Advertisement
YOU ARE HERE: LAT HomeCollections

Del Taco to Announce Its Chapter 11 Days Are Over : Fast food: The Orange-based company will seek to more than triple its Mexican-style restaurants to 1,000.

March 17, 1994|CHRIS WOODYARD | TIMES STAFF WRITER

ORANGE — Hoping to become a bigger enchilada in Mexican fast food, Del Taco Inc. plans to announce today that it has emerged from bankruptcy with its senior managers having assumed ownership.

The company, which recently moved its headquarters from Costa Mesa to Orange, now expects to embark on a nationwide expansion aimed at more than tripling its restaurants to 1,000 by the year 2000.

"No longer are we merely positioning ourselves for growth," said Del Taco Chairman Kevin K. Moriarty, now majority owner of the privately held firm. "Today we redirect our sights on real, accelerated expansion through ambitious company and franchise growth across the country."

Moriarty said Wednesday in an interview at the recently rehabilitated Del Taco eatery at South Coast Plaza in Costa Mesa that Taco Bell Inc., its much larger archrival, has created a national awareness of Mexican-style fast food. And unlike the crowded market of burger chains, Del Taco has a relatively open field in its bid to compete against Taco Bell.

Del Taco filed for a Chapter 11 bankruptcy reorganization on March 29, 1993, in U.S. Bankruptcy Court in Santa Ana. At that time, Moriarty said the company was profitable from operations, but was sagging under the weight of $87 million owed to General Electric Capital, its largest creditor and a 79% owner.

The filing gave Del Taco a chance to remove itself from some leases of unprofitable restaurants, said Executive Vice President Paul Hitzelberger.

Del Taco said it closed 21 restaurants, leaving more than 270 in the chain, and modified or rejected 93 leases since its filing. Moriarty and Hitzelberger led the management buyout, using their own money and borrowing from GE Capital.

The company emerged from bankruptcy protection in December. Because it is privately held, Moriarty would not divulge how much of the new corporation he or the other officers own, or even the company's projected sales this year.

Bankruptcy documents show that in 1992, Del Taco earned $1 million in profit before taxes and interest on $124 million in revenue.

Now, Moriarty said Del Taco has "a great balance sheet" and is making provisions for renovating company-owned stores, which make up more than half the chain. That is expected to cost about $30 million over the next few years.

But that's what it will take to challenge Irvine-based Taco Bell, the Pepsico unit with more than 4,500 restaurants nationwide. Though his chain is small when compared to its competitor, Moriarty likes to say that Del Taco is "the No. 2 Mexican restaurant chain in the world."

With sales of salsa having exceeded ketchup for the first time in 1993, Moriarty said the nation is ready for an alternative Mexican-style food chain. While Del Tacos are sprinkled in states as varied as Alabama, Missouri, New Hampshire, New York, Arizona, Nevada, Georgia, Illinois, South Carolina and Utah, the vast majority are in Southern California.

Janet Lowder, a restaurant consultant based in Rancho Palos Verdes, agreed that Del Taco has a strong chance to expand.

"Southern California is the most concentrated market for Mexican food," Lowder said. "Once you get outside California or the Southwest, you will find Taco Bell . . . but there aren't a lot of choices for Mexican food."

Advertisement
Los Angeles Times Articles
|
|
|