W. R. Grace & Co. announced Friday that it is selling about 100 of its Del Taco and Taco Villa restaurants in the southeastern United States to Taco Bell Inc.
The Grace-owned Del Taco outlets, mostly in Georgia and Texas, are not affiliated with the Mexican-style restaurant chain operated by Del Taco Inc., based in Costa Mesa. Grace, a conglomerate based in Boca Raton, Fla., said it was selling the fast-food division as part of a plan to concentrate on its core businesses such as chemicals and health care.
"This transaction to divest the Del Taco unit is consistent with the previously announced strategy, and will conclude Grace's effort to remove the company from the Mexican restaurant business," the company said in a statement.
The Grace restaurants will be transferred to Taco Bell during the next nine months. The sale price and other terms were not disclosed.
Taco Bell, a Pepsico subsidiary based in Irvine, had no comment about its plans for the restaurants. Industry sources said the existing buildings may be torn down to make way for Hot 'n Nowhamburger stands, a 77-unit chain acquired by Taco Bell two years ago.
Taco Bell bought Hot 'n Now, based in Kalamazoo, Mich., because of its success with small kitchens, double drive-through lanes and inexpensive food items. Taco Bell has been studying ways to reduce the size of its restaurant kitchens by adding more precooked items that can be prepared at central commissaries.
For Del Taco, the sale will mean less customer confusion, said Executive Vice President Paul Hitzelberger. "Now there's only one Del Taco," he said.
Grace acquired the Del Taco outlets through a licensing agreement in 1978. Its restaurants had different menus, logos and policies from the Costa Mesa company. Although they shared information, they had little more in common than their name.
Hitzelberger said Grace had little luck with its Del Taco operation. "They have not done a good job with them." While Del Taco's sales "have been up double digits, they (Grace's restaurants) have been going the other way," he said.
The sale comes as Southern California's Del Taco is launching a big expansion by securing multiple franchise deals. Until now, only about a quarter of the 279 Del Taco outlets have been franchises. The rest are company-owned.
To encourage franchising, the company has also adopted new signs, a subdued look and a building that can be constructed fast and relatively cheaply.
Barry Ziegler, an analyst for A.G. Edwards & Sons brokerage in St. Louis, said Pepsico officials have told him that they want to expand the Hot 'n Now chain, but gave no indication that it would be done through acquisition.
"If they can find 100 good sites, it's more economical than finding and building from scratch," Ziegler said.
What's in a Name?
Del Taco Inc. couldn't be happier that W. R. Grace & Co. is selling its Del Taco units in the southeastern United States to Pepsico's Taco Bell subsidiary. Although they share the same name, Grace operated its units independently of Costa Mesa-based Del Taco. Officials of Del Taco say the sale will end the name confusion.
Del Taco Inc.
* Headquarters: Costa Mesa
* Founded: Del Taco, 1964; Naugles, 1970; the two chains merged in 1988
* 279 Del Taco/Naugles in California and Arizona
* 31 Naugles restaurants in Utah, Nevada, Illinois and Missouri
* Almost all restaurants have both dining room and drive-through facilities
* About 25% of the restaurants are franchised; the rest are company-owned
* Menu: Includes tacos, burritos, quesadillas, salads, tostadas, french fries, breakfast burritos
* Customers: About 52 million annually
* 6,000 in company-owned restaurants and corporate headquarters
* 2,000 in franchised-owned restaurants