Del Taco Restaurants, Inc. (NASDAQ:TACO) Q4 2020 Earnings Conference Call March 8, 2021 4:30 PM ET
Raphael Gross - Managing Director, ICR
John Cappasola - President and CEO
Steve Brake - CFO
Conference Call Participants
Alex Slagle - Jefferies
Nick Setyan - Wedbush Securities
Joshua Long - Piper Sandler
Todd Brooks - C.L. King & Associates
Thank you for standing by, and welcome to the Fiscal Fourth Quarter 2020 Conference Call and Webcast for Del Taco Restaurants.
I would now like to turn the call over to Mr. Raphael Gross, Managing Director at ICR to begin.
Thank you, operator, and thank you all for joining us today. On the call with me is John Cappasola, President and Chief Executive Officer; and Steve Brake, Chief Financial Officer.
After we deliver our prepared remarks, we will open the lines to your questions. But first, let me remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We do not undertake to update these forward-looking statements at a later date, and refer you to today's earnings press release and our SEC filings for a more detailed discussion of the risks that could impact Del Taco's future operating results and financial condition.
Today's earnings press release also includes non-GAAP financial measures such as adjusted net income, adjusted EBITDA, and restaurant contribution, along with reconciliations of these non-GAAP measures to the nearest GAAP measures. However, non-GAAP financial measures should not be considered as alternatives to GAAP measures, such as net income or loss, operating income or loss, net cash flows provided by operating activities or any other GAAP measure of liquidity or financial performance.
Let me now turn the call over to John Cappasola, Chief Executive Officer.
Thank you, Raphael, and we appreciate everyone joining us today. While 2020 was certainly a challenging year for all of us, I couldn't be more pleased with the resiliency of our brand and the tenacity that our operators, our franchisees, and our support center staff exhibited in a very tough operating environment. They have worked tirelessly since the onset of COVID-19 to ensure business continuity, execute operational changes, and implement new best practices. All while serving our guests through our drive-thru, take out, and rapidly expanding delivery channels. Even in this challenging new operating environment, the team delivered record setting overall guest satisfaction scores setting us up well as we enter 2021.
During Q4, we leaned into our core values and stayed focused on our people-first culture. Across the system, we operated with the overwhelming majority of dining rooms closed as stay-at-home orders and COVID-related restrictions continued. Still, our comparable restaurant sales trends strengthened through the quarter as we benefited from strong operational performance across our key guest experience metrics, our digital transformation led by delivery, a mid-quarter price increase, which aided both sales and margins, and a couple of exciting LTOs. Our LTOs included a new flavor for the already popular crispy chicken menu and a seasonal favorite over the holidays with our Tamale's promotion.
On the franchise front, we were very happy with the strength of their comparable restaurant sales growth, which improved sequentially from Q3, and resulted in a very strong second-half. We are also proud to announce that franchise same-store sales achieved its eighth consecutive year of positive growth in 2020.
Looking at our Q4 results at a high level, our system-wide comparable restaurant sales increased 3.8%, which included a 7.5% increase at franchise restaurants and a 0.6% increase at company-operated restaurants. From a dayparts standpoint, we are still challenged at breakfast and graveyard due to the pandemic as morning commutes remain disrupted and fewer people are out in about overnight due to various restrictions and changes in behavior.
As we first stated in our early January business update, during Q4, comparable restaurant sales within Los Angeles, Orange, and Clark counties were notably negative, and represent approximately half of all company-operated restaurants, while all other company-operated counties had positive comparable restaurant sales. In light of a very significant COVID impact within LA and Las Vegas, we were pleased to have generated slightly positive overall company comparable restaurant sales in Q4, and believe these counties are poised for a strong rebound once COVID subsides.
Our franchise comparable restaurant sales outperformance continues to be a geographic story as they operate across a broad 15-state footprint, mostly outside of California. It is also a real testament to the relevance of this brand amid the pandemic, and has energized discussions with current and prospective franchisees on new restaurant development.
