Del Taco is a chain of roughly four hundred fast food restaurants. It is the second largest mexican fast food franchise in the United States, although it is a distant second to the Taco Bell power house. They offer a menu featuring such fare as tacos, nachos, quesadillas, the classic "Macho Combo Burrito", and offerings such as hamburgers and fries, for those who find the highly Americanized mexican fast food too "ethnic" for their tastes. The offerings are cheap and varied, and there are even decent vegetarian items offered; the "Veggie Works Burrito" is quite flavorful for fast food, and when ordered without the sauces is quite healthy.
In 1964, Ed Hackbarth and David Jameson founded the first Del Taco restaurant in Barstow, California. One of their smartest moves was getting a drive-thru window. By 1966, they had a hot franchise on their hands that was popping up across California. That year, they formed Red-E-Foods Systems, Inc. and began leasing Del Taco franchises to other entrepreneurs. The company name was short-lived, however, and in 1973 was changed to Del Taco, Inc. In 1975, Hackbarth and Jameson cashed out, and sold their stock to an independant firm.
"Dick Naugle says, 'Eat Out More Often'"
Naugles, meanwhile, was formed in 1970. It was a mexican fast food franchise similar in many ways to Del Taco. Naugles rapidly grew to 225 restaurants under the ownership of Harold Butler, who sold the company to Collins Food International in 1985. In 1988, Del Taco and Naugles merged, and all Naugles franchises were converted to Del Taco franchises.
However, this meant that Del Taco inherited the litigation that was being pursued against Naugles by former franchisee Vylene Enterprises Inc., run by Debra Vylene Green. The rapid expansion of Naugles had caused the franchise to make a mis-step. Vylene had been running a Naugles restaurant in Long Beach, California, when Naugles licensed a second restaurant to someone else, less than two miles away. A huge court battle was begun which lasted twelve years, until 1996, when a San Francisco federal court ruled that Naugles, now Del Taco, had breached its "covenant of good faith and fair dealing", awarding almost three million dollars to Vylene. This case was very closely watched by the entire fast food franchise industry, and the ruling sent all of the major franchises into deep contemplation of the terms "covenant of good faith and fair dealing." It is common now for franchises to conduct economic impact and viability studies anywhere that a new franchise is proposed.
Despite the legal issues, Del Taco has had no problem recruiting new franchisees. There are more than two hundred new franchises planned over the next two years. Taco Bell has saturated most markets, and Del Taco advertises better returns for franchise owners than Taco Bell restaurants, despite being the smaller of the two chains. Del Taco has most recently made its way into Texas, and continues east across the country at a phenomenal rate, giving closest competitors Taco Bell, McDonald's, and Rubio's a good run for their money.
http://www.deltaco.com - the Del Taco home page
http://www.nrn.com/resources/mathay.html - Analysis of the legal situation between franchises and franchisees, citing Naugles as a primary example.
http://www.deltaco.com/content_history.html - Del Taco's autobiography web page.
http://www.aafd.org/publications/franchisevoice/1998/winter/content.shtml - More recent info on the Naugles franchisee lawsuit
http://www.hoovers.com/co/capsule/2/0,2163,47602,00.html - Hoover's Online summary of Del Taco