CEO: Del Taco can weather any shock
All of a sudden, Del Taco came on the public radar screen in 2015 as a company poised for national growth. The concept went public in a merger when a buyout company owned by long-time restaurateur Larry Levy sought a growth brand. The deal included $120 million in private equity to pay off debt.
“The deal significantly reduced our debt. That allowed us to go out there and do the refinance almost immediately,” said Paul Murphy, CEO at Del Taco, adding the company can now “weather any macro event.”
It also gave the company a stable launch pad for growth. “We’ve been a strong regional brand and now it’s our opportunity to become a strong national brand,” said Murphy.
Until national growth speeds, however, Del Taco is well positioned on the West Coast as wages are set to grow under a new minimum wage law. “We like that California positioning going into 2016. We think the economy will remain strong out there,” said stock analyst Andy Barish at Jefferies.
He said the premium offerings and those higher California wages will help Del Taco continue growing same store sales and even raise prices a bit as commodities ease. In other words, higher wages will mean everyone will have more money to spend on tacos.
“Del Taco has had some good traffic growth as they’ve moved that concept to the more premium side in QSR plus,” said Barish, predicting Del Taco will raise prices some 3 percent from last year.
The company is also looking to expand its franchise support system while maintaining a mostly even split between company and franchised stores.