Franchise News

Del Taco In Midst of Brand Relaunch After Nearly 50 Years

First started in Yermo, Calif., in 1964, Del Taco found itself in competition with large chains with cutting-edge marketing teams that helped keep them on top of the curve. The chain was acquired by Sagittarius Brands in 2006 but has since divested from it. In 2009, Paul Murphy joined the company as CEO. For the past four years, Murphy, along with John Cappasola, EVP and chief brand officer, and the rest of the executive team, have been fine-tuning the "new" Del Taco brand.

Phase one includes the reimaging program, the first such "refresh" in 20 years, that features contemporary colors and redesigned exteriors and interiors.

"It is designed to strengthen the brand relaunch and the idea of thinking differently about Del Taco," said Murphy in a prepared statement about the changes.

The company also started its Guest Experience Measurement (GEM) program, which collects feedback from customers. The information the company has gathered showed that guests believe Del Taco's food tastes better than its competitors' food, but they couldn't say why, which Murphy called a weakness. To give customers the knowledge they need to talk about Del Taco's food, the company hired the Camp + King marketing firm in August 2012, and the UnFreshing Believable" tagline was born; it already has begun to appear on menus and advertising. The campaign seeks to highlight the quick-service chain's fresh ingredients, such as its beans that are cooked from scratch several times a day at every location. In addition to the new tagline, the company has released an aggressive value menu, the Buck & Under Menu, which features 11 items priced at $1 or less.

The company is on track to complete the reimaging of all 550 locations in 18 states by the end of 2013.

In a recent interview, Murphy and Cappasola talked with Sunbelt Foodservice Magazine's Heather Blount about the Del Taco brand relaunch and what they expect for the future of the brand.

Q: At what point did a brand relaunch seem like the best course of action for Del Taco?

Murphy: This is a fairly new management team here at Del Taco. We've been in place three to four years and have been obviously working on the brand, but the thing we've always been known for is that we deliver great value to our customers and we've had strong variety with both the Mexican and the American grill. The prices were just fantastic for what was out there in the marketplace, and we were getting really high marks in those areas.

But we felt like there was a component that was really missing. When we would go out and do research and talk to people familiar with the brand, they would say that they like Del Taco, that the food tastes better but they could never articulate why. We felt that that really was, frankly, a weakness because you can tell somebody you like something, but if you can't tell them hy you like it, it's certainly not a call to action for you to go give,whatever it is, a try.

So we felt like we had a secret. A lot of the things that we do in our kitchen, we're basically starting with the raw ingredient, starting from scratch. We do the beans from scratch every day. It takes us three hours to do one batch, and we do several batches a day. We're shredding cheese from 40-pound blocks. We're chopping cilantro. We're making fresh, homemade pico de gallo. We're back there grilling chicken just like you would see in the fast-casual category at a Chipotle or a Qdoba. And you don't really see that in the QSR (quick-service restaurant) category, that sort of quality of ingredient and freshness of preparation, and we just felt like that was a little hidden secret that we needed to get out there and expose the consumer base to and let them really know the work we do in the kitchen.

It's a working kitchen; we're not just opening the bag and reheating it or pouring it into a bowl. In a lot of items, we're starting from scratch and producing them, just like you would see in fast-casual or even casual dining, yet we still have a great price point. Some people say when you have something at 50 cents or even 75 cents like on the new Buck & Under Menu, that at that price point, it must be "cheap".

We know that we need to get out there and say, OK, we have a 50-cent bean and cheese burrito. The beans in that are fresh-cooked on premise. The cheese was hand grated at that store, and yet we're still choosing to charge 50 cents for that because we want to have what we believe is the best in class value menu in QSR with our things starting at a buck and going down. A lot of other QSRs, while they certainly have a dollar menu, their price points then move up.

As we looked at that, we realized we have some barriers we have to remove.

That's what led to the whole Del Taco 4.0, the combined solutions, and the first thing we really realized we had to do was try to get our house in order: We had to lay the foundation, in both the operational aspects of our stores and in our facilities. We needed to bring credibility and belief to the quality message. A lot of our facilities had not been invested in for a lot of years, so we developed a reimage program. We did a lot of work, starting with a new prototype, and then did some remodel work. Those led to a reimage program that's cost effective both for franchisees and the company. It's one that we could execute quickly, and we expect to be done by the end of 2013 with the whole system.

We thought it doesn't do any good to have new messaging or new products if you drive up to an old-looking building; the credibility and belief isn't there. At the same time, we know and realize that we had to work on our operational consistency. We had to elevate our game there. For that, we really did a lot of work against our processes and procedures to focus on the customer experience both on the product side and the service side, and then took a hard look, frankly, at our drive-thru lines. How could we become more efficient at it, how could the service times be better, how could the order accuracy really improve? Even though we had strong order accuracy, it can always get better.
– You spoke about freshness. Has Del Taco always had such a high level of fresh product?

Murphy: The brand has always done that, but it has never had a concentrated campaign that had some longevity to it to break through in the marketplace and educate the customers out there that these are some real strengths of the brand.

It's always been part of the brand, and I think that's why a lot of people say, "Boy, the food tastes better," but they couldn't say why. I don't think they really had a clue how the food was prepared in a Del Taco.

I'll tell you, when I joined the company, I trained in a restaurant. I was shocked. I can remember the third night calling my wife at home saying, "My gosh, I think in some ways this brand has more fresh prep than some casual diners do." That's certainly not something typical in the QSR category.