Restaurant contribution margin decreased only 40 basis points to 17.0%, which we view as a solid outcome. Absent the timing of advertising, which increased 60 basis points compared to the prior year, we had slight margin expansion as higher delivery fees and incremental direct COVID-19 costs were more than offset by lower food and labor costs.
In terms of profit, adjusted EBITDA fell to $18.4 million from $20.5 million, while adjusted net income per diluted share increased to $0.20 from $0.18 last year.
Finally, we reduced our drawn revolver by $9 million to $115 million, which helped to lower our net debt to adjusted EBITDA leverage ratio to approximately 1.96 times.
As I referenced earlier, if there has been one constant throughout this pandemic, it is the incredible level of focus by our operations team that is clearly driving results. This effort called Focus for Better, prioritizes four critical dimensions of our business: trusted and safe, making our teams and guests smile, throughput, and ultimate convenience.
Impressively, we improved quantitatively across all four areas versus pre-COVID. And as we start 2021, we are using this foundation as a backbone to deliver on our five drivers of sales acceleration: value leadership, menu innovation, brand engagement, digital transformation, and ultimate convenience.
Along with these drivers, we are also planning to capitalize on our recently introduced Fresh Flex prototype, which has already been very well received and is helping to attract new franchisees to better position us for accelerated long-term system growth. It will also play an integral role in our plan remodeling program designed to contemporize the Del Taco fleet and drive returns.
So, with that, let me provide a few key updates. I'll start with a brief, but important comment on our value leadership strategy. We recognize the continued economic uncertainty facing today's consumer, even in the midst of a recovery, and therefore maintain that value will continue to play an important role in restaurant purchase decisions.
While we have always offered great everyday value across our barbell menu, our Del's Dollar Deals Menu introduced last year is the foundation of our value strategy, as it has been proven as a best-in-class value menu with high guest satisfaction marks. We will continue to keep this important platform in our everyday value top of mind through ongoing marketing and new product news throughout the year.
For instance, we started 2021 with the delicious new Honey Mango flavor, which spans our barbell menu strategy beginning with $1 New Crispy Chicken Taco, up to a $5 epic Burrito. On the menu innovation front, our team has been busy with menu development during the pandemic, highlighted by the launches of new handcrafted fresh guacamole and the new Crispy Chicken menu. 2021 also has a very strong pipeline of new products, flavors, and new product platforms, and the team is working on this to drive sales.
We just brought back our popular seasonal Crispy Jumbo Shrimp LTO in February, which represents great mid-tier and premium value for the consumer, and it will be followed by our newest Crispy Chicken flavor. Upon its late-March launch, we will have introduced more innovative Crispy Chicken items than any other QSR brand with a total of 11 unique Crispy Chicken offering spanning our barbell menu strategy since last July.
Next is our digital transformation, which involves not only enhancing our one-to-one digital guest engagement, but also expanding our convenience. The Del Taco mobile app and delivery channels have played important roles in these efforts. Today, we have more than 1.35 million registered users, up over 50% from the end of 2019, while active app users have also increased. This reflects the effectiveness of our regular disruptive offers that are only available on the Del App.
During the quarter, 6.3% of all company restaurant sales were delivery, compared to only 2% last year. Our delivery check average also remains about 1.85 times, our at restaurant check primarily due to party size. We believe the 20% delivery price premium enacted in Q3 has been effective and allowed us to improve margins and flow-through on delivery transactions. All in all, it is clear delivery will be a permanent and meaningful sales channel for Del Taco.
Consumers are also using technology to access and interact with brands they care about, and we are capitalizing on this opportunity by investing in ultimate convenience and a holistic CRM platform. Ultimate convenience is about making sure we are maximizing all of our on and off-premise service modes and considering new ways guests want to access Del Taco.
