While the Moto-Fuji scenario was being played out, Harry Loyle, 48, a Moto board member, was privy to the action. Some years ago Harry made a major investment in Moto stock which now is truly a penny stock. Yet he feels that the Moto franchise structure was strong and there remained an opportunity once Fuji's Sword of Damocles could be removed. He said he worked on his plan to purchase Moto assets for six months.
He gathered other Moto area developers, like himself, and came up with an investor group to finance MOTO Franchise Corporation, a private company. They are Dick Schuman and his son, Andy, area developer for Washington, Maryland and Virginia; Ron Olson, Arizona, California and Colorado; Jim Brown, Oklahoma and part of Texas, an original Moto franchisee; Tom Dentice, Michigan and Illinois, a former McDonalds franchise holder; and Joe O'Hara, a former Moto employee who is Harry's partner in ProMoto Management Corp., the area developer for the Northeast. Harry told me that collectively these seven men own about 20 franchise stores themselves while serving as area developers for about 80% of the Moto family of stores.
The plan is for Harry to serve as president with the other guys operating as a franchise advisory board. There was no indication as to how much each invested. Harry would only say that he is the major investor and Joe O'Hara the lead minority investor. These two and Harry's wife, Barbara, who operates a very successful Moto store in Northfield, NJ, will be the board of directors.
According to Harry, the group put together a business plan, met with the Fifth Third Bank, an Ohio-headquartered bank, and received a commitment of funds, not disclosed, in the event the court awarded the group the Moto assets.
Once the group had its ducks in a row, Moto Photo, Inc. filed a Form 8-K with the SEC stating that it had entered into an asset purchase agreement to sell all assets to Harry's group. The announcement stated that "the proposed sale would be consummated under the provisions of Section 363 of the Bankruptcy Code." According to Harry, Section 363 allows for a pre-arrangement for the sale of assets that should result in a more rapid conclusion to the bankruptcy process.
Of course, much depends on the decisions of the court. Only Harry and his team had the advance knowledge of what was to take place and used that time to set the table. Being insiders, there was a lot they could do with the assistance of Moto management to develop a plan to present to the court in conjunction with the bankruptcy filing. A nice neat package.
Once the Chap. 11 filing was made in November, however, Moto was put into play. Might there be others out there who would find Moto an attractive acquisition? I can't think of anyone in the photo trade that would find it interesting. Right now Ritz is still absorbing the Wolf purchase and, anyway, why would they want 250 stores that would continue to be owned by independent franchises? Not likely.
How about Fuji? Taking over the chain might be a way of getting back some of their outstanding and lost millions. Had this been their mindset, they had the opportunity of taking it over before Chap. 11 by exercising their rights under the terms of $10 million in Amended G stock. They could have converted these shares to common and owned 95% of the stock, according to the 2001 Moto annual statement, and controlled the operation.
But Fuji has acquired retailer chains before, Dean's in San Diego, CA and Back In A Flash, Austin, TX, both sizeable chains, and finally divested itself of both. Retail is not their business. Besides, I don't think their biggest customers, Wal-Mart and Ritz, would think too kindly of having Fuji as both a vendor and competitor.
Moto has always received high ratings from various franchise organizations and publications. It's conceivable that some other national franchiser might find Moto a neat fit to its own offering. Mail Boxes, Etc. comes to mind since I recall that there was once talk of a test program operating MBE and Moto under one roof. I don't know if it was ever done or what the results were, but it suggests that there could be some franchiser who might like the combination. A PIP printing also comes to mind.
Or, there may be lurking out there some operation that would see Moto as a natural mate for its own service and might like to have an instant network of 250 stores to insure a known retail channel. A portrait-related firm, for example.
Harry Loyle's hope is that there will be no other bidders and that by the end of January, MOTO Franchise Corp. will be up and running.
The only executive to be leaving Moto will be Larry Destro, president and CEO. Larry, an experienced franchise professional, joined Moto in July, 2001 and replaced Michael Adler, founder of Moto, who remained as chairman. Michael and Dave Mason, CFO and long timer with Moto, retired from Moto last December and continued to serve as consultants.
According to Harry, the new company will lease the current Moto headquarters facility in Dayton, owned by Michael, David and others, and will retain all company officers and office staff, about 43 total. "No layoffs, no hires."