Signs Moe's Southwest Grill Won't Be Around Much Longer
It's always a bad sign when a company can't pay its own employees. So what exactly went wrong at Moe's?
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00:00It's always a bad sign when a company can't pay its own employees.
00:04So what exactly went wrong at Moe's?
00:07In just 10 years, Moe's Southwest Grill has gone from opening new locations to closing them down.
00:13In 2014, the chain opened 120 new locations within six months that year.
00:18However, the success was short-lived. In 2019, Moe's had 726 locations,
00:25but it closed 109 in the next five years. And as of spring 2024,
00:30there were only 617 Moe's restaurants in 37 states.
00:34Chief Brand Officer Tory Burlett told Franchise Times in 2023,
00:39The reason those locations aren't there anymore is because the unit economics weren't there,
00:44and that could also be real estate-driven in some cases.
00:47One of the more surprising closures was when seven locations closed in Indiana in 2023
00:53leaving surprised customers to speculate about what was happening.
00:57At this time, there's no official reason for the closure.
01:01Moe's Southwest Grill's biggest competitors, Chipotle and Qdoba, are both fast-casual
01:06Mexican restaurants that use a similar assembly line concept. However, their sales dwarf Moe's.
01:12Sadly, Moe's operational costs are sometimes higher than its sales in individual locations.
01:17While the average sales for a single location were $1.15 million in 2022,
01:23its franchise costs can run as high as $1.8 million in some cases.
01:28So, Moe's is not always as profitable as it should be.
01:31Meanwhile, the average Qdoba was making 25.23 percent more in sales than its highest operating
01:38costs, and the average Chipotle was making 14.58 percent more than its operating costs.
01:44Like every other restaurant, Moe's has been increasing its prices.
01:48However, its sales are lower than they were back in 2019, and not just because of the pandemic.
01:53In 2022, sales were 3.52 percent lower than before the COVID-19 pandemic hit in 2020.
02:00Meanwhile, Qdoba was making 2.12 percent more than before the pandemic,
02:04and Chipotle was making a whopping 55.35 percent more.
02:09Marketing can be everything when it comes to whether a restaurant thrives or dies.
02:14So, with relatively few remaining locations and low overall sales,
02:17Moe's decided to make some big advertising and operational changes with Project Victory.
02:22In 2023, Tory Bartlett told Franchise Times that Victory stands for
02:27Validate necessary ingredients, improve line efficiency and speed of service,
02:32clean up the appearance of food, transform flavor profiles,
02:36optimize omni-channel guest experience, redesign menu board, yield a brand that is built to grow.
02:42Some of the other changes include upgrading menu offerings, redesigning the menu board,
02:47and streamlining operations so that the same things are happening at every store.
02:51The idea is for everything to be and look better, while making the service even faster with possibly
02:57more fun. Heck, they even brought in a special fun consultant to make sure it's cool.
03:01It's your boy, international superstar and taco connoisseur T-Pain.
03:06The company is trying to go back to its roots,
03:08changing its marketing to emphasize its earlier rebel spirit image.
03:12After all, the three letters in Moe's name actually stands for musicians,
03:16outlaws, and entertainers, rather than the name of a real person.
03:20In 2023, some Moe's franchise owners spent millions remodeling their locations to
03:25improve guest experiences and draw in new customers, in keeping with Project Victory.
03:31Unfortunately, customers aren't handing out compliments about the latest remodel.
03:35One disgruntled Redditor said,
03:37"[R-Moe's used to be so thoughtfully designed on the inside — painted yellow walls,
03:42interesting artwork on walls, even TVs in there — and now it's just plain white walls,
03:46literally no interesting menu names, bare basic boring artwork, and no TVs.
03:51It feels like zero personality now."
03:54Moe's has made a lot of menu changes as of late,
03:56but customers aren't liking the food as much as they once did.
04:00One Redditor wrote,
04:01"[I don't get it. They had a perfect business model. Why destroy it?"
04:05Part of the motivation behind removing items is a lack of sales.
04:09Although menu items like shredded pork carnitas were only responsible for 2 percent of sales,
04:14customers are petitioning to get it back.
04:16Customers are also upset that the chain no longer has mushrooms, limes, or cotija.
04:21One of the decisions to remove carnitas in particular, Tori Bartlett told Restaurant Dive,
04:26We didn't remove it just because it was a slow mover, but also so we could innovate and grow.
04:31There's only so much space you have on those hot and cold lines."
04:34When the company stopped including a drink or guacamole with its Moe Monday deal
04:38and raised the price of the deal from $6.99 to $9.99,
04:44some customers were unhappy enough to abandon the chain altogether,
04:47saying it was the last thing keeping them coming in the door.
04:51If you look at the reviews at your local Moe's Southwest Grill,
04:54you may well see more negative reviews lately than positive.
04:57Many customers say it's getting worse and more expensive.
05:00There have been complaints of getting old food and cold food, as well as hard rice or beans.
05:06Other customers complain that their order is never right.
05:09The ingredient portions seem smaller, they say, with meat amounts being especially skimpy.
05:13Some customers have even talked about getting a burrito that had so little filling that the
05:17tortilla made up the bulk of the meal. The prices are also a point of contention.
05:22One Redditor who was excited to visit a city with the Moe's again said,
05:26"...I was flabbergasted to see that my veggie burrito made as a meal was $17.
05:31In the past, that entire meal would have cost less than $10."
05:34Plus, some customers feel the upcharges have become ridiculous.
05:38One customer who asked for queso on their burrito was charged nearly $2.50 extra, a 25% upcharge.
05:46Moe's Southwest Grill started adding drive-thrus to some locations around 2020
05:50because of changing customer habits. As part of that change,
05:54the drive-thrus include a touchscreen kiosk so customers can get both preset menu items
05:59and craft customized options like a build-your-own bowl or burrito.
