Despite maintaining a positive streak of quarterly same-store sales, profit at Del Taco Restaurants Inc. slipped during the first quarter, driven in part by bad weather in its core California market.
Systemwide same-store sales grew 3.7 percent during the first quarter ended March 27, the 18th consecutive quarter of gains for the Lake Forest, Calif.-based Mexican quick-service chain. Same-store sales grew 4.2 percent the previous year.
Net income of $3.2 million dropped from $4.2 million the previous year. Revenue increased 6.8 percent, to $112.6 million.
Del Taco CEO John D. Cappasola Jr. said a “highly competitive” restaurant environment, along with heavy rains in California, resulted in sales erosion during the quarter. Food inflation also hurt margins, he said.
To boost transactions, Del Taco will tweak its Buck & Under Menu later this year and roll out a new late-night menu, Cappasola said.
The chain plans to promote a new Buck & Change section of the value menu. Cappasola didn’t provide specifics and only stated that select items on the Buck & Under Menu would “migrate” to the Buck & Change section to help elevate pricing beyond $1.
Cappasola assured investors that Buck & Under, a value menu featuring up to 15 items for $1 or less, is not going away.
“Buck & Under allows us to promote value without sacrificing margins and is integral to driving our value and affordability perceptions,” he said.
The Buck & Change Menu, already adopted at nearly 400 franchised and company-owned restaurants, will expand in June. At that time, Del Taco will debut a new $1 Grilled Chicken Quesadilla Snacker on the Buck & Under Menu to “drive transactions,” Cappasola said.
Later this year, Del Taco plans to expand delivery and launch a mobile app that will offer targeted promotions to drive foot traffic. Restaurants will also introduce a new late-night menu with some “pretty highly craveable” and “Instagramable items,” he said. One of the menu items will be a Churro Dipper Shake.
Del Taco closed the quarter with 566 restaurants.
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