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Del Taco: Beyond Meat tacos attracting new, lapsed users

The chain’s quarterly streak of same-store sales gains ends

The streak is over at Del Taco.

Systemwide same-store sales at the quick-service Mexican food chain slid 0.1% for the first quarter, compared to a gain of 3.7% for the same quarter last year. The dip ends the company’s 21-quarter streak of positive same-store sales.

CEO John D. Cappasola Jr. said sales and transactions were impacted by unfavorable weather in California and a delayed Lenten season. In the second quarter, comparable restaurant sales have swung back to positive territory — driven, in part, by the March launch of $4, $5 and $6 Fresh Faves value boxes.

The “full meal deals” are meeting growing consumer demand for “abundant” value, Cappasola told investors during a Monday afternoon conference call.

The recent national launch of Beyond Tacos, made with plant-based meat from Beyond Meat, has also shown early promise.

 “We feel great about the launch of Beyond Tacos,” Cappasola said.

Specifically, the CEO said the vegan tacos are generating a lot of social media buzz for the brand, which is leading new and lapsed customers to try the Beyond Meat offerings.

The key is to keep those customers coming back, Cappasola said.

“We’ll see where it shakes out,” he added.

The $2.49 tacos are made with seasoned, plant-based crumbles from Beyond Meat, which had a blockbuster initial public offering last week. Cappasola said the new tacos are also improving check average trends because they’re about $1 more than The Del Taco.

On the digital side, the Lake Forest, Calif.-based chain said it has logged 500,000 registered users on its revamped app. This summer, the company plans to add mobile pickup and delivery options on the app. Offering direct delivery is a growing trend in the industry with Chipotle Mexican Grill one of the first large scale restaurant brands to offer consumers delivery through its own app.

Del Taco, currently found on the Grubhub marketplace, also plans to add delivery through Postmates and DoorDash later this year.

The company purchased three franchised restaurants and sold 13 restaurants during the quarter. Last week, the company hired The Cypress Group to manage its refranchising initiative in four non-core Western markets. Cypress is charged with finding operators with a proven track record for growing brands, and who are the “right cultural fit” for the brand, Cappasola said.

The company’s goal is to shift its franchise mix from 45% of total units to 55% by 2020.

For the first quarter ended March 26, Del Taco revenue of $114.2 million increased 1.5% compared to $112.6 million for the first quarter of 2018. Same-store sales at company stores decreased 0.6%, while franchise same-store sales increased 0.4%.

Net income of $1.4 million, or 4 cents per share, decreased compared to profit of $3.2 million, or 8 cents per share, for the same quarter last year.

The company opened four restaurants and closed one during the quarter, bringing Del Taco’s systemwide total to 583.

Contact Nancy Luna at [email protected]

Follow her on Twitter: @FastFoodMaven

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