They Bought 67 Moe’s Restaurants for Their “Unit-Level Economics.” Six Years Later, Only 38 Remained.
Relevant FDD Topics: Item 6, Item 7, Item 8, Item 17, Item 19, Item 20
This report is for educational purposes only and is based on publicly available information, Franchise Disclosure Documents, bankruptcy filings as described in published reporting, and other sources available at the time of publication. The statements and opinions expressed herein are those of the author. Quality Fresca I LLC’s Chapter 11 proceeding remains ongoing, and circumstances may change as the case progresses. Nothing in this report should be construed as legal, financial, or investment advice. Prospective franchisees should conduct independent due diligence and consult qualified legal and financial professionals before investing.
In March 2020, an experienced multi-brand restaurant operator made one of the largest acquisitions in the history of Moe’s Southwest Grill.
Quality Restaurant Group, through a newly created subsidiary called Quality Fresca, acquired 67 existing Moe’s restaurants across Florida, South Carolina, Virginia, Maryland and Washington, D.C. The transaction immediately made Quality Fresca the largest franchisee in the Moe’s system.
This was not an inexperienced entrepreneur buying a first restaurant. Quality Restaurant Group was already operating a substantial portfolio that included nearly 200 Pizza Hut restaurants and 27 Arby’s locations. When the Moe’s acquisition was announced, the company’s leadership spoke publicly about the opportunity for growth and specifically identified Moe’s “unit-level economics” as one of the characteristics that attracted it to the investment.
Quality Fresca subsequently added two more locations, bringing the portfolio to 69 restaurants.
Six years after the original acquisition, only 38 remained.
On August 4, 2026, Quality Fresca filed for Chapter 11 bankruptcy protection. By then, 31 of its 69 Moe’s restaurants had already disappeared from the portfolio. According to reporting based on the bankruptcy filings, the company entered Chapter 11 seeking to preserve viable locations while addressing debt, leases and underperforming restaurants. It also sought authority to reject leases associated with another 16 locations.
If all 16 ultimately close, Quality Fresca could be left with roughly 22 restaurants from a portfolio that once contained 69.
The easy headline is that a large franchisee went bankrupt.
The more important question is what happened during the six years between a sophisticated operator publicly praising the brand’s unit-level economics and that same operator entering bankruptcy after closing nearly half of its restaurants.
Moe’s own Franchise Disclosure Documents help tell part of that story.
Nearly $59 Million in Revenue Was Not Enough
Quality Fresca was not operating a business without customers. According to bankruptcy-related reporting, the company generated approximately $58.9 million in revenue during fiscal 2025. Yet its consolidated EBITDA for the same period was approximately negative $111,000.
That distinction matters.
Franchise conversations frequently use revenue as shorthand for business performance. High sales are interpreted as evidence that a concept works. Multi-unit ownership is often treated as further evidence of success because larger operators presumably benefit from purchasing power, centralized management and economies of scale.
Quality Fresca demonstrates why neither assumption should be made without examining what happens below the revenue line.
According to reporting on the bankruptcy filings, the company attributed its deterioration to several pressures, including declining customer traffic, rising food and shipping costs, labor constraints, inflation and fixed obligations such as rent and debt service. Some restaurants reportedly remained profitable while others produced losses significant enough to place pressure on the broader organization.
The company also entered bankruptcy with substantial secured debt. Reporting based on court documents places its remaining secured obligations at approximately $16 million.
That means the economic question was never simply how much the restaurants could sell.
It was whether the cash produced by those sales was sufficient to support the restaurants themselves, the leases attached to them, the debt used to acquire and operate them, and the additional obligations of a large multi-unit organization.
A franchise portfolio can generate tens of millions of dollars in annual sales and still become financially unsustainable.
Meanwhile, Moe’s Item 19 Continued to Show Million-Dollar Restaurants
The financial performance representations presented to prospective Moe’s franchisees looked very different from a bankruptcy headline.
In its 2025 FDD, Moe’s reported average 2024 Net Sales of approximately $1.24 million among the traditional franchised restaurants included in its Item 19 population. Median Net Sales were approximately $1.17 million.
The following year, Moe’s reported average 2025 Net Sales of approximately $1.18 million, with median Net Sales of approximately $1.14 million.
The decline was not confined to one segment of the system. Reported average sales fell across every quartile.
