Taco Del Mar goes to Conn. firm in bankruptcy auction

Taco del Mar was auctioned in a bankrupcty sale Thursday, 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, said Les Winograd, a spokesman for Franchise Brands. He said it's premature to comment on the firm's plans for the brand.

Seattle-based Taco del Mar, which runs and franchises a chain of Mexican fast-food shops, filed for Chapter 11 bankruptcy protection in January. It owns roughly 22 stores in the U.S., Canada and Guam and sells franchise rights to others. Individual Taco del Mar franchisees are not in bankruptcy.

Taco del Mar went on a franchise expansion spree that caused the brand to balloon from 74 locations in 2003 to 270 in 2008, according to a filing in U.S. Bankruptcy Court in Seattle. There appears to have been churn as the brand grew, because more than 200 shops closed between 2005 and 2009.

The company lost money for several years, and its debt now totals more than $3 million, according to a filing in U.S. Bankruptcy Court for Western Washington.

"Such debt has resulted from recurring losses, poor expense management, litigation expenses related to TDM guaranties of failed franchisee leases, litigation expenses pertaining to the propriety of franchise sales, and numerous judgments against TDM resulting from such litigation," Taco Del Mar said in the filing.

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. It current brands include Mama de Luca's Pizza Now; a fitness and training company called the Personal Training Institute; and HomeVestors, known by their commercials as the "We Buy Ugly Houses" people who rehab and try to resell or lease old homes.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com