–If all of your restaurants cook from scratch every day, how can you charge such a low price point?

Murphy: I'll be very upfront about it: when you're preparing it from the raw commodity, every time that a commodity gets touched, the price of that raw commodity goes up. So in other words, if we bought raw beans and somebody else cooked those beans, prepared them, they packaged them and then were shipping that weight plus a lot of water, all of a sudden, the raw ingredient cost of the beans in the burrito are exponentially higher.

On some of the items that are on the Buck & Under menu, the food cost is maybe a touch higher, but we also believe as we looked at the menu that the margin mix on it is good for us.

We're seeing, obviously, strong velocity on the items. A lot of the items allow us to call out the freshness cues at what we think is a best-in-class price. It really is a decision on our part. You don't have to maximize the margin on every isolated item that's on your menu; it's how does the menu work in totality?

– Have you gotten other types of helpful feedback from the Guest Experience Measurement Program?

Murphy: The Guest Experience Measurement Program really took care of a blind spot in the business.

I think a couple of the most exciting things are, one, it gives you feedback, what the guest says we're doing right and also the things that we certainly need to do better.

I think it helps to really guide us in our initiatives as a brand, looking at things that are systemic, that may be a weakness for the brand that we're not delivering to the guests out there.

The second thing I really like about it is it gives feedback all the way down to the store level. Customers have a chance to comment, and those comments come through on a daily basis to the store so the management team at the store is able to look at these comments. The ones that are good, they're able to give "atta-boys" to the crew, and things that need improving, they get real-time feedback on what's working and what's not working, and what are things specific to their store.

Cappasola: We were really known for price, value and variety, coupled with some other attributes like speed and things like that. But when we looked at wanting to get credit in regards to what we do to make the food taste better and to really make a well-rounded consumer value proposition,we needed fresh and quality. And those sorts of things were going to be things that we needed to get over the hump on and that were not going to be things that customers were going to be immediately giving us credit for.

A big part of our plan wasn't just about telling the story of our freshness and quality paired with that value, but it was about improving and elevating the brand at the restaurant, and improving the experience as much as we could so that when guests looked at our brand and they saw us out in the market with an elevated brand promise, they could actually connect and say these guys have raised their game in the restaurants, and that's all about being able to do that one transaction at a time at the restaurant level.

We've said we want to have the chance for new and existing guests to reappraise Del Taco (and to) change or think differently about how they've traditionally thought about the brand. That has got to happen across many touchpoints, not just the advertising.

– Some of the other chains in the Mexican QSR segment are known for having great value but maybe not great quality. Does this perception present certain challenges regarding quality and value?

Cappasola: Well, I think it's really what you make it at this point. There are other examples of Mexican food in the fast-casual space that are considered very high quality. So when we look at it, there's really two ends of the spectrum. There's what traditionally Mexican QSR has been known for, and that's a really high value with that value being more around price point and variety. Then you've got a higher quality perceived Mexican occasion that's come into the fray over the last five or 10 years, in regards to fast casual. They're high quality, and it's a different type of value.

It's not necessarily price value. It's more of that old value equation of what you get for what you pay. So you're willing to pay that seven or eight bucks maybe for a burrito. You can't do it as often as you'd like to, but you do it because of the perception of higher quality, and you do it because of experiential elements, maybe.

When we looked at this, we thought outside of our category on this for sure. We looked at it and said, "Hey, we're taking the necessary steps internally with our process and the way that we handle our food, and we know that that's why guests give us better marks in regard to taste. They just can't articulate that."

From our perspective, we felt like we could separate a bit from the typical

Mex-QSR and get ourselves into more of a wide-spaced territory in between QSR and fast casual that we knew that today we could deliver. And it could continue to kind of be a road map for the future for us. I guess the key is, when you think about brands making the shift, you can't alienate your base. You can't drift too far from your core value proposition. We know that a big part of our success is price/variety, so we need to be able to do that and continue to do that well and elevate our game in that regard like we did with the Buck & Under Menu, but at the same time, we need to tell our fresh story and elevate our game with regard to other areas of the menu that could really kind of perpetuate that message.

We're thinking about it in regard to living in both spaces, and I said this a few weeks ago to somebody, we're great with customers just being able to self-select at Del Taco. So we're not going to all of a sudden come out and say we're not about having great price points and great variety. We're not about to walk away from that, but we are absolutely about to prop that up with fresh and continue to evolve our menu on the more core and premium side.

– Anything else?

Murphy: I think from my standpoint, we're certainly excited about the relaunch because as we look at it, we're definitely elevating the brand and addressing what we believe have been some barriers for people to interact with the brand, whether to increase frequency or give a trial, so that's why it has certainly been a process. We knew we had to lay the foundation.

It's been exciting to be able to launch this with the messaging and the menu, and we know that it's going to iterate and it's going to evolve. We certainly believe we're on the right path and know that we're going to have to get out there and let the customer know why we"re different, how we"re different. We think that when they do interact with the brand, they"re going to see the difference, they're going to like that difference and give us some really strong word-of-mouth and really help to propel the brand into the future.

It's been needed, and it certainly takes time, but the organization really rallied, and I couldn't be more proud of everybody who works at Del Taco to make this happen, both in the field and at the corporate office.
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