We want to meet our guests wherever they are and give them great experiences with the brands. A big focus to date has been our drive-thru business, where we expanded the access and convenience of our drive-thru lanes by temporarily extending queue lines and adding technology to improve throughput in high-volume restaurants with wireless outside order takers. This has resulted in our drive-thru being 6% faster during the lunch daypart versus pre-COVID.
In addition, for guests that are looking for alternative limited contact service modes, we are leveraging our Del App and it's order ahead feature to test curbside and a program we call park and get it. This is another potential service option for those looking to dine-in their car and it's certainly helpful when our dining rooms are closed as they are now. It will also be beneficial for our Fresh Flex drive-thru only building, which I'll talk about more in just a moment. This brings us to the new holistic CRM platform, which we plan to launch by this fall. This platform will enable us to further digitize Del Taco and incentivize and reward our fans for their loyalty. The launch will include a host of features and improvements to the Del App, the launch of our loyalty program, as well as data and attribution capabilities to drive personalized and valued experiences for our guests to increase sales and frequency over time.
Now, let's briefly discuss our exciting new Fresh Flex prototype, which we announced earlier this year. To recap, Fresh Flex is flexible, scalable and designed for future growth. First and foremost, it was built to expand real estate opportunities; modernize the guest experience; and propel growth with new and existing franchisees. Our goal is to create the most efficient, convenient and enjoyable environment possible for guests, crew members and franchisees alike. The design is distinct and evokes a contemporized QSR plus feel. Our top priority was also to give the new design unmistakable curb appeal and you can see that clearly with our backlit towers and vibrant welcoming color palette, which are both unique to Del Taco.
Innovations available in the new prototype includes third-party delivery pickup stations, double drive-thru lanes, a dedicated lane for mobile orders or delivery driver pickups and dedicated parking lot areas to park, eat and go. Thanks to the designs flexible nature, which scales around the kitchen, we're able to provide active developers what we like to call a Menu of Venues. We're now offering multiple build-out options to maximize real estate opportunities, which can help lower net investment and expand real estate access. With this expanded access Del Taco can grow in a number of ways, including through small footprint drive-thru only models, drive-thru end caps, conversions and freestanding sites. All in all, we are excited about this new prototype and look forward to our first Fresh Flex building in our new company seed market in Orlando later this year.
With that, let us now turn our attention to development. For 2021, our system growth will be led by franchisees with the company remaining focused on opening select infill locations in our core markets, as well as our new seed market in Orlando. We expect to open four new company units and at least a dozen restaurants system-wide as our franchisees begin to get back on track, barring any further delays related to the pandemic. We believe our unique brand position and ubiquitous menu drives broad national appeal and we are poised to accelerate franchise growth. Our franchise systems are proven with eight consecutive years of comparable restaurant sales growth across a franchise geography that spans 15 states coast-to-coast.
With that in mind, we are optimistic about our ability to continue to accelerate our franchise pipeline through both existing and new franchisees in 2021, especially with the addition of the new Fresh Flex prototype, as well as the broad based success that our non-California franchisees are seeing. Along with our development pipeline, we will expand our test remodel program in 2021 and we'll integrate the new Fresh Flex design by mid-year. We believe this is a great opportunity to drive both a positive brand image and AUV growth through the new design along with functionality improvements we can apply across the age portion of the fleet over time.
The remodel design cost we are targeting with this test ranges from $150,000 up to $500,000 per restaurant, based on the age of the facility and type of legacy prototype that we are remodeling. We expect the older restaurants will come in at the higher end of the range, while the restaurants built since the 1990s should come in closer to the lower end of the range with mostly cosmetic upgrades. Ultimately, we believe we can generate AUV growth and an appealing ROI through this final phase of testing that will lead to a formal system-wide remodel program that is compelling to franchisees as we move into 2022.
Before I turn it over to Steve, let me quickly discuss our approach to driving shareholder returns. As we announced back in early January, we initiated a quarterly cash dividend, which reflects our ongoing commitment to deliver value to our shareholders. This is enabled by our strong and consistent historical operating cash flow that helped drive over $34 million of aggregate debt reduction plus share repurchases in 2020.
