Pantry fatigue and stimulus checks are likely contributing to improved sales at Del Taco, which is taking a cautious approach to reopening dining rooms in the U.S.
“Our general approach is to make sure that we open on a timeline that's going to make sense for the brand, our employees and our guests,” CEO John D. Cappasola told investors during the brand’s first quarter earnings call.
For the first quarter ending March 24, the Lake Forest, Calif.-based quick service chain reported a 3.4% decrease in systemwide same-store sales. Roughly 99% of company and franchise stores remain open for off-premise business.
Though restaurants are operating at reduced hours, the company has not had to furlough any workers. The hardest hit dayparts have been late-night, breakfast and graveyard segments.
Despite the challenges, Cappasola said the brand’s digital investments and ability to serve guests safely through drive-thru lanes have helped to sustain operations during the crisis.
“We found that the mobile app is an absolute nimble and entrepreneurial way to go,” he said.
Del Taco's recent "10 tacos for $4.20 promotion" on April 20 was the brand's most successful app offer ever.
Throughout the pandemic, the chain has been using app promotions to shift diners to contactless digital ordering. A “10 tacos for $4.20 promotion” on April 20 logged a brand record for app redemptions.
Del Taco now has more than 1 million registered users. App usage, combined with an expanded delivery footprint, “has really served us well over the last six or seven weeks,” the CEO said.
Consumers are also gravitating to the brand’s newly revamped dollar menu during pandemic.
Same-store sales trends are improving, swinging from a decrease of 30% at the start the second quarter to down 10% at franchise stores and down 14.9% at company stores during the two most recently completed fiscal weeks, the company said.
“We also contend that as consumers begin to experience stay at home fatigue and grow tired of pantry stocking, they become more willing to order at the drive-thru window, carry-out and increase utilization of delivery options,” Cappasola said.
He said the arrival of stimulus checks are likely contributing to improved sales, as well.
“We are highly confident that Del Taco will not only survive this crisis but will thrive and emerge even stronger,” the CEO said in prepared remarks.
Total revenue of $109.8 million decreased compared to $114.2 million from the previous quarter, last year. A net loss of $102.4 million compared to net income of $1.3 million for the same period, last year. The losses were primarily driven by one-time charges totaling $99.2 million.
The company and its franchisees had 596 stores at the end of the first quarter.
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