Del Taco Restaurants Inc. is set to launch a refranchising program to reduce the number of company-owned restaurants by the summer of 2020, executives said Monday.
The Lake Forest, Calif.-based quick service company intends to reduce its number of company-owned units from 55 percent to 45 percent in that period, said Del Taco chief financial officer Steven Brake, left, in a presentation with John D. Cappasola Jr., the company’s CEO and president, at the annual ICR Conference in Orlando, Fla.
Executives said the refranchising effort was to help stimulate growth in new restaurant and average unit volumes at existing locations. Del Taco has 580 restaurants systemwide.
As part of the effort, the company announced earlier in the day that it will sell 13 lower-volume company-operated restaurants in the Los Angeles area during the first quarter and buy three high-volume franchised restaurants in the period. Those deals are expected to be completed in the first quarter.
The sale will be to three experienced franchisees, the company said.
“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,” Cappasola, left, said in a statement.
The company added in an announcement that “these franchisees have each previously demonstrated their ability to improve performance at restaurants they acquired from other Del Taco franchisees.”
Other refranchising efforts will be spread out over the next year and a half, the executives said.
“The company also expects to refranchise non-core Western markets to new or existing franchisees with proven operational and development capabilities who commit to additional development in these and/or other markets,” Del Taco said.
The timing of those refranchising transactions has not been determined.
Before the ICR presentation, Del Taco announced preliminary same-store sales results for the fourth quarter ended Jan. 1.
Systemwide same-store sales grew 1.9 percent in the quarter, with company restaurants increasing 1 percent and franchised units up 3.2 percent.
Del Taco, founded in 1964, has restaurants in 14 states.
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