Del Taco is staking a claim in the Sunshine State. In fiscal 2023, it signed 52 commitments in Florida, which would mark over 740% in growth for its local footprint once the restaurants open. As of Oct. 1, 2023, there were only seven Del Taco restaurants open in Florida. Florida stores that have opened in the past year are “killing it,” said Van Ingram, Del Taco’s VP of franchise development, adding that experienced operators are committing to expand the brand in that state.

The Mexican chain, which has 600 units across 16 states, is plotting growth in other parts of the Southeast, as well. Del Taco also opened its first Mississippi location last year and signed commitments for Texas, as well as Montana and Wyoming in the Northwest.

“[We’ll] continue to really exploit the Southeast because it’s the fastest-growing part of the U.S. and Florida is the fastest-growing state,” Ingram said. “It makes sense. And there’s a lot of pent-up demand for a brand like Del Taco. … We can go out there and compete with a brand leader like Taco Bell.”

Del Taco began accelerating development and refranchising after Jack in the Box bought it in 2022 for $575 million. The chain, which was 71% franchised during fiscal 2023, is working on being more of an asset-light company similar to Jack in the Box, which is 93% franchised, according to the company’s ICR presentation shared in January. Del Taco expects to be over 90% franchised by 2026.

During fiscal 2023, Del Taco sold 111 company-owned restaurants and signed 138 new commitments. Most of its new commitments were from existing Del Taco franchisees expanding their portfolios and Jack in the Box franchisees purchasing Del Taco commitments, Ingram said. 

Refranchising was also used to accelerate new development. For example, if a franchisee bought 20 existing company-owned stores, they are required to develop an additional 20 locations, Ingram said. This strategy will continue throughout 2024 as the chain works toward having a higher concentration of franchised units. Additionally, the chain will continue to fill in markets like California and Nevada where it has a core presence, and expects further expansion in Florida, Georgia and South Carolina. The chain’s first locations in North Carolina and Virginia are likely to open this year. 

“You’re going to continue to see us opening in new markets, across the country — a lot of it is Southeastern based. That’s just because I think there's pent-up demand,” Ingram said.

Why franchising demand is growing

Franchisees see Del Taco as a high-potential brand with plenty of space to grow around the country, Ingram said. Morale is also up after Tom Rose joined as president in September, especially since he is a turnaround expert, Ingram said, adding that one franchisee called Rose an “operator’s operator,” meaning he understands operations and will have no problem going into restaurants and “getting his hands dirty.” 

Compared to Jack in the Box, Del Taco has less competition on a national scale, sinceTaco Bell is one of the only other Mexican fast food chains operating nationwide. 

Del Taco completed a strategic market plan in 2023 that laid out potential development opportunities across the U.S. Management created a mapping system that layered in demographics, psychographics, profiles of most successful Del Taco restaurants, and other relevant data, Ingram said. The maps can show the potential success of a restaurant down to a specific address, he said. 

Ingram said that this strategic market plan is “really the core of our selling process,” since it can provide a specific answer to franchise prospects on where opportunities lie in a specific market. It was also easy for Del Taco to do since Jack in the Box recently completed the same process. 

The map is interactive, allowing management to move a point on a map and look at competitive sales data and mobile phone data to determine where customers went before and after visiting a specific address. Management can also use heat maps to see population concentration. 

“If you’re a franchise prospect and looking to go into Orlando, Florida, then we can show you exactly where we would like to develop locations and where we feel there’s a higher propensity for people to go to a Del Taco,” Ingram said. “That way we’re helping the franchisee really target the highest-profile areas, our real estate can support them in those markets, and we can retain brokers to have them search for us in those markets.”

Refreshing stores with Fresh Flex

The chain’s remodeling program is also driving franchisee interest. In 2021, Del Taco unveiled its Fresh Flex design. Franchisees have responded positively to the new design, and many are looking to not only develop new locations, but also remodel their existing units, Ingram said. 

Del Taco also is offering an incentive to remodel and upgrade existing locations, offering anywhere from $50,000 to $100,000 in assistance depending on the level of the remodel, Ingram said. Remodels can range from a re-paint all the way up to a complete remodel, which could include adding in new back-lit sign towers and a lighting program. 

The Fresh Flex design comes in a range of prototypes, from a small off-premise-only location, which is ideal for metropolitan areas where development costs are high and space is limited, to a traditional store with a dining room and drive-thru. The larger store is ideal for suburban areas where customers may want to come into the restaurant and sit down, Ingram said. 

The smaller locations require about 1,200 to 1,500 square feet, while a traditional buildout needs about 2,300 to 2,400 square feet and a set amount of parking spots depending on the local municipality requirements.

The chain opened its first drive-thru only prototype last year that features a double drive-thru and no dining room. Jack in the Box is also rolling out off-premise-only locations along with other QSRs like Chick-fil-A, Starbucks, Biscuitville and Taco Bell. 

Del Taco is already seeing positive responses to its off-premise-only location. In addition to positive customer feedback, third-party delivery drivers said they like having food lockers on one side of the building allowing them to quickly pick up orders using a QR code without having to wait in a drive-thru line or going into the building, Ingram said. 

“It’s really been a huge improvement for our third-party delivery drivers,” Ingram said. “It takes some of those larger orders that might slow down the drive-thru out of the drive-thru line. The [delivery driver] is happier and our rank and file customer that just wants to go through and order their lunch can do it in a quick, timely fashion.” 

Del Taco expects to have several more of these drive-thru-only restaurants open this year.