Moe's Southwest Grill President: Fast-Casual Is Still Hot

NEW YORK ( TheStreet) - "Welcome to Moe's."

Walk into any Moe's Southwest Grill locations in the U.S. and the first thing you will hear is the entire staff enthusiastically greeting you. Saying "Hello" is part of the Atlanta-based fast-casual Mexican chain's appeal to creating a friendly and inviting atmosphere for families.

The menu at Moe's reflects that. Offering fresh, made-to-order Tex-Mex food with an emphasis on all-natural ingredients, is a staple at the 10-year-old franchise. It also has some amusing names for its menu items, such as the signature Homewrecker burrito, Close Talker salad and Coctostan quesadilla.

This past spring, Moe's was named the top Mexican chain restaurant above its two larger competitors Chipotle Mexican Grill (CMG), with 1,399 stores at year-end and Qdoba Mexican Grill, with about 636, according to food consulting and research firm Technomic. Qdoba is owned by Jack in the Box (JACK).

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Moe's is starting to close the gap. This week Moe's celebrated its 500th store opening in New York City. It plans to open an additional 50 stores by year end.

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Moe's Southwest Grill is owned by Focus Brands, which in turn is owned by private-equity group Roark Capital. Under the Focus Brands umbrella are a handful of other popular franchised names including Auntie Anne's Pretzels, Schlotzsky's Deli, Carvel Ice Cream, Cinnabon and Seattle's Best Coffee. Roark Capital owns roughly two dozen franchise brands overall including Massage Envy, FastSigns and Primrose Schools.

TheStreet caught up with Moe's president Paul Damico at its newest store this week. An edited transcript of the interview is below.

Moe's competes in the ever-growing category of fast-casual Mexican. What do you think is the appeal of this specific category?

Damico: Fast-casual Mexican is in the hottest segment. It's not just the Mexican category. Fast casual is so popular today because people are continually trading down from full-service restaurants where they don't have customizable options and they don't have to pay a 20% gratuity. So we're still seeing people trade down to fast casual.

How does Moe's specifically distinguish itself from other competitors?

Damico: There's lots of distinguishing factors, but a favorite of mine is our kids' meals. All the great attributes that we talk about at Moe's - cage-free, hormone-free, steroid-free, organic and all-natural -- all those same great attributes are part of our kids' meal program, which is really nothing like what you see in the industry today.

You guys are definitely very family friendly and of course when everyone walks in, we feel welcomed.

Damico: "Welcome to Moe's."

Let's talk about growth. This is the 500th store? That is quite an achievement.

Damico: It's a milestone for the brand.

So where's the opportunity to grow from here? Is there still opportunity in the U.S.?

Damico: There is. Today, we're in 35 states, Russia and Costa Rica. There's lots of growth available in the U.S. domestically. We're moving West across the country, right now so Dallas and the state of Texas are big growth markets for us. Las Vegas, Nevada, Phoenix, Arizona, Salt Lake City, Denver, are all available markets.

With a significant amount of stores, are there any plans for to separate from your parent company through an IPO?

Damico: There's no plans right now. We are part of Focus Brands, which also owns Auntie Anne's Pretzels, Schlotzsky's Deli, Carvel Ice Cream and Cinnabon so there's five great brands in that portfolio and there are no plans right now.

What kind of franchisee is Moe's looking for?

Damico: We're looking for multi-unit franchisees with multi-brand experience, so food-service experience, franchise experience and multi-brand experience.

When you say multi, is that three? Is that ten?

Damico: No, it's 20 or greater.

What are the costs associated with being a franchisee?

Damico: Well, the franchise fee for Moe's is $30,000. The average unit investment in one of our restaurants is $460,000 and then our FDD (Franchise Disclosure Document), our earnings claim is $1.2 million in sales as a return on that $460,000.

Taco Bell saw some success with their Doritos Locos Taco. Would Moe's ever consider partnering with another brand to do a promotion similar to that?

Damico: We have considered that in the past and we have actually partnered with a company like Texas Pete, the hot sauce company. We're very particular about the ingredients we use in our products and so Doritos is not going to be a product that you're going to see in a Moe's, but there could be other products out there that we might partner with as long as they fit our food mission.

And what's that?

Damico: It's all about the sustainability of our products -- organic, healthy, all natural, cage free, steroid free, hormone free.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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