The top quartile average declined from approximately $1.82 million in 2024 to $1.75 million in 2025. The second quartile moved from approximately $1.31 million to $1.25 million. The third declined from roughly $1.05 million to $1.01 million, while the bottom quartile fell from approximately $753,000 to $719,000.
Those figures do not contradict Quality Fresca’s bankruptcy.
They measure something different.
Moe’s Item 19 reports Net Sales. It does not tell a prospective franchisee what remains after food costs, labor, rent, royalties, advertising, technology expenses, insurance, utilities, maintenance, debt service and the other costs required to operate the restaurant.
The FDD itself warns readers that its sales figures do not include the expenses necessary to determine net income or profit.
A restaurant with $1.2 million in revenue may be highly profitable. Another restaurant producing the same revenue may be losing money.
Revenue alone cannot tell a buyer which one they are looking at.
But there is another limitation in the Item 19 data that becomes particularly important when viewed alongside the Quality Fresca story.
The Restaurants That Closed Were Not Part of the Average
Moe’s Item 19 does not include every traditional restaurant that operated at some point during the reporting year.
For the 2024 financial performance representation contained in the 2025 FDD, eligible traditional franchised restaurants generally needed to report sales for all 52 weeks of the fiscal year.
That meant 25 traditional franchises that permanently closed during 2024 were excluded from the Item 19 population. All 25 had been operating for at least 12 months before closing.
The 2026 FDD followed the same general approach for fiscal 2025.
That year, 33 traditional franchised restaurants that permanently closed during 2025 were excluded. Once again, each of those restaurants had been operating for at least 12 months before closing.
Moe’s discloses those exclusions. There is nothing inherently improper about defining the Item 19 population in that manner. But the distinction matters enormously to the person reading the FDD.
When a prospective franchisee sees average Net Sales of $1,182,975, that number describes a defined population of restaurants that met Moe’s eligibility criteria, including remaining open long enough to report sales throughout the year. It does not include the 33 mature traditional restaurants that permanently closed during that same year.
Those restaurants may be precisely the locations a prospective buyer should want to understand.
What were their sales before they closed? Were they producing operating losses? Were occupancy costs too high? Were they approaching remodel obligations? Did the owners simply retire or sell their assets, or had the economics deteriorated?
Item 19 does not answer those questions.
That is where Item 20 becomes important.
Item 20 Was Showing a Shrinking System
While Item 19 continued to report seven-figure average restaurant sales, Moe’s systemwide outlet tables showed a franchised footprint moving in the opposite direction.
Moe’s began 2023 with 636 franchised U.S. restaurants. By the end of 2023, the number had fallen to 606.
It ended 2024 with 591. By the end of 2025, only 563 franchised U.S. restaurants remained.
That is a net reduction of 73 franchised restaurants in three years, or approximately 11.5% of the franchised system that existed at the beginning of 2023.
Ownership was also changing hands. Moe’s reported 46 franchise transfers during 2023, 60 during 2024 and another 27 during 2025. None of those numbers, standing alone, proves that Moe’s is a poor franchise investment. Restaurants close for many reasons. Franchisees retire. Leases expire. Markets change. Locations may be sold or consolidated.
But a prospective franchisee looking only at the headline Item 19 average would miss an important part of the system's story.
The average eligible restaurant was still generating more than $1 million in annual sales.
At the same time, the overall franchised footprint was shrinking.
Both facts belong in the same due diligence analysis.
Quality Fresca Was Part of That Contraction
The experience of Quality Fresca makes those systemwide figures less abstract. The company began with 67 restaurants in 2020 and subsequently reached 69. By the end of 2024, Moe’s franchisee disclosures showed a smaller Quality Fresca portfolio. The 2026 FDD showed further deterioration during 2025, with Quality Fresca locations appearing among the restaurants no longer operating within the system.
By August 2026, only 38 remained.
The financial distress had also surfaced before the Chapter 11 filing. According to bankruptcy-related reporting, Moe’s notified Quality Fresca in August 2025 that the franchisee was in default under its franchise agreements. The parties subsequently entered into an arrangement that deferred certain royalty and advertising obligations while Quality Fresca attempted to stabilize its finances. Discussions reportedly continued into 2026 regarding liquidity, restaurant closures and additional relief.
That timeline is important, although it should not be overstated.
