A long-dormant fast food brand anticipates a revival with its first full-time location in two decades, in Huntington Beach.
Naugles Corp. is working with Mayer Corp. in Irvine on a space across Coast Highway from Waterfront Beach Resort, A Hilton Hotel.
Mayer Corp. owns the resort and leases the land across the street from the city of Huntington Beach, according to a spokesperson.
The restaurant hopeful takes its name from a onetime Mexican-style fast food chain that had 171 locations in the late 1980s.
The new push for the Naugles brand expands on a test kitchen and weekend restaurant at its Fountain Valley headquarters, which it plans to move to full-time hours at some point.
The main focus now is on the beachfront site, according to Naugles President Christian Ziebarth.
“Opening Huntington Beach comes first.”
Naugles also is looking at leases of four more locations for company-owned restaurants in Orange and Los Angeles counties. Long-term plans include franchising.
It’s also pursuing a $20 million private placement of preferred stock that began in January.
Naugles’ departure from the OC restaurant scene began when it merged with the Del Taco chain in the late 1980s. Naugles was based in Orange; Del Taco was in Costa Mesa.
American Restaurant Group Inc. in Newport Beach bought both chains in 1988 from separate owners for an undisclosed price. The merged entity had about 373 locations; Naugles pitched in 171 of those.
The owner began closing or converting Naugles locations to Del Taco restaurants and sold the chain two years later for about $125 million. The last Naugles shuttered in 1995.
Ziebarth was a food blogger and committed fan of the defunct brand when in 2010 he became involved in a trademark dispute with Del Taco, now based in Lake Forest.
He argued that Del Taco abandoned the Naugles name when it closed the last location.
Ziebarth won the rights to the trademark last year.
Partners
Naugles filed regulatory documents in January to sell $20 million in preferred stock. It’s raised $3.3 million so far, according to Mike Van Meter, vice president for business development, who hopes to fully fund the offering in about 18 months.
About a third of the $20 million to be raised is planned for overhead—including marketing, advertising, salaries and operations—the documents say, and about 55% will be dedicated to building out new locations.
Ziebarth brought in Joshua Maxwell as chief executive and Daniel Dvorak as chief marketing officer. The trio’s experience in web development, operations and branding has largely been in the technology industry.
Each owns about 30% of Naugles’ common stock, with remaining equity owned by others, including the attorney who helped win the trademark case and Van Meter.
Naugles employs 18 full-time workers.
The documents indicate a long-term plan that includes franchising as company-owned stores show results and the company files franchise documents with California.
The filing anticipates an initial franchise fee of $30,000 to $50,000 for one location and royalty and marketing fees at about 8% of gross sales—about on par with industry averages.
Fans, Future
Ziebarth enters a crowded Mexican-style fast food market, much of it based in Orange County.
n Irvine-based Taco Bell Corp. is by far the largest operator of such locations, with more than 6,500 worldwide. It has cultivated the millennial generation customer.
n Del Taco, with 550 locations, and Costa Mesa-based El Pollo Loco Holdings Inc., with 435, have promoted their food as healthier alternatives.
n Smaller chains, such as Aliso Viejo-based Chronic Tacos Enterprises Inc., with about 30 locations, take an edgy approach to restaurant design and marketing.
Naugles’ regulatory filing notes a focus on baby boomers, who it says have higher disposable incomes than other age groups. Older customers also could connect with the chain’s past popularity, Ziebarth said.
“One of the reasons I stuck with [the trademark fight] is it seemed to me there were thousands of people who would go to Naugles if it existed,” he said. “There is a cult following of devoted fans out there.”
He also says niche items and customization are a selling point.
In Naugles’ past incarnation, “they told individual stores ‘If you come up with an item, go for it,’” he said. “We can’t make spaghetti, but if a customer wants something we can do in the kitchen, let’s do it for them.”
