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Del Taco Plots Changes Under Jack in the Box

Del Torta offering; big refranchising plan

Since Del Taco Restaurants Inc.’s $585 million sale to Jack in the Box Inc. in January, just about every part of the Lake Forest-based restaurant chain is up for grabs when it comes to changes. Even the name.

The Mexican fast-food restaurant chain temporarily switched its name last week to Del Torta, to mark its newest menu item.

A Mexican-style sandwich, known as a torta, will become a permanent addition to Del Taco’s menu.

On social media, “Del Torta” appeared along with a short-lived logo. A location in Lakewood switched its signage to accompany the changes as well. The Del Taco sun logo became a sandwich.

The new “Epic Torta” sandwiches are the chain’s longest tested product, Chief Marketing Officer Tim Hackbardt told the Business Journal (see story, this page).

It’s also one of the first steps toward a new branding initiative for the chain, which counts nearly 600 locations across 16 states.

The restaurant chain’s newest campaign is titled “Del Taco Better Mex,” to reflect the company’s focus to improve operations both internally and externally, according to Hackbardt.

“It’s a promise of the brand’s attitude that we are constantly trying to be better,” Hackbardt said.

Del Taco announced the new initiative and product at the end of last month.

Refranchising Plan

It’s been a whirlwind year for Del Taco, which ranks No. 6 among Orange County-based restaurant chains by systemwide sales, with $973 million in 2021 from its own stores and franchised stores.

Since the completion of its sale to San Diego-based Jack in the Box (Nasdaq: JACK) in January, it named former Chief Operating Officer Chad Gretzema as brand president to replace previous Chief Executive John Cappasola.

Del Taco reported $126 million in revenue for company-owned stores for its first quarter under the umbrella of Jack in the Box, which counts a $1.6 billion market value; its shares are down 15% since the start of the year.

Jack in the Box has about 2,800 locations, including the Del Taco restaurants it bought. About half of the Del Taco stores are owned by the company, with the rest franchise restaurants. More than 90% of Jack in the Box spots are franchise restaurants.

Reports from the Wall Street Journal last month said that Jack in the Box is looking to refranchise upward of 250 Del Taco spots that it now owns, to cut back on internal operating costs and improve its ability to access cheaper debt.

Such a plan would put Jack in the Box’s mix of franchises back to a percentage closer to what it had prior to the acquisition of Del Taco.

Other Changes

A refranchising plan could be formalized later this month, according to news reports. The process could take between one and three years, Jack’s Chief Financial Officer Tim Mullany said.

Several existing franchisees for the San Diego-based restaurant parent were cited in the report to show interest in also purchasing Del Taco stores.

Mullany noted that Jack in the Box anticipates about $15 million in savings from the refranchising efforts in about two years. A multi-unit incentive program for franchises was also introduced in August.

A new restaurant prototype debuted in December 2021 before the acquisition was finalized called Fresh Flex, designed to optimize real estate and utilize better technology for future Del Taco locations.

“Fresh Flex is an example of better restaurants, a better experience, and better technology. It even allows for easier work for the employees with technology and the layout,” Hackbardt said of the new style referencing the “Better Mex” campaign.

A company 501(c)(3) foundation is also in the works.

A Mix of Value Pricing, Premium Offerings

The “Epic Torta” is a “product 20 years in the making,” Del Taco Chief Marketing Officer Tim Hackbardt tells the Business Journal.

The Mexican-style sandwich had been tested in various markets three times before its current iteration, which is at a higher price point—around $7—than much of its current menu offerings.

“It succeeded once we decided to focus on high quality instead of low value,” he noted.
With the popularity of higher quality products at other quick-service restaurants, the Del Taco menu had an opportunity to add its own option, officials say.

Hackbardt pointed to the $6 burger at other chains, or Popeyes $8 fried chicken sandwich combo, as current examples of this strategy.

“The category has grown in a way where it allows for those quality premium sandwiches now,” he said.

It helps that no other Mexican-inspired fast-casual restaurants offer a similar product, Hackbardt said. Three types of the Mexican-style torta sandwiches were made available on Sept. 1 as a permanent menu item.

“We’re always looking to build out the quality of our products,” Hackbardt said of the company choosing to add the torta permanently, rather than a limited-time offer. The marketing officer described the fast-food menu as a duality between better value and better quality.

With existing items such as fresh guacamole, made-from-scratch pico de gallo, and hand-shredded cheese, Hackbardt said the quality is what aided in the torta’s transition from testing to the menu. “QSR plus,” he said.

Fast-Casual Standout

The chain counts advantages to others in the QSR industry, according to Hackbardt.
“You can drive the business 24 hours all day,” he said. “It’s available at every meal.”

To lean into consumers’ inflation worries, the company introduced the “20 under $2” menu when value items were fighting to combat rising costs in January. “We’ll continue to lead the industry with everyday value,” Hackbardt said.

For Del Taco, the torta sandwich was another way to create a differentiated product that its competitors did not have.

The item was tested on both coasts in Bakersfield, Las Vegas, Utah and Atlanta last year in Del Taco ghost kitchens, where delivery proved to be another major factor in introducing the sandwich product.

To help the chain’s goal of building a unique menu, the torta also allows Del Taco to step into and compete in the sandwich category. Hackbardt also hinted at breakfast torta items coming to the menu in the future.

—Emily Santiago-Molina

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