To briefly recap, our strategy to drive shareholder returns is focused on three key levers: driving our core business; deploying a disciplined investment strategy; and returning excess capital. As I discussed earlier, our core business is well positioned for average unit volume growth and strong margin performance, which we expect will continue to generate strong cash flow. Our disciplined investment strategy has set up to grow the Del Taco brand primarily through accelerated franchise growth and a remodeling program that will leverage our new Fresh Flex design. And finally, similar to the last five years, we expect to remain in a position where we are able to return excess capital. Now on an expanded basis including a quarterly cash dividend along with our share repurchase program and repayment of debt.
In closing, we are excited about what is in-store for Del Taco despite continued uncertainty from the COVID pandemic. Between the combination of our focus for better strategy, a great operating culture that is able to move on a dime, the five drivers of sales acceleration that will continue to fuel innovation to drive sales and our Fresh Flex prototype and accompanying development strategy, we believe we are set up to continue to drive solid top line performance in 2021, and we intend to emerge from this crisis as a stronger company.
Now I'll turn the call over to Steve to review our fourth quarter financials.
Thanks, John. Total revenue decreased 0.2% to $156.7 million from $157.1 million in the year ago fourth quarter. System-wide comparable restaurant sales increased 3.8% consisting of the 0.6% increase at company-operated restaurants and a 7.5% increase at franchise restaurants.
Company restaurant sales decreased 2.2% to $141.7 million from $144.8 million in the year ago period. This decrease was driven by fewer company-operated restaurants, compared to last year, primarily due to our re-franchising activity, partially offset by positive comparable restaurant sales. Franchise revenue increased 15% year-over-year to $6.7 million from $5.8 million last year. The growth was driven by the increase in franchise comparable restaurant sales coupled with additional franchise-operated restaurants, compared to last year, primarily from our re-franchising activity.
Turning now to our expenses, food and paper costs as a percentage of company restaurant sales decreased approximately 110 basis points year-over-year to 26.7% from 27%. This was primarily driven by a menu price increase of approximately 4%, which exceeded food inflation of over 2%. Despite the $1 increase in California minimum wage to $13 an hour, our labor and related expenses as a percentage of company restaurant sales, decreased 20 basis points to 32.6% from 32.8%. This was driven mainly by effective management of variable labor and the favorable impact of menu pricing along with reduced workers' compensation expense based on favorable underlying trends.
Occupancy and other operating expenses as a percentage of company restaurant sales increased by approximately 170 basis points to 23.7% from 22.0% last year. This increase was primarily due to a 60 basis point increase in advertising expense to 4.1% of restaurant sales, as well as a higher delivery fees as delivery grew to 6.3% of sales, compared to 2.0% last year and incremental direct COVID-19 costs.
Looking ahead, this line item is expected to experience elevated delivery fees and incremental COVID-19 cost during the first quarter of 2021, followed by an expected leveling in our delivery fees, compared to the prior year and the potential reduction in incremental direct COVID costs, as vaccination rates improve as the year progresses.
Restaurant contribution was $24.1 million, compared to $25.2 million in the prior year, while restaurant contribution margin decreased approximately 40 basis points to 17.0% from 17.4%. This was in our view a solid outcome and concluded a second-half of 2020, which featured margin expansion of approximately 30 basis points with modest company-owned same-store sales growth of just over 1% and despite a $1 increase in California minimum wage.
General and administrative expenses were $13.9 million, up from $12.1 million last year and as a percent of total revenue increased 110 basis points to 8.8%. As we laid out on our last call, the increase was primarily driven by increased performance-based management incentive compensation as we lapped a negative bonus expense last year based on 2019 performance and higher legal expenses, partially offset by reduced travel expense.
Adjusted EBITDA was $18.4 million, down from $20.5 million last year and decreased as a percentage of total revenue to 11.8% from 13.1% last year.
