A dispute with one of its largest franchisees has led to the closure of all but one of Del Taco’s restaurants in Colorado. The franchisee, Newport Ventures, abruptly closed 18 locations in Denver and Colorado Springs after losing financial support from its lender, according to court documents. This leaves Del Taco with just one operational location in the state, in Grand Junction, which is owned by a different operator. The closures follow Newport Ventures’ October bankruptcy after Del Taco terminated its franchise agreements over an unpaid $125,000 fee for 10 unbuilt restaurants.
Del Taco described the closures as “temporary,” stating that the restaurants would reopen “as soon as possible.” However, the closures come amid challenging times for the chain, which has seen declining sales as consumers cut back on fast food. Same-store sales fell 4.5% last quarter, with declines continuing into this quarter.
Newport Ventures acquired 18 restaurants in 2023 for $14.1 million, borrowing $11.8 million for the acquisition and remodels. The operator cited unexpected repair costs, labor issues, and software problems related to the franchisor for its financial struggles. Del Taco accused Newport of poor operations, including health and safety violations, which further strained the relationship.
The lender, National Bank Holdings, raised concerns over multiple defaults, including unpaid sales taxes and misuse of funds, leading to the appointment of a chief restructuring officer (CRO). However, the CRO ceased operations after the lender withdrew funding. Employees were informed of the immediate closures via email.
— news from Restaurant Business Online