Portland - 17 July, 2003 -

Seattle-based fast-casual Mexican chain Taco Del Mar has signed its first U.S. master franchisee, for the territory of Oregon and Clark County, Wash. Agreements for Utah, Phoenix, California's Central Valley and Minneapolis-St. Paul are expected to follow shortly, said company co-founder James Schmidt. The deals, known as master area development agreements, give the developer the right to recruit store owners and build stores throughout their territory. The developer receives a royalty and part of the sign-up fee for each store in their region. This master-developer method has become the technique of choice for many of the largest restaurant chains, including two of Taco Del Mar's biggest lunchtime competitors, Subway Restaurants and Quiznos Sub. The structure keeps 11-year-old Taco Del Mar's overhead modest: Instead of hiring a network of area representatives to sell franchises, the company hands that work off to the area developers. On the downside, the company must share the royalty stream with the developer. "It's a conservative way for Taco Del Mar to grow," Schmidt said. "This way, somebody is buying the job that will be very committed, an entrepreneurial caliber of person who wants to own equity, as opposed to an employee." Over the past two years, Taco Del Mar has grown by selling individual stores to franchisees, adding 10 stores last year to end 2002 at 53 units. The chain plans to open 25 new eateries this year and 50 in 2004, as its new territories begin to develop. Taco Del Mar stores are projected to ring up $24 million in sales this year, up from $16 million in 2002, Schmidt said. Average store sales in the Puget Sound area top $400,000, he added. The Oregon/Clark County developer is Lance Jensen, a former longtime Dairy Queen franchisee. For the past two years, Jensen owned the Seattle office of FranNet, a franchise-consulting chain that helps match prospective business owners with a franchise concept. Jensen brought an interested prospect to Taco Del Mar, and got involved himself. "It was just a funny twist of events," he said. "I became very enamored with this concept, and the people. I just think this is a wonderful business opportunity for me, and I jumped on it." With eight stores already operating in Oregon, mostly in the Portland market, Taco Del Mar has some brand identity in the state. Jensen will work to build that, hoping to open 50 stores in his territory over the next five years. Two new stores, in Eugene and Corvallis, are under construction now. Schmidt said the slow economy had made it tough to sell developer agreements over the past two years, putting the brakes on the company's plans to rapidly franchise its concept. "It's taken a lot longer than we thought," he said. "It's a significant investment, and people worry about the economy--they want to make sure we've bottomed out before starting new ventures. We've had a lot of demand for stores in ones and twos, but we really needed the infrastructure of the master area developers around the regions." In all, Taco Del Mar now has 35 franchisees, many of whom own several stores. Interest in owning a Taco Del Mar franchise is strong in part because of the low barrier to entry--it takes just $130,000 to open a store, while competitors require at least $50,000 more, Schmidt said.

This article has been read 802 times .