Depreciation and amortization was $8.1 million, up from $7.8 million last year, the increase primarily reflects the addition of new assets, partially offset by the impact of re-franchising. As a percentage of total revenue, depreciation and amortization increased 20 basis points to 5.2%.
Interest expense was $1.1 million, compared to $2.1 million last year. The decrease was due to a lower average outstanding revolver balance and lower one-month LIBOR rate, compared to 2019. During the fourth fiscal quarter, we reduced our outstanding revolving credit facility borrowing to $115 million, compared to $145 million at the end of fiscal year 2019 and the remaining availability under the revolving credit facility was $117.7 million at year-end.
In addition, at the end of the [first] [Ph] quarter, our balance sheet debt, net of cash to adjusted EBITDA leverage ratio declined to a ratio of approximately 1.96, compared to approximately 2.25 at the end of fiscal 2019. We also repurchased 496,356 shares of common stock at an average price of $8.49 per share during the fourth quarter for a total of $4.2 million. At the end of fiscal 2020 approximately $18.1 million remained under our $75 million repurchase authorization.
Net income of $7.5 million or $0.20 per diluted share, compared to net loss of $114.1 million or $3.08 per diluted share last year. We also reported adjusted net income, which excludes various items identified in our earnings release in the financial tables. Adjusted net income of $7.5 million or approximately $0.20 per diluted share, compared to adjusted net income of $6.7 million or $0.18 per diluted share last year.
Lastly, due to the continued uncertainty surrounding COVID-19 and its impact on our business, we won't be able to provide you with a full outlook for 2021. However, we can offer the following guidelines: commodity inflation of approximately 1%, excluding any adverse impacts from COVID-19 on our supply chain; labor and related inflation of approximately 6%, which is due primarily to California regulations including a California minimum wage increase from 13 to 14 per hour that began on January 1st; and a mandated minimum salary of twice the minimum wage, which impacts slightly over half of our General Managers; menu price increase of approximately 4%; modest restaurant contribution margin expansion, compared to the 16.1% achieved in fiscal 2020.
Total G&A at approximately 9% of total revenue, reflecting expectations for normalized incentive compensation during 2021 and modest underlying inflation, including the return of travel and related expenses as the year progresses. Effective tax rate of approximately 27%, capital expenditures in the low $30 million range, including expenditures to maintain or enhance our existing restaurants, company-operated restaurant openings, our test remodel program and various discretionary technology and restaurant level of investments. For the company-operated restaurant openings, which one has already opened and eight franchise restaurant openings of which one has already opened for a dozen system-wide openings.
Lastly, we are nearly 10-weeks into the first quarter and I'm pleased to report that both company-operated and franchise restaurants continue to generate positive comparable restaurant sales and have demonstrated sequential improvement, compared to the fourth quarter last year. For the remainder of our first quarter, we expect accelerated performance as we lap the initial COVID-19 impact that should result in first quarter of comparable restaurant sales growth in the mid single-digits for the company and the low double-digits for franchise and high single-digits for the Del Taco system.
As we look ahead, we expect continued accelerated performance through the second quarter. In addition, we believe our five drivers of acceleration coupled with ongoing margin management strategies will help drive our results in the second-half of the year and facilitate modest restaurant contribution margin expansion on an annual basis.
That concludes our formal remarks. As always, thank you for your interest in Del Taco, and we are now happy to answer any questions.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]
Thank you. Our first question comes from Alex Slagle with Jefferies. Please proceed with your question.
Hi guys. Thanks for the question. On the quarter-to-date same-store sales, I think you partially answered my question. But it looks like the outlook for that gap between the franchise and the company comp that's been getting bigger and bigger is, you see that sort of starting to decline as we look ahead to the first quarter and maybe the rest of the year, is that the right way to think about it?
Yes, overall, once we post the first quarter, it will be little more clear exactly to what extent that does or doesn't, why didn't? I would say, in light of the gap, we saw both the Q3 and Q4, I don't think the differential be dramatically different from what we saw second-half last year.
