Taco Del Mar Franchising Corp. has announced that it is voluntarily restructuring its business under the protection of Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court in Seattle. The company is expecting to continue all business operations during the restructuring without interruption, according to a news release.
"Although this was not our first choice, we believe that the Chapter 11 process will allow us to maximize the value of the company's assets," president and CEO of Taco Del Mar, Larry Destro, said in the release. "Taco Del Mar has tremendous traction in its core markets and this process offers an opportunity to grow without the constraints imposed by the current debt burden and threats of litigation. When we emerge from this restructuring, Taco Del Mar will have become a much more competitive brand and a more financially secure investment for our existing and future franchisees.
The restructuring does not involve the franchisee-owned Taco Del Mar store location operations; only the Taco Del Mar Franchising Corp. will restructure. Taco Del Mar has an estimated 225 locations.
According to an article in the Seattle Times, Taco Del Mar's debt ranges from $1 million to $2 million.
From the article:
The largest liability listed in Taco Del Mar's preliminary filing in U.S. Bankruptcy Court in Seattle is for $500,000. That's the amount that a Maryland franchisee seeks in a pending lawsuit against the company. The chain disputes that liability.
Among the company's 20 largest unsecured creditors is David Huether, who stepped down as president of the chain in 2007, when he still owned a large portion of the company. Taco Del Mar owes him $86,875 that it borrowed for operating capital, and it owes $56,761 to co-founder James Schmidt.
Taco Del Mar is the second fast casual restaurant to publicly announce its filing for Chapter 11 protection. Earlier this month, 68-unit Daphne's Greek Cafe filed for Chapter 11.
Daphne's founder George Katakalidis said the filing was intended to help the company slow down and refocus on its core market of California. The company has closed its locations in Arizona and Oregon.
Katakalidis said the company plans to emerge from Chapter 11 quickly. According to the filing, the company had more than $17 million in debt as of Nov. 30, 2009.
