Del Taco announced January 14 it would begin strategically selling company-owned stores to franchisees.
The new refranchising strategy will help the company “surgically surgically evolve our restaurant portfolio to stimulate growth in new restaurants and existing restaurant average unit volumes,” Del Taco’s president and chief executive officer John D. Cappasola, Jr. said in a statement.
The strategy will focus on shifting the company’s ownership of about 55 percent to 45 percent by summer of 2020. Del Taco is currently comprised of 560 units. Of those units, 310 units are company-owned and operated. In order to meet the goal Cappasola outlined in the release, the company will need to sell at least 60 units to franchisees.
During the first quarter of 2019, the company will begin strategically refranchising 13 lower volume company restaurants and acquiring three high volume franchise restaurants in the Los Angeles market.
However, the overall strategy will mainly focus on markets outside of the company’s core markets. “Further planned actions include refranchising non-core Western markets to new or existing franchisees with proven operational and development capabilities,” Cappasola said in a statement.
He continued, “Our portfolio optimization strategy positions the brand for accelerated franchise growth and focuses company operations on our core Western markets and strategic seed markets to support emerging market growth.”
The announcement to shift to move the company toward a franchised-owned unit majority comes after the California-based company released its fourth-quarter earnings. Del Taco’s systemwide same store sales grew by 2.5 percent compared to this time last year with company-operated restaurants growing by 1.5 percent and franchised restaurants growing by 3.8 percent.
The growth within franchised units supports the company’s decision to grow the number of franchised-operated units.
“Preliminary comparable restaurant sales performance during the fourth quarter reflected sequential improvement from the third quarter despite continued competitive discounting, and again included stronger results from our franchisees which supports brand portability due to their broad geographic footprint,” Cappasola said.