There is no basis here to conclude that a private franchise agreement default involving Quality Fresca was required to appear as Item 3 litigation or otherwise be separately identified to prospective franchise buyers in the FDD. What the timeline demonstrates instead is a limitation inherent in relying on the FDD as though it were a real-time operating report.
A Franchise Disclosure Document provides standardized disclosures required by franchise law. It does not necessarily tell a buyer that one of the system's largest franchisees is negotiating financial relief behind the scenes.
That information has to be found through deeper due diligence.
The Economics of Buying Moe’s Were Changing Too
The investment required to enter the system was also increasing. The 2025 Moe’s FDD estimated that developing a traditional restaurant could require as much as $1.85 million for a freestanding location. The 2026 FDD pushed the high end of the estimated investment higher still. Those investment figures matter because the same $1.18 million in restaurant sales looks very different depending on how much capital was required to produce it.
The FDD also imposes continuing capital obligations after opening. Franchisees are required to refresh their restaurants every five years and remodel them every ten years to meet Moe’s then-current standards. That means a prospective franchisee evaluating an existing location cannot simply examine last year's sales. The buyer also needs to know when the next remodel is due, what equipment will require replacement, whether deferred maintenance exists, what the lease looks like, how much debt will be required to acquire the restaurant, and what the location actually produces after operating expenses.
The same analysis applies even more strongly to a large portfolio acquisition. Multiplying the number of restaurants does not eliminate those obligations. It multiplies them.
Buying an Existing Franchise Is Not the Same as Buying Proven Economics
Quality Fresca also challenges one of the assumptions surrounding franchise resales. An existing franchise is often perceived as safer than a new development because there is a historical operating record. The buyer can examine previous sales, customer traffic and expenses rather than projecting performance for a restaurant that has not yet opened.
That is a genuine advantage.
But an operating history can reveal problems as easily as it can demonstrate strength. An existing restaurant may come with established customers and trained employees. It may also come with aging equipment, an unfavorable lease, deferred capital expenditures, a declining trade area, looming remodel requirements or margins that have been deteriorating for years. That makes one question particularly important when evaluating a franchise resale:
Why does the existing franchisee no longer want to own this business?
When a multi-unit operator is selling several restaurants, that question becomes even more important. And when dozens of locations across the system are simultaneously closing, transferring or otherwise leaving the network, a prospective buyer should understand the reasons before relying on systemwide averages.
The Survivors Are Not the Whole Story
This is where the Quality Fresca bankruptcy intersects most directly with Item 19. Financial performance representations frequently depend on eligibility criteria. Those criteria may be perfectly reasonable and clearly disclosed. But buyers still need to understand which businesses are represented by the numbers and which are absent.
Moe’s tells prospective franchisees that the average eligible traditional restaurant generated more than $1.18 million in Net Sales in 2025. It also tells them that 33 mature traditional restaurants permanently closed during that year and were excluded from that calculation. Item 20 separately shows that the overall franchised system has been contracting.
Those disclosures become significantly more meaningful when considered together.
The restaurants that remain open tell a buyer something about the system. The restaurants that disappear tell them something too.
The Reality Check
In 2020, an experienced multi-brand restaurant operator acquired 67 existing Moe’s Southwest Grill restaurants and publicly cited the brand’s “unit-level economics” as part of the attraction. The portfolio eventually reached 69 locations. Six years later, only 38 remained when Quality Fresca filed Chapter 11. The company was still generating nearly $59 million in annual revenue, but revenue alone was not enough to make the broader organization economically sustainable.
At the same time, Moe’s continued reporting average Net Sales exceeding $1 million among the traditional restaurants that qualified for its Item 19 financial performance representation. Neither fact makes the other untrue.
Instead, the Quality Fresca story demonstrates why a prospective franchisee cannot stop at Item 19. Item 19 tells buyers how a defined group of restaurants performed. Item 20 shows what was happening to the system around those restaurants. The former-franchisee lists show who left. The current franchisee lists show who remains.
And validation conversations can sometimes explain why.
For prospective franchisees, the lesson is not that a million-dollar Moe’s restaurant cannot be profitable, nor that every multi-unit operator will experience what Quality Fresca did. The lesson is that average sales are only one piece of franchise economics. A sophisticated operator once looked at 67 existing Moe’s restaurants and concluded that the unit-level economics justified the acquisition.
Six years later, nearly half of those restaurants were already gone.
When evaluating a franchise opportunity, the restaurants that disappeared deserve just as much attention as the ones included in the average.