That said, actually, the next couple of weeks here certainly get interesting. Our 11th week, a year ago started with a lot of rain and then by the weekend coming up here that's when COVID really began to have impact on the consumer, leading the precipitous drops in AUVs and thus same-store sales. Our final week 12 of our 12-week quarter naturally were very much in stay-at-home orders a year ago, and obviously be an outsized comp that will continue as we go into Q2 as well.
So, hard to say, given the volatility we're going over exactly what that gap does, but in general, it might be in a similar area and again it's really a geographic story as we've covered in the past.
Got it. That makes sense. And then, any dynamics or performance that you're seeing in the California restaurants as restrictions have started to ease some. Does this - how should we think about it? Does it sort of drive more mobility broadly and serve as a tailwind for Del Taco? or is it send more consumers to other types of restaurant formats, if there's anything, you can kind of call out and what you've seen recently?
Yes, sure. Well, first off, it's important to note that we're obviously continuing to follow local guidelines here in California and in many of the states we operate in. And all of our company restaurants in California are currently in the states, most restrictive tier right now and are at 0% allowable dining room capacity.
Obviously, as things loosen up a bit and we move to the next year, I think the next year we get into is allowable 25% dining room capacity, and then eventually it's about 50% allowable dining room capacity. So that obviously will take time to get to as the numbers continue to drop, and perhaps the environment becomes a bit more normalized.
So, obviously, still having fairly strong impact, in regards to that dynamic across our California stores and then also those counties that we talked about in early January and once again on the call today. Clearly, those counties are continuing to see their fair share of demand struggles, but we do believe that they're poised to bounce back as things begin to normalize.
On the reopening front, Alex, just to kind of address that question, I think it's a good one. The reopening of restaurants or retailers, I mean, remember that goes along with other activities that are also reopening, right? So, you're going to see movie theaters reopening, maybe a gradual return to offices reopening as we move through the year. And we think all of these things are good overall, because it means that people are out and about again. They're actively participating in the economy, if you will.
And the quick service category, as you know, will continue to be a category that's driven by value and convenience. And if consumers are on the run, in-between activity is going to school and going to work, and juggle in a lot of things just them being out and about is a good thing for our business value and convenience of QSR and for Del Taco. We'll continue to be really important we believe moving forward.
Great., That's helpful. Thanks.
Thank you. Our next question comes from Nick Setyan with Wedbush. Please proceed with your question.
Hey, thanks. Just on the unit growth, is it reasonable to expect an acceleration to sort of at the 2019 mid single-digit franchisee growth rate by 2022?
Yes, I think that is reasonable, Nick, I think what you said was taking a look at our 2019 franchisee unit growth, in particular, could we get back to that unit growth in 2022? We do think that is within our sights. I think if you look at during 2021, and think about it moving forward, our system-wide growth will continue to be -- we said publicly it will be led by franchise growth, we're excited about that.
And as I expected, we -- as I said, we expect at least 12 system-wide openings in 2021. We said about - around eight of those will be franchise-driven. And then I think the way to think about it is that's going to be followed by a modest improvement in system-wide openings in 2022. I think back to 2019 is probably the right way to think about it and then a more pronounced step-up in openings during 2023.
So, obviously, existing franchisees are excited about the brand and building pipeline, and we'll begin to get back on track this year and next year, and we're seeing more high-quality franchise prospects coming in – coming to the table, if you will, excited about our Fresh Flex prototype. And also the fact that, as we said on the call, we've had eight consecutive years of positive franchise same-store sales growth. So, that feels really good to those folks, too. So, I think new signings in 2021 will obviously heavily impact 2023 and beyond, but we expect momentum in that area this year.
And just to add the context of back to 2019, I think as you laid out, Nick, that's really more in the context of the absolute number of franchise openings. We opened 14 that year, not necessarily in terms of the absolute level of system openings, because as we said, focus is on franchise growth, company remain a grower, but at a more modest clip.
