franchisees are up in arms with Raving Brands. According to reporter Fred Minnick of QSR.com, 23 of Moe's Southwest Grill operators on March 30 filed a lawsuit in the U.S. District Court of Atlanta alleging racketeering and a secret kickback scheme.

The plaintiffs have asked for a special receivership to be appointed to protect assets owed to the franchisees because of an anticipated sale of Moe's Southwest Grill.

The lawyer of the franchisees, Mr. Bob Casey of Casey Gilson Leibel P.C., states that according to his clients, Roark Capital, owner of Carvel and Schlotzky's, is the buyer. Roark and Raving Brands would make no comment in regards to the pending sale.

The main allegation against Raving Brands is the founder receives private kick-backs from suppliers (raising franchises' cost of goods sold).

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 [Raving Brands founder] as a part owner to SOS, which was involved in the supply chain," Casey says.

Then there is the flat-out charge of theft. Moe's owners were led to believe that a percentage of sales on Cinco de Mayo day (called Cinco de Moe's) would be be donated to the National Center for Missing and Exploited Children. The franchisees say that not only are the children missing but also the donations are now missing.

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(Note from Don: Thank you to the member who emailed in this story and asked for it to be published.)

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