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Del Taco puts its hope in the Beyond Taco

The Mexican QSR says the product has helped reverse a steep traffic slide in the first quarter.
Photograph: Shutterstock

The Beyond Taco is getting customers back to Del Taco.

The Lake Forest, Calif.-based chain, which saw traffic plunge by 5.5% at company restaurants in the first quarter, said that those customers returned more recently thanks to a host of efforts—particularly the introduction last month of the plant-based Beyond Taco and Beyond Avocado Taco.

The taco is made with Beyond Meat that tastes similar to the beef Del Taco uses in its regular tacos. The product costs $2.49—$1 more than the signature Del Taco—and the company says it is already 6% of the chain’s product mix.

The company said that its check and transaction same-store sales have improved “significantly” since the product’s April 25 introduction.

“We feel great about the launch of Beyond Tacos,” CEO John Cappasola said on the company’s first quarter earnings call, according to a transcript provided by financial services site Sentieo. “We are seeing some new faces as well as a lot of trial among our existing guests. It’s a great opportunity here from a customer standpoint.”

He said that marketing related to the Beyond Taco generated “over 728 million online and print media impressions through the first week.”

Fast-food chains have been turning to plant-based products from Beyond Meat and rival Impossible Foods in recent months. The products have given the chains a natural marketing boost and appear to be luring meat eaters who want to eat more plant-based products but do not want to give up their meat-centric favorites.

Customer enthusiasm for the products has sent the shares of Beyond Meat soaring since its initial public offering last week. The IPO has already enjoyed the strongest first-day pop for any offering in years and has continued to increase in value.

For Del Taco, the introduction eases the pain of a difficult quarter, at least from a traffic standpoint.

Same-store sales systemwide declined by 0.1%. But they fell 0.6% at company locations, where traffic was down 5.5% in the period.

The company blamed the problem on bad weather in California. But the chain also increased prices by 4% in the period, leading to a 4.9% higher average check.

Many restaurant chains have been more aggressive of late in raising prices as wage costs rise. But California chains have been especially aggressive. The minimum wage there rose by $1, to $12, Del Taco executives noted.

Habit Burger last week told analysts that it plans to increase prices an average of 5.3% later this year. The chain has already been raising prices this year—average transaction rose 7.4% in the company’s first quarter, and transactions declined 4.2%.

Del Taco plans further increases later this year, in the summer and then in the fall, and CFO Steve Brake said that the company takes “a very scientific approach” to pricing based on marketplace and competitor trends.

Despite its increases in the first quarter, however, labor costs as a percent of sales still rose 80 basis points to 33.9% from 33.1%.

The Beyond Taco wasn’t the only effort Del Taco made to generate traffic in the quarter. The company started delivering with Grubhub at most of its company locations and plans to add both Postmates and Door Dash this year.

It also introduced $4, $5 and $6 Fresh Faves Boxes with two or three entrees, fries and a drink to “help address growing consumer demand for abundant value.” The boxes, like the Beyond Taco, have a 6% product mix and “a typical margin percentage profile.”

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