Top Executives Leaving Taco Del Mar

Posted Sat, 2007/11/24 - 11:13 by Bob Frankman

As Dissatisfaction from Franchisees Grow, President and Vice President Leave

SEATTLE - First, Mexican food franchisor Taco Del Mar lost its President and Chief Operating Officer, David Huether. Huether has been credited for implementing a model of regional franchisors called Master Developers, which allowed the company to quickly expand into new markets. He resigned during the week of November 5.

Now comes the resignation of Vice President of Franchise Sales, Neil Hollingsworth. There is "an incredible opportunity at another company," explains co-founder and Chief Executive Officer, James Schmidt about Hollingsworth departure.

Some franchisees have been complaining loudly since summer that the company's food costs are excessive and that its distribution and support systems are inadequate. At least one has threatened suit.
Hollingsworth seemed to tacitly address that unhappiness in his departure e-mail, writing, "Please don't look at this as anything other than an opportunity for me and my family that made all of the sense in the world." [Dan Richman, Seattle's Post-Intelligencer]

When Taco Del Mar had high growth rates and food costs were lower, franchisees seemed satisfied. But the cost of food has spiked upward in 2007. At the same time, high fuel costs have dampened consumer spending at fast-food restaurants, giving considerable stress to many franchisees.

During such stressful times, accusations of personal kick-backs and poor support have been posted in late summer. Dismissing such allegations, Taco Del Mar's CEO emphatically declared, "I do not get kick backs... and no one else in my company does."

Store growth has apparently stalled. "Problems are so deep [at Taco Del Mar] that franchisees are closing stores almost as fast as new ones are opening. Or faster," calculates Franchise Times at the beginning of November.

One franchisee who will head up a Taco Del Mar independent franchisee association, Jim Templin, felt that there was a problem in growing franchises a few at a time throughout the 50 states and Canada.

"You need to have a lot of stores developed quickly in an area to build brand awareness. And you need to reduce costs, because franchisees in outer markets are paying more per case of product to cover transit costs. In Texas, Sysco didn’t stock every item because there wasn’t enough volume. Franchisees had to do special orders, and delivery wasn’t reliable.” [FT, Taco Del Mar]

Leadership changes seem to be happening quickly. Taco Del Mar's two executives in charge of daily operations and selling new franchises have stepped down. Vice President of Franchise Development, Kevin Hansen, was announced as the new COO on November 10. CEO Schmidt said about the new COO:

"We need a different sort of leadership as the franchise organization becomes stronger. We need somebody who will work as a partner with franchisees." [Seattle Times, TDM President Steps Down]

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