Building on years of strong sales, Del Taco Inc. is planning its most ambitious expansion effort the next two years and has ramped up its sports marketing budget to get out the word.
Del Taco, the nation's second-largest Mexican restaurant chain, plans to open 120 restaurants in Western states this year and next, boosting the number of outlets to more than 500 in 12 states.
The privately held, 37-year-old Laguna Hills chain has signed promotional deals with eight teams in four states, including the Los Angeles Clippers and Utah Jazz in the NBA and the Phoenix Coyotes in the National Hockey League.
Although Del Taco's $700,000 annual budget for sports promotions is meager--less than 5% of Del Taco's total ad budget--a company can build name recognition using banners and handing out free promotions at sports arenas, said Keith Bruce, sports marketing director at advertising agency Foote, Cone & Belding.
"The general rule of thumb is if you sponsor a major league team, you're much more likely to be seen as a player in that market," he said.
Indeed, Del Taco cut its first sports marketing deal with the Mighty Ducks of Anaheim nine years ago to help boost the company as it emerged from bankruptcy reorganization.
This time, however, Del Taco has been chalking up some big league results as it expands and steps up its sports marketing.
For 12 consecutive years, sales at stores open at least a year--a key industry measure--have gone up. In 2001, as the Mexican fast-food industry struggled with flat sales, Del Taco's same-store sales climbed 6.4%.
Its operating profit margin exceeded 10% on sales of $358.1 million. That margin is more than 25% higher than the average for fast-food restaurants, said Tim Carlin of Technomic Inc., a research firm near Chicago.
Although dwarfed by rival Taco Bell Corp., which operates nearly 7,000 restaurants that generate annual sales of more than $5 billion, Del Taco has built a base of loyal customers by emphasizing food quality, including fresh ingredients, said Janet Lowder, president of Restaurant Management Services, a Rancho Palos Verdes consulting firm.
Underscoring the freshness message, Del Taco has been serving its products in bags and cups with slogans such as, "We Don't Make It Until You Order It," said Tim Hackbardt, Del Taco's vice president of marketing.
The sports marketing campaign attempts to increase Del Taco's visibility in areas targeted for major expansion.
The chain also has signed promotional deals with the Long Beach Ice Dogs of the West Coast Hockey League; the University of Nevada at Las Vegas football and basketball teams; and two minor league baseball teams, the Utah Stingers and the San Bernardino Stampede.