06:03Yet, time has shown that it's a challenge for an assembly line-type restaurant to take orders
06:07like this at the drive-thru, and not everyone likes it. Speed, accuracy, and quantity seem
06:12to suffer in particular here. For one thing, it takes two or three minutes to navigate through
06:17order options on the kiosk. While it doesn't take long to get your food after you've made your
06:21order, the line can get long behind the person using the kiosk. One person wrote on TripAdvisor,
06:27"...you don't get as much food as you would if they were making it in front of you.
06:30They skimp because you're not there to keep an eye on them."
06:33Other customers have mentioned drive-thru problems like missing items in their order,
06:37which they would have realized if they'd been watching the employees make it.
06:40Customers have also reported making an online order and not being allowed to pick it up in
06:44the drive-thru, despite no other customers waiting in the car line.
06:49In July 2023, Moe's decided it could make more money if it opened earlier.
06:54Instead of opening for lunch at 11 o'clock a.m., it's now open 30 minutes earlier.
06:59The decision to open early came after the chain took note of changes in customer habits.
07:04Ever since the COVID-19 pandemic, people have been ordering more catered lunches from places
07:09like Moe's, so employees have been coming in early to prep for those orders. The company
07:13decided that it made sense to open up the restaurant doors early too,
07:17since employees were already working in the building.
07:20Tory Bartlett told Restaurant Dive,
07:22"...we tested opening early and we were getting upwards of three guests per day per store during
07:26that half hour, and the impact of that is just enormous from a financial margin standpoint."
07:31Yet that speaks to some deeper issues. When three guests make an enormous difference in profits,
07:37it sounds like locations are not making much profit in the first place.
07:41You know things aren't going well for a chain when some of its employees stop
07:44getting paychecks on time. In July 2023, employees at 18 Moe's locations in Florida,
07:50owned by franchisee Tony Friel, didn't get paid when they should have.
07:54Friel blamed the bank for employees going more than two weeks between paychecks.
07:58Supposedly, $325,000 in sales over the Fourth of July holiday
08:03didn't show up in the bank account until after payday.
08:06Not surprisingly, the affected Moe's employees weren't happy.
08:09Some took it upon themselves to put up closed signs at the restaurants because
08:13they weren't willing to work until they had been paid. To prevent this type of problem
08:17from happening again, Friel opened up a line of credit with the bank that would allow him
08:22to borrow money for payday. However, running the businesses on such tight margins can't be
08:27a good sign. The U.S. Chamber of Commerce suggests businesses keep enough money available to keep
08:32their business running for three to six months in case of emergency. Instead, Friel reportedly
08:37had to even dip into personal funds to pay employees.
08:40And I assure you, this will never happen again.
08:42In early 2020, four different franchisees decided that they wanted out of the Moe's
08:47restaurant business. The sales represented 67 stores that need a new ownership.
08:53North Carolina-based Quality Restaurant Group bought all 67 locations,
08:57making it the current largest Moe's franchisee. These restaurants range up and down the East
09:02Coast, including locations in Washington, D.C., Maryland, Virginia, South Carolina, and Florida.
09:08Quality Restaurant Group also owns hundreds of other franchise locations,
09:12including a large number of Pizza Huts, Arby's, and Sonic restaurants.
09:16Quality Restaurant Group CEO Matt Slane told Franchise Times that his company has a habit
09:21of picking up assets that others might be afraid to buy. The old owners had different reasons for
09:26wanting to offload their franchises, ranging from wanting to take advantage of a good buying price
09:31to simply running out of ingredients due to COVID-19-related food shortages.
09:36One franchisee even decided to join the new restaurant group rather than try to continue
09:40on their own. When you look at customer satisfaction and customer promotion at
09:45Moe's Southwest Grill, it's valuable to compare that to its biggest competitor, Chipotle.
09:50And it doesn't look great. In just about every category, customers are far more satisfied with
09:55Chipotle. According to Comparably, Moe's still enjoys 77 percent customer loyalty,
10:01but those customers are less satisfied with food quality, prices, and customer service than
10:05Chipotle patrons. Moe's customers rate its food quality at 3.1 out of 5, whereas Chipotle's
10:12customers rate it at 3.7, and give the prices a slightly better rating, too. Even the customer
10:18service is worse, with Moe's Diners rating it at three stars, while Chipotle's at 3.5.
10:23Even more telling is Moe's Net Promoter Score, which shows how likely customers are to recommend
10:28the restaurant to others. The score comes from taking the percentage of customers who are willing
10:33to promote the restaurant and subtracting those who are more likely to smack talk the place.
10:38In the case of Chipotle, 51 percent of customers are promoters, while 34 percent are detractors,
10:44giving it an NPS score of 17. Unfortunately, at 47 percent for detractors to 40 percent for
10:51promoters, Moe's ends up with a dismal score of negative seven.
10:56So, is Moe's going out of business? Fans are definitely wondering, as the chain's negatively
11:02perceived changes have made some customers question whether it's on its last legs or not.
11:06Despite rumors of the chain closing, there aren't any such plans on the horizon,
11:10at least not publicly. The marketing team is still churning out new ideas,
11:14and the chain has not made any announcement that might indicate a plan to close across the board.
11:19However, when individual stores fail or are struggling along under poor leadership,
11:24it can fuel rumors that others nearby may be shutting, too. When those seven Moe's restaurants
11:29closed in Indiana in 2023, the owner of one still-open location took to Reddit to let everyone
11:34know they hadn't closed. We are open and doing great. We still have the best queso in Indy,
11:39and we know at least one person who was happy to hear that.
11:49you