Understood, understood. That's very helpful. You guys have a lot of top line initiatives, I guess, I was curious to focus on of the remodels just because since like the opportunity is so great there. Can you just remind us how many stores to date you have remodels? And how many in 2021 the task includes?
Sure. So, over the past two years, we did modernize five older restaurants prior to any COVID impact and then five additional modernization since COVID. –And certainly, overall, guest employee feedback very positive. Also the team's done a great job working at a remodel process that has very limited downtime, which helps, of course protect end year sales during the remodel process.
The five, I mentioned prior to COVID, pre-post versus control, we saw a nice lifts in sales in that double-digit area. We view that very favorably. The five more recent ones since COVID, due to COVID trends in SoCal, in particular, it just can heavily impact individual restaurants, trade areas, control groups, such that it's really hard, if not impossible to discern the lift that's happening, other than we think the assets look great and it positions us very well for the future.
So that's where we are in the current journey. Naturally, the year heads is going to kind of wrap up that test in that more of a formal system-wide launch later this year.
And so, how many remodels will there be in '21?
Up to 20 was the number of them being the full investment. Then a more limited portion also be in the more cost effective, that's more cosmetic on our more modern facilities to help capture the appeal and the essence of Fresh Flex.
Up to 20 inclusive of the 10 already completed, or up to 20…
No, 20 incremental in the New Year.
Okay, okay. And then, just lastly on the technology initiatives, is there a timing on the loyalty launch?
Yes, we've said fall of this year, Nick, we're positioned to be able to pull that off obviously, we have last year we put investment into our technology platform, building off of our digital transformation that we had done in 2019, continued that in 2020. And obviously through the work we did with ultimate convenience, and then we invested in our restaurant technology platform to be able to more seamlessly deliver on the ultimate convenience strategy, as well as this fall launch of our CRM platform. So, we're excited. We're excited about being able to deliver that later this year. And I think we're well positioned to be able to hit that timeline.
Great, thank you very much.
Thank you. Our next question comes from Joshua Long with Piper Sandler. Please proceed with your question.
Great, thank you for taking the question today. I wanted to circle back to the digital pipeline and what you've learned through about consumer as we've gone through COVID, and as you've gone through your digital investments, I know we'll have more learnings to come in terms of that Loyalty launch that you mentioned there towards the fall of this year. But just curious on what you've learned about the consumer thus far and what's going to be kind of fed into that that Loyalty launch going forward?
Well, I think number one is the adoption of technology to be able to access restaurants, restaurant occasions, both on and off premise has been quite impressive in 2020, as the consumer has really been forced to be able to adopt technology in order to access restaurants. So, clearly, our ultimate convenience strategy was designed to be able to really play into that trend, that that trend around convenience and access. So when you saw our dining rooms closed down obviously, we saw drive-thru really accelerate into the low to mid-80s, depending on the timeframe that you're measuring. And so a lot of actions were put against obviously being able to efficiently executed the drive-thru. Throughput was a key initiative for us. We talked about lunch being up about 6% pre-post-COVID due to that focus.
And then we looked at delivery obviously, and we saw what's happening in delivery with the height of delivery, certainly over 7% of sales in more recent quarters trending in the 6% area clearly demand from the consumer. So, Josh, I think that all plays into a need for convenience and greater access that the consumer is wanting from brands. So we want to continue to be able to do that and deliver that well with great guest experiences as well as look at opportunities like the park and get it tests that we currently have underway. And again, it leverages that technology integration to be able to allow a consumer to order from their mobile phone. Basically they can sit out under a tree in our parking lot and place the order and have the food brought to them if they just want to hang out and relax in their car and take 20 minutes to enjoy some Epic Burritos, right. So we want to be able to kind of meet that consumer wherever they are, and give them great experiences with our brand.
