In a previous newsletter I cited a number of problems Seattle-based Taco del Mar was having. The franchisor grew very quickly from 74 to 270 locations in four years. Between 2005 and 2009 over 200 locations closed but the franchisor continued to sell. Some believe Taco del Mar was "churning" locations. Churning is when a franchisor repeatedly sells the same franchise site to a new franchisee, where the franchisor would know that the site is unlikely to operate successfully.
The franchisor filed for protection under Chapter 11. Since The franchisor lost money for several years, its debt now totals more than $3 million, according to the filing in U.S. Bankruptcy Court for Western Washington. Individual Taco del Mar franchisees are not in bankruptcy.
Taco del Mar was auctioned in a sale on 10-3 2010, and the winning bid of $3.25 million came from a Connecticut company called Franchise Brands.
A bankruptcy court judge still must approve the sale.
Franchise Brands was created in 2005 with help from the founders of Subway restaurants. Both are based in Milford, Conn., and the spokesman for Franchise Brands is also a spokesman for Franchise World Headquarters, which owns the Subway trademark.
Franchise Brands partners with small and mid-sized companies that either franchise or want to franchise. Its current brands include Mama de Luca's Pizza Now.
An Example of Rapid Franchise Growth Leading to Problems
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