Del Taco’s changes go beyond strategies to overcome the labor shortage. Menu innovation is also key as the brand looks forward. Within the past few months, Del Taco introduced its newest Crispy Chicken flavor, Honey Chipotle Barbecue. Del Taco also relaunched its Crunchtada platform with new recipes that go along with the fried tortilla at $1, $2, and $3 price points.
On a same-store basis compared to 2019, all Del Taco dayparts were positive, except for breakfast, with late snack and graveyard as the top-performers. The breakfast daypart has since improved to flat, Cappasola said, and he senses a growth opportunity there. That’s why Del Taco brought new Double Cheese Breakfast Tacos with shredded cheddar cheese and its signature Queso Blanco to its menu.
“We believe this offering can jumpstart our breakfast sales as we approach two near-term breakfast catalysts, namely morning routines continuing to normalize as offices repopulate and the return of breakfast seasonality in the fall as kids return to in-person school,” Cappasola said.
The Stuffed Quesadilla Tacos are another menu innovation that Del Taco will unveil later this summer in hopes of driving sales in 2021 and 2022. The Stuffed Quesadilla Tacos combine the Del Taco quesadilla with Queso Blanco, folded in the shape of a taco and stuffed with grilled chicken, carne asada, or crispy chicken.
Cappasola acknowledged the business environment remains challenging relative to the pandemic, especially with the rise of the Delta variant and COVID-19 surges across the country.
“It's not yet impacting our business from what we can tell at this point, but we're certainly watching it very closely just like we did during COVID,” Cappasola said.
Del Taco’s multiple quick- service modes, including drive-thru, delivery, and takeout, would lessen the burden if the pandemic did unexpectedly worsen.
Another challenge that came with the pandemic is supply chain issues. Del Taco is not the only restaurant dealing with these problems given the labor shortage. However, Del Taco Chief Financial Officer Steven Brake said the company has only dealt with packaging shortages, not the availability of products.
Food and paper costs as a percentage of company restaurant sales diminished around 140 basis points year-over-year to 25.5 percent from 26.9 percent. Brake attributed this to a menu price increase of around 4 percent and flat food inflation.
In the second quarter, Del Taco’s revenue increased 19.5 percent to $125 million from $104.6 million in the year-ago period, with company restaurant sales jumping 18.6 percent to $113 million and franchise revenue increasing 24 percent to $5.6 million year-over-year. Del Taco finished the quarter with earnings of $0.16 per share, beating estimates of $0.12 per share.