FDD Talk 2015: The Del Taco Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Del Taco franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Del Taco franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Del Taco’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2013 and 2014 average net sales, food and paper costs, labor costs, benefits, utilities, repairs and supplies, miscellaneous expenses, total controllable expenses, controllable profit, advertising, local advertising, insurance, and operating profit before rent and real estate taxes for all freestanding company-operated Del Taco restaurants that the company has operated for at least one year

Section I – Background Information

Del Taco has been around for more than 50 years. It presents a combination of both American-style Mexican food as well as American staples (burgers, fries, shakes).

The first location opened back in 1964 by Ed Hackbarth and David Jameson in Yermo, California. Within a couple years and four more locations a third partner joined the enterprise, Dick Naugle, and the trio found its fledgling chain spreading throughout Southern California.

In the early 1970s Naugle left the company and started his own Mexican chain called Naugles, and the remaining duo sold the burgeoning chain. By 1977 there were 50 locations, but just a year later in 1978 there were 100.

When 1981 rolled around, there were around 350 locations, still largely concentrated in California. Towards the end of that decade, Del Taco acquired the 171 Naugles locations as well. It was also during the 1980s that the chain started keeping its restaurants open 24 hours.

The 1990s saw a major rebranding effort that included everything from building exteriors to restaurant kitchens and the corporate logo.

Early in the new millennium Del Taco scored several important deals. One was with American military bases, and the other was a series of lucrative sports-sponsorship programs that included both minor and major league hockey, basketball, and football teams. The sports program resulted in Del Taco locations averaging $1 million in sales per year – an impressive feat as such fast food giants McDonald’s and Carl’s Jr. were experiencing declining annual sales.

Del Taco was recently purchased by Levy Acquisition Corporation and became a public company. Now with more than 550 locations, here’s how Del Taco keeps things cooking in the American-Mexican QSR market:

A Winning Menu Combination

The combination of Mexican and American cuisine works well for Del Taco. Its menu includes Hard Shell Tacos, Soft Tacos, Burritos, Quesadillas, Nachos, Deluxe Taco Salad, Crinkle Cut French Fries, Chili Cheddar Fries, Double Del Cheeseburger, Bacon Double Del Cheeseburger, Triple Del Cheeseburger, Fries, Shakes, and at least four types of Dinner Burritos.

The Founder is Still Involved

Although founder Ed Hackbarth sold the chain back in the 1970s, he retained the right to continue developing Del Taco locations, and currently helps manage three locations in Barstow, California. Having the expertise of the founder still available to the chain, however limited, is impressive. After all, he’s approaching 80 years of age!

Growing Strong

According to QSR Magazine, Del Taco occupies the number three slot in the Mexican QSR segment, trailing behind Chipotle and Taco Bell. Its $660+ million in annual sales, however, trails significantly behind Chipotle’s $4.1 billion and Taco Bell’s staggering $8.2 billion.

Section II – Estimated Costs

• Please click here for detailed estimates of Del Taco franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis