Franchise News

Lansner: Better burritos, better economy? Del Taco's Epic' changes to its value concept suggest consumers are beginning to spend again.

You can gauge the economic climate by juggling all the numerology that comes forth.

You can measure the pain of traffic jams or gaze at how full parking lots are or how long the lines are at popular events.

You can listen to the business buzz among friends, family and co-workers.

Or you can watch what I spy on: Changes on menu boards at local fast-food restaurants.

Take three new burritos at Del Taco, the Mexican-theme fast-food chain based in Lake Forest. To my eye, these offerings — a more upscale twist from a concept known for its value grub — is just another sign of a firming economic climate.

Del Taco's 'Epic' trio of burritos is this chain's direct attempt to compete with the Chipotles of the quick-serve world. That chain — born in Colorado and wildly beefed up to national powerhouse status by, of all things, McDonald's money — moved mainstream cheaper Mexican fare from simple tummy filler to the niche's relative fine dining.

Del Taco is expanding its food lineup in the middle of a major brand retooling this year. The first food salvo in the overhaul was a revamped value menu in the spring, a tip of the cap to the core Del Taco audience.

"How do we spin value?" was a key question driving the chain's latest product addition, chief executive Paul Murphy says.

Executives at the chain — more than 545 stores in 18 states controlled by investment dollars from Wall Street giant Goldman Sachs — say the new thinking already has led to near-record results by many metrics.

Sales, traffic, customer satisfaction and profit margins have all jumped since the rebranding began. Starting last week, however, came a big leap of faith in the brand's momentum.

Big burritos — that class of one-pound-ish tortilla-wrapped fare — are nothing new to Del Taco. But in the past, the chain's roughly $5 burritos — the "Macho" line — was heavy on the heft of rice, beans and protein. "We were doing foil-wrapped burritos before they were cool," says John Cappasola, Del Taco's chief brand officer.
The Epic burritos are equally priced — and big in size, too. The change? Let's just say that the taste is more refined. There's an upgraded tortilla. And three Epic flavors: beefy steak and potato, spicy chicken fajita and creamy chicken chipotle. This trio was culled after months of taste testings and limited in-store sales from an initial roster of 16 recipes.

Del Taco's ,value spin, is that a $5 Epic price will either draw in newcomers or keep some Del Taco regulars from venturing to the likes of Chipotle or Cafe Rio, where comparable fare can be as much as $2 more.

"We're going into this from a position of strength," CEO Murphy says.

Just the notion that Del Taco wants to play at its niche's high end, especially when the chain's value logic is clicking, argues that there's a growing class of folks with wider-open wallets these days.

Del Taco executives note that their recent buck-and-under push drove its value menu from one-fifth of sales up to one-quarter. These same executives note, however, that more than a few diners are buying value menu items as add-ons to other purchases, not strictly as budget-stretchers.

Pricier fare doesn't simply work because of higher price points. It offers a new customer base. The value end of the food game is dependent upon households whose income has not stabilized or rebounded in recent years, a troubled slice of the populace. These folks are not much better off today than they were a few years ago.

Opportunity aside, going upscale is no slam dunk. Public image of thrifty vs. quality is hard to change. Pulling off value alongside more refined is tricky from both operational and marketing perspectives. Look at two fast-food behemoths. Taco Bell has succeeded with its fancier,Cantina Bell, menu items; McDonald's failed at its attempt at higher-scale Angus burgers.

The notion that Del Taco executives actually see a shot at some riches at higher price points reaffirms my belief in improving consumer fundamentals. People are buying. and will continue to pay up for, various goods and services, including higher-quality Mexican fare.
Yet it will be Del Taco's food-selling skills, not the economic climate, that decides this experiment's fate.
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