Franchising: A Last Meal for D'Lites?

A Last Meal for D'Lites?

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The D'Lites chain of fast-food restaurants seemed like a surefire formula for success in the health-conscious '80s. Its menu was designed for the slender set, featuring such fare as vegetarian pita-bread sandwiches, diet cheeseburgers, frozen yogurt and light beer. The chain grew from one Atlanta outlet in 1981 to about 100 restaurants in 19 states last year. But now D'Lites may be down to its final few bites. Company President Jefferson McMahon, a former Arby's executive who was hired only last November to tighten up D'Lites' management, abruptly quit the top job last week. The chain acknowledged that it may soon have to seek bankruptcy protection unless it can arrange an infusion of new capital. D'Lites lost $18.7 million during fiscal 1986, after making a profit of $948,000 in the previous year.

Disappointed investors blame the financial squeeze on an overheated expansion drive led by Founder Doug Sheley, 39, who left the company last February. D'Lites outlets were successful in white-collar neighborhoods, but foundered when Sheley situated them in working-class districts, where most fast-food fans remained loyal to Big Macs and Whoppers. D'Lites' stock, after hitting a peak of 15 in 1984, the year it went public, sank last week to a low of 1/2.