Del Taco Chief Is Champion of Fast-Food Fights : Management: The Costa Mesa company’s new president hopes to duplicate his turnaround triumph with Burger King.
Kevin Moriarty, new president and chief executive of Del Taco Inc., is having his photo taken outside one of the company’s Costa Mesa restaurants when he notices a dirt smudge on the orange sun logo on the wall behind him.
“Will you get me a cloth, please?” he asks the store manager.
Balancing atop a bicycle stand, he begins shining the logo. “There’s the photo,” he says, laughing and turning his head to see if the photographer has taken the hint.
Moriarty, who joined Del Taco three weeks ago, is nothing if not market-savvy. In 1986, he took a chain of 288 Burger King restaurants in Chicago whose sales had plummeted 15% and, within two years, made it the most profitable chain in the company. Using what he likes to call guerrilla marketing tactics, Moriarty out-promoted the competition with a budget of $3 million--about a sixth of the money he claims McDonald’s spent during the same time.
“We blew their doors off,” Moriarty boasted. “As a result, (Burger King) gave me half the United States.” He was promoted in 1988 to vice president in charge of the company’s 30-state Central and Western divisions, overseeing 2,500 outlets. He left Burger King in April, a year after it was acquired by Grand Metropolitan of London.
Moriarty faces no less a challenge now in Southern California. Del Taco’s major competitor, Taco Bell Corp. of Irvine, has seized a 70% share of the Southern California Mexican fast-food market, according to Taco Bell figures. Nationally, Taco Bell has 3,300 restaurants, or about 10 times more than Costa Mesa-based Del Taco. (The rights to franchise Del Taco restaurants outside California are owned by an Atlanta-based firm.) And Taco Bell, with sales of $2.1 billion last year, has access to the resources of parent company PepsiCo Inc.
Del Taco, meanwhile, has been trying to play catch-up while contending with two ownership changes in the past two years--the most recent a management buyout in January that left the company an estimated $150 million in debt. A 1988 merger with the Naugles Mexican food chain and subsequent menu changes and price increases have confused customers or sent them scurrying to competitors.
And Del Taco’s own marketing efforts haven’t always cleared up the confusion. For example, an attempt to unify the chains with a “Viva Naugles, Viva Del Taco” TV advertising campaign was quickly canceled when viewers complained that they couldn’t understand why two competing chains would be featured in the same commercial.
Another setback came last month when Del Taco/Naugles President Wayne Armstrong, the executive who led the management buyout, resigned for personal reasons.
“I would be worried if it were not for my very high regard for Kevin,” said Steve Read, senior vice president of G.E. Capital, the General Electric Corp. unit in San Francisco that financed the buyout. “Losing Wayne certainly had the potential to be pretty disruptive. Having Kevin in the job absolutely minimizes that disruption.”
Read said he is impressed by Moriarty’s enthusiasm and directness. “The guy captivated me,” he said. “He is just what he seems to be.”
He said Moriarty will decide the direction of Del Taco.
Moriarty said he is still planning his moves, but he agreed that a turn the company took in January was in the right direction. Under the previous owner, Newport Beach restaurateur Anwar Soliman, Del Taco and Naugles had been adding fancier menu items and raising prices. Some old favorites like the Del Beef Burrito were removed from the menu.
But in January, the new management team began bringing back the old favorites and lowering prices. The restaurants have introduced a 49-cent hamburger and a 69-cent cheeseburger. Del Taco officials said the tactic has boosted sales by more than 10%.
But Michael Mooslin, who was president of Naugles before Soliman merged the chain with Del Taco in February, 1988, said the strategy won’t work. “Pepsi has an endless amount of money to throw into this thing, and Taco Bell won’t allow itself to lose that battle,” he said. “Southern California is too good a market.”
Taco Bell spokesman Elliot Bloom said his company isn’t worried by Del Taco’s challenge. “We are the eighth-largest fast feeder in the world,” he said. Del Taco, with sales of $211 million last year, ranks 87th, according to Nation’s Restaurant News.
Since joining Del Taco on Aug. 1, Moriarty has been visiting the chain’s restaurants and learning the kitchen operations well enough to serve up Big Del Beefs or taco salads to customers.
Moriarty, in fact, is an old hand on the service side of the restaurant counter.
On his 18th birthday, Moriarty’s mother hustled him out of bed to start his first day at the family-owned pub, Moriarty’s Cafe, in the Flatbush section of Brooklyn, N.Y. Moriarty’s mother had kept the pub running for several years after her husband’s death until Moriarty and his brother were old enough to take over. The two brothers ran the pub for 10 years.
Moriarty gave up full-time management of the family pub in 1974 and joined a Burger King management training program to learn more about food service. He planned a 6-month stint at Burger King, but he ended up staying 16 years.
When he left Burger King in April, he was vice president of operations and also one of five members of the company’s executive committee.
He had planned to take the summer off, spend some time with his family and get his pilot’s license. He got the license, but his plans for a laid-back summer went out the window when Del Taco offered him a job.
Moriarty said he lost his enthusiasm for Burger King when it was acquired by Grand Metropolitan as part of the company’s 1989 takeover of Pillsbury Corp., which owns Burger King. Grand Metropolitan centralized Burger King’s corporate structure, reducing Moriarty’s autonomy. “There was less room for him to be entrepreneurial,” said Michael Hagerthy of Interim Management Corp. in Torrance, who recruited Moriarty for the Del Taco job. “Even though he was one of the top guys, it just wasn’t the same place to him.”
Moriarty said he not only likes running his own show but believes that such independence will ultimately work in Del Taco’s favor. He draws a comparison between restaurant chains such as Del Taco and McDonald’s, which are only in the fast-food business, and others like Taco Bell and Burger King that are part of larger companies.
“Burger King is a subsidiary, so they make determinations on their investment based on their entire portfolio,” he said. “McDonald’s, on the other hand, is just McDonald’s. They’re thinking about McDonald’s next month, and they’re thinking about McDonald’s 10 to 15 years out.
“In Russia, (McDonald’s) spends $50 million building a facility to support their restaurant. I don’t care what volume they do in that restaurant, they won’t make any money there. But they’re building for the future.”
Moriarty plans to run Del Taco his way. He plans to temporarily close the corporate offices later this year and dispatch top executives to the kitchens of Del Taco and Naugles restaurants for a day or two--something he also had done at Burger King.
Robert Terrano, who is now a market controller for Burger King in New York, was one of those executives Moriarty hauled from an office into a kitchen when they were in Chicago together. Terrano said he learned a bit about pressure.
“You look up and see 100 people in line, well, it’s not like sitting in an office,” he said.
