A Hungry Del Taco Plans to Open 215 New Outlets

Del Taco Inc., the nation’s second-largest Mexican fast-food chain, said Thursday it will increase its number of restaurants by more than 60% thanks to new franchise agreements that will add 215 restaurants, half of which will be outside Southern California.

The deals with 28 franchisees will give the Laguna Hills-based company more than 500 restaurants within the next three years. Industry leader Taco Bell Corp., based in Irvine, has more than 7,000 locations.

Privately held Del Taco, with 345 eateries, did an estimated $325 million in sales last year while Taco Bell had annual sales topping $4 billion.

The expansion signals that the company is gearing up to be a national player, moving into new markets and growing in already established ones, said Paul W. Hitzelberger, Del Taco’s executive vice president of franchising.

About half of the new restaurants will be in California, Del Taco’s stronghold, including new Northern California markets such as the San Francisco Bay Area and Redding.

The chain also has entered Arizona and will have about a dozen locations by the end of this year, with plans for more than 40. Del Taco also will make its initial foray into Colorado with about 20 locations in the Denver area, and it will debut in Oregon with five stores.

“It’s an opportunity for them given the fact that there is only one major competitor in the Mexican food segment of the fast-food industry,” said Bob Sandelman, president of Sandelman & Associates, a Brea firm that tracks fast-food industry trends. “They may be able to compete successfully as they have done in L.A., where they are certainly a formidable competitor to Taco Bell.”

Sandelman said Del Taco’s expansion plans should be helped by the fact that Mexican fast food has “really permeated throughout the whole country” and because the chain also has French fries and burgers on its menu, something Taco Bell does not.

Taco Bell officials declined to comment Thursday on Del Taco’s expansion plans. Company spokeswoman Laurie Gannon did say that “as the market leader, really what we focus on is great-tasting food at the best value for our customers.”

Hitzelberger said other franchising deals are in the works. “Our plan is to be at at least 1,000 restaurants by 2004,” he said. “This is the most aggressive franchising this company has ever done in its history.”