Del Taco is jumping into the fried chicken wars with plans to introduce a dollar taco and a premium Epic burrito, both stuffed with the company’s new Crispy Chicken offering.
CEO and president John D. Cappasola Jr. said the Lake Forest, Calif.-based chain will be the first national quick-service Mexican brand to offer a fried chicken product. The $1 Crispy Chicken taco debuts next week, along with a $4 Crispy Chicken & Fries box and a $5 Epic burrito that will feature the fried chicken and the brand’s new fresh guacamole.
The dollar taco will be the first new item added to the Del's Dollar Deals menu, the brand’s revamped value menu which debuted in late January. Menu innovation is part of the company's pandemic recovery plan, which also includes a new mobile app giveaway program, improving the drive-thru experience, adding delivery only kitchen stations and trimming the menu.
On Thursday, the company revealed second quarter results, which show the full impact of the COVID-19 crisis.
Del Taco recorded a 10.1% decrease in systemwide same-store sales, but leaders said the brand is seeing sequential improvement in comp sales in the current quarter. Those improvements come as the company has not reopened any dining rooms, underscoring the importance and strength of the brand’s off-premise operations.
During the pandemic, Del Taco expanded its third-party relationships to include all four major delivery players. While that drove volume, the move hurt margins prompting the chain to launch another price increase on third-party delivery menus.
The dollar Crispy Chicken taco debuts next week.
Last year, the quick-service company began increasing prices found on aggregator sites like Grubhub and Postmates by about 10%. Now, with delivery orders surging during the pandemic, the brand is now looking at increasing those prices by about 20%.
That price is “similar to what we’re seeing across the competition,” Cappasola said.
Premium pricing is a tactic being used by many chains to offset margin-hurting fees from third-party delivery companies like DoorDash, Grubhub, Uber Eats and Postmates. Delivery, which is also available through the brand’s app, represents 7% of systemwide sales.
On Wednesday, Chipotle Mexican Grill announced plans to experiment with raising prices on delivery apps.
Del Taco said consumers are willing to pay more for doorstep delivery.
“Convenience really carries the day with delivery,” Cappasola said. “That's an overriding factor that allows us to absorb a little bit more of that pricing through that channel.”
The brand is also incentivizing consumers to order through their mobile app by offering special deals geared for loyalty members. Membership has now reached 1.1 million users, up 28% from 880,000 at the end of 2019. That’s important as it allows the brand to engage directly with consumers, which drives “more trial and frequency” Cappasola said.
On the drive-thru side, Del Taco is looking to increase throughput by trimming the overall menu, creating delivery only stations in the kitchen and shoring up staffing with outside order takes during peak periods. To date, the company has taken more than a dozen items off the menu to ease the complexity of kitchen operations.
Creating a better experience at the drive-thru is crucial as the company said 90% of its sales are currently being generated from delivery and drive-thru.
“It's definitely a drive thru and delivery dynamic. I think that speaks to where the consumer is today,” Cappasola said.
Total revenue decreased 13.9% to $104.6 million for the quarter ended June 16. Net loss of $0.6 million, or 2 cents per share, compared to net income of $2.1 million, or 6 cents per share, for the same quarter, last year. The company and its franchisees operate nearly 600 restaurants.
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