Del Taco operator grows debt-free, plus new moves by Toppers and Tide
Asked if Utah is a good state to do business in, Del Taco franchisee Paul Hitzelberger stage-whispers “Oh, it’s a terrible place,” as if he intends to keep rivals away. “Just kidding,” he adds a moment later, chuckling. “I enjoy doing business here.”
Indeed, he and his wife, Jane, have opened 30 of the 24-hour Mexican fast-feeders since 2001 and have plans to open two more this year. Almost all are in Greater Salt Lake City. The couple, who’ve been married 44 years, also operate a unit in Reno, Nevada.
For the record, Utah is one of the country’s business-friendliest states. Last year, Forbes reported Governor Gary Herbert has been trimming enormous amounts of red tape. “He’s eliminated or significantly changed nearly 400 regulations during the past seven years,” the magazine said.
Before turning franchisee and taking over eight company-run outposts in Utah, Hitzelberger was Del Taco’s vice president of marketing for 11 years. “It was eight in a state that should have 40 of them. So this was an opportunity for growth,” he explains. The couple looked at other geographical areas to franchise but Utah appealed because of its “family orientation,” which meant large parties when families showed up in a restaurant.
Hitzelberger acquired the eight units with no debt, and he has continued to open Del Tacos mostly without having to borrow. “That’s a hallmark of ours. We grow out of cash flow and have minimal debt. It allows us to go after opportunities and fund projects without the burden.”
The franchisee declines to reveal specifics of the sites he likes. But he does say that residential, light office, industrial and retail areas are high on his list. “We look for busy intersections with traffic generators for our 24-hour operation.”
Hitzelberger prefers to build new units rather than to covert an existing one. Only two of his 31 Del Tacos began life under a different name. One, on 4th Street near the University of Utah, is the former Training Table restaurant—not that a stranger would know. “When I do a conversion it includes all the elements. You can’t tell what it used to be,” he says.
The industry is again enamored with delivery. Higher-end restaurants that traditionally haven’t delivered have jumped in the space, facilitated by third parties who charge both eatery and customer for their service. You may recall a similar preoccupation when Domino’s pizza promised 30-minute delivery 50-plus years ago. It discontinued the guarantee nearly 25 years ago. Yet delivery lives on.
“That’s the future,” declares new Toppers Pizza franchisee Mike McLaughlin, without a trace of irony. He cites the current success of Domino’s and Papa John’s as proof.
McLaughlin and business partner Willie Frank, who also operate a growing nine-unit Five Guys franchise in northern Virginia and southern Maryland, have agreed to open 22 Toppers in the same region over the next seven years.
“Willie and I have been looking for a second brand for a number of years,” he says, adding they researched several fast-casual pizza chains. “But we didn’t know which ones would survive.”
The pair were comfortable with Toppers, more of an old-school delivery model headquartered in Whitewater, Wisconsin. The franchisor nonetheless wasn’t ignoring digital efforts to enhance delivery. “Technology is revolutionizing what the pizza delivery guys are doing. For such a small company, Toppers gets that,” explains McLaughlin, who launched his career at Domino’s and later worked for Papa John’s.
The partners have agreed to open 22 units over seven years. “We were able to negotiate our development schedule,” McLaughlin says, adding new units, which cost about $425,000, will be financed with an SBA loan. The first two Toppers will open in Alexandria, Virginia, a residentially rich and affluent Washington, D.C., suburb; a third is planned for nearby Arlington.
Despite rents in the mid-$40s per square foot, the partners believe business will be robust in the right location. Offers McLaughlin: “Pizza delivery is all based on drive times. You identify the central area and look for a center point.”
Robert Lyons and two silent partners already operate four Tide Dry Cleaners units in Boca Raton, Naples, Bonita Springs and the Wellington/Royal Palm Beach, Florida. In March they opened the fifth, in Fort Myers, of an eight-unit agreement. Number six opens in Sarasota later this year.
“What really attracted us to dry-cleaning was the fact there hasn’t been a lot of change,” explains Lyons, a former marketing executive for a tile-and grout franchisor. “We saw an opportunity for consolidation of these old-school type dry cleaners. It’s a service that will always be required.”
How much business is there in south Florida, where shorts and t-shirts rule? Lyons concedes there isn’t much dress-shirt laundering, but “we’re lucky in our market because we have a high percentage of dry-cleaning items.”
Think red-wine-stained Tommy Bahamas shirts. “We do a great job with silk shirts,” declares Lyons, who maintains that “our clothes come back smelling like Tide instead of chemicals.” The average spend is between $28 and $$35.
The partners are looking for higher-income and higher-density areas. Lyons likes daily-needs centers anchored by a supermarket, and in fact operates a store in an endcap.
“But I prefer a free-standing locations. We’re competing for the same sites as Chase banks, McDonald’s and Starbucks.”
Lyons and partners believe they have a leg up on rivals given they all have real state backgrounds. Their preference is to buy a building and develop it, leasing any additional space, he adds.
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at firstname.lastname@example.org.