And then, the CRM platform obviously we'll take that a step further because now we'll have a loyalty platform and mechanism to really incentivize and reward that consumer for accessing our brand through these different channels. So I think holistically, it all comes together very nicely here as we enter into the fall, and even if dining rooms are reopening and the environment around us is shifting we believe that it's unlikely that the consumer will step backwards in regards to their want and need for convenience, we think that we'll continue to move forward. So we want to be positioned to be able to do that well as a brand
That makes sense and excited to see how that unfolds when we think about the menu innovation work that you talked about and provided an update today on. So appreciate that, can appreciate how value still plays an important role going forward. And then you've done a great job in terms of just expanding and I'm sure optimizing as well the different areas of the menu, whether that's by protein or by daypart, if you might be able to provide an update on how you're thinking about that and overall, holistically. And then when we think about some of those dayparts that you've mentioned in terms of breakfast or graveyard. Is there anything that can be done in the meantime or do we really look forward to just that increasing mobility and whether it's vaccination rates or any of the other driving forces there to really the consumer getting back into a more normalized trend and that's really what is going to help drive those -- the recovery of those dayparts.
Okay. Let me address both, let me impact that a little bit and get to both of your questions. I think first off, we feel like we're positioned well from the standpoint of our five drivers of sales acceleration, particularly, you heard us talk about value and the need for value out there. And I think that the Del's Dollar Deals Menu is that foundation of our barbell menu strategy. We'll continue to innovate and market against that in 2021. Our product and new menu innovation pipeline is strong as we're entering the year, and we feel really good about the calendar this year and what we'll be able to bring to the table both in terms of new news around products and perhaps as we get later in the year a new platform or two. So we feel good about that. And then obviously we're entering into the digital space in a big way that I just talked about through ultimate convenience and our CRM launch in the fall. So a lot of innovation, a very solid lineup that really runs the gamut across that those five drivers of sales acceleration.
In regards to the second part of your question with dayparts and gets an important one to address, I think there is two driving factors here of this performance and you kind of hit the nail on the head there Josh, consumer demand related to changing behaviors because of the pandemic is one and then two some of the curtailing of hours that has occurred at these dayparts just due to optimizing profitability, right? The demand is not there so we've taken hours incrementally here and there store to store depending on the circumstances.
So both of these factors start to take care of themselves, as things opened back up and consumers returned to more normalized activities. We do believe that both dayparts are poised to have an acceleration in same-store-sales, once some of that starts to happen. And once some of that normalization occurs in the meantime, we're keeping them top of mind for those stores that have all the stores that have those open and that are doing well with them. And as we start to see activity opened back up, we'll start to press the gas pedal, if you will on things like a breakfast refresh, perhaps some breakfast innovation, as well as some more messaging towards the graveyard and late night hours.
So again, it's going to be relevant to regarding when consumers start to come back and that demand starts to come back. And we certainly hope, late night as an example, we can start to pull that lever in the summer months, and that's always a great time to be talking about late night activity and that graveyard daypart. So it would be great to be able to do that. And it'd be great as we enter the fall. We had folks are going back to school normally, and perhaps some more normal occurrences of folks are returning to work, it'd be great to be talking about breakfast then. So just a little bit of a heads up in regards to how we're thinking about that. But clearly we have got to watch the marketplace and the consumer and see what happens.
Understood. And then last one for me, when we think about that low $30 million for the CapEx. Would it be possible to talk about that in rough buckets of size, in terms of new units, some of the digital initiatives that you've outlined, or maybe other corporate pieces just to kind of help to put a sharper point on the modeling side?
Sure. Certainly the largest bucket will be expenditures to maintain and enhance the current fleet. As you know, we did slow down some of activity last year especially when COVID first hit. So maybe a little bit of catch up happening this year to some degree. So that's definitely the biggest bucket. The other two very meaningful ones would be certainly the remodel program that we touched on that we're real excited about as well as spend towards new company opening, certainly the four that we expect to deliver this year. Typically there's also spend on units that'll open because first quarter, first-half of the following year 2022. And then finally some discretionary investment, whether that