News

Del Taco Q2 results show value in 'value' menus, expanded delivery

July 30, 2019

Though net income dropped at Mexican-American QSR, Del Taco during the quarter ending June 18, systemwide comp sales grew 2.2% along with 3.1% growth in revenue over the 12 weeks, according to financial results released by the chain. In fact, the company said strong franchise and company operated sales increases due largely to higher check totals, though fewer transactions, allows it to reaffirm its guidance for the year. 

In the second quarter, company operated comparable restaurant sales increased 1.7%, with an average check growth of 4.2% that included some menu mix growth that was partly offset by a 2.5% drop in transactions at those stores. Meanwhile, franchised comparable restaurant sales grew 2.8%. 

Other key highlights of the quarter include: 

• Revenue grew 3.1% over the same quarter last year, to $121.5 million.
• Company operated restaurant sales grew 2.2% over Q2 2018 to $112.2 million. 
• Net income fell to $2.1 million (6 cents/diluted share) from $4.2 million (11 cents/diluted share) in 2018.
• Adjusted net income fell to $4.9 million (13 cents/diluted share) from $5.4 million (14 cents/diluted share) in 2018. 
• Restaurant contribution margin fell from 19.7% of 19%, quarter over quarter. 
• Adjusted EBITDA fell from $16.8 million to $16.7 million, quarter over quarter. 
• Closed three company restaurants, while opening one.
• Opened two franchised restaurants. 

Del Taco President and CEO John D. Cappasola said the results indicate that the many levels of improvement the chain has initiated are paying off. 

"Del Taco's digital transformation, value evolution and menu innovation strategies drove sequential system-wide comparable restaurant sales improvement during the second quarter," he said in the release. "Company operated restaurants experienced a 230 basis-point and 300 basis-point improvement, respectively, in comparable restaurant sales and transactions relative to the first quarter, while franchised restaurants similarly generated stronger sequential trends. 

"We also improved our restaurant contribution margin performance compared to the first quarter due to these stronger top-line results coupled with effective cost management. Based upon our second quarter performance and outlook for the remainder of 2019, we are reaffirming our annual guidance."

Cappasola said the company plans to add Postmates and DoorDash partnerships to its current use of Grubhub for delivery in company operated stores. He said that the brand's app now counts 675,000 registered users, which allowed it to extend online ordering capabilities to those stores to help grow delivery and pickup sales. 

Similarly, he said that value-based Fresh Faves meals also fueled sales, while the brand's "Beyond Taco" platform increased its prominence in menu innovation. 

"These products accentuate our QSR-plus brand positioning and have been very well received by our guests as 'Fresh Faves' mixed at nearly 5% throughout the quarter while the Beyond Tacos mixed at over 6% since their system-wide launch on April 25," he said. "During the third quarter we expanded our Beyond product line to include the Beyond 8 Layer Burrito and the Epic Beyond Cali Burrito as we seek to capitalize on the popularity and versatility of this 100% plant-based protein."

Del Taco Executive Vice President of Strategic Planning Chad Gretzema recently discussed some of the inner workings of the nation's second largest Mexican American QSR on the QSRweb podcast, including detailed insights into how the company's culture is fueling a better brand.