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    Del Taco Bounces Back with Beyond Offerings

  • After starting 2019 with a down quarter, the taco chain saw a turnaround over Q2 and believes it’s back on the right path.

    Del Taco
    So far guests have been receptive of the Beyond menu items at Del Taco.

    After rolling out Beyond Tacos in April, followed by Beyond Burritos in June, Del Taco found the plant-based protein resonated well with guests. But when it comes to Beyond Meat on the menu, the company says it’s just getting started. 

    The possibilities for Beyond menu items are vast and Del Taco wants to be an innovation leader in plant-based proteins, the company’s chief executive officer John Cappasola said during a July 29 conference call. 

    Guests have been receptive of the Beyond menu items, which made up more than 6 percent of the sales mix during the second quarter. However, there is still room to improve when it comes to continued customer engagement. The additional frequency of vegetarians and vegans visiting restaurants has increased, but the company believes it still needs to work on turning those guests into return customers. Del Taco said in June that it's sold nearly two million Beyond Tacos and Beyond Avocado Tacos since launch, with close to 100,000 hand-sliced avocados used for the Beyond Avocado Taco alone.

    “I am proud of the high level of execution by our franchisees and company operators that have delivered a product that very much lives up to the brand promise,” Cappasola said. “We are very pleased with the guests' reception to our Beyond Tacos.”

    As Del Taco extends its Beyond product line, it will focus on targeting two different types of customers: vegans and vegetarians, and educated diners who are turning into flexitarians. For the latter, Cappasola believes these are guests who are already Del Taco regulars, but are willing to trade protein for plant-based options or try something new to feel a little healthier when they dine out.

    By capturing both groups, Cappasola thinks Del Tacos incremental traffic will profit. 

    “Whether this existing guest trial reflects an emerging flexitarian trend, or simply a desire to try something new, we are pleased to be at the forefront of Mexican limited service restaurants by offering this unique alternative and we believe that Beyond platform is well positioned to drive incremental sales opportunities and further strengthen our brand position over the long term,” Cappasola said. 

    After the release of Beyond Burritos, Del Taco saw the sales mix jump over 7 percent over several weeks. With results like that, the company plans to continue to leverage Beyond and “further embed the platform through ongoing marketing and product extensions,” Cappasola said. 

    "We believe that sustained mid- to high-single digit beyond sales mix in each of the first 13 weeks is indicative of a permanent demand dynamic,” Cappasola said. 

    Despite these results, Del Taco is still working hard to maintain sales increases. During Q2, same-store sales at corporate locations lifted 1.7 percent compared to a 0.6 percent decrease last quarter. Franchise restaurants outpaced company restaurants with a 2.8 percent increase. Overall system-wide same store sales grew 2.2 percent compared to the 0.1 percent dip in Q1. 

    Same-store sales lapped sales for the second quarter of 2018, which resulted in a two-year increase of 5 percent. 

    During the second quarter, Del Taco opened two franchise restaurants and, so far, have opened nine new locations in 2019. There are 12 restaurants under construction and five in the pipeline, which will break ground sometime in August. Cappasola said the company is on track to hit the 25-store goal by the end of 2019. The brand will also be expanding its Midwest presence in the near future after recently signing a seven restaurant deal in Columbus, Ohio. 

    Before the slightly disappointing first quarter, the California-based chain had 21 consecutive periods of same-store sales growth. This quarter proveds Del Taco’s ability to bounce back, but the chain isn’t taking anything for granted. So far, the third quarter of 2019 has been lackluster. Despite transaction driving initiatives, sales are slower than expected, Cappasola said. It will take work to ensure Del Taco doesn’t take another dip. 

    The chain’s Fresh Fave Boxes which include two to three entrees, French fries, and a drink, come in at $4, $5, and $6 price points, launched in late Q1 and are still proving valuable. In June, two new boxes were released and guests can expect to see more roll out in the future. The Fresh Faves made up 5 percent of the sales mix in the second quarter and is seeing a slight bump during Q3, Del Taco’s chief financial officer Steven Brake said. 

    “We plan to further embed the Fresh Faves platform in the back half of 2019 through a combination of ongoing marketing and new box news,” Cappasola said. “Our plan is to continuously optimize the platform.”

    Doubling down on digital 

    Del Taco’s digital evolution is another component of its transaction driving strategy. By giving customers more opportunities with a diverse ordering options, the company hopes it can develop and increase repeat customers across the system. 

    The Del Taco app, which launched last November, now boasts 675,000 users and mobile ordering capabilities for pick up or delivery were recently rolled out. Along with mobile ordering, guests can order Del Taco through Grubhub and by the end of the year, Postmates and DoorDash will be added to its POS systems. 

    “Although, we have been happy with the addition of Grubhub, our long-term plan is to maximize consumer demand through a multiple delivery service provider approach and we are particularly excited about our plan to soon add DoorDash who has recently reported significant market share gains, as well as Postmates who is the market share leader in our core Los Angeles market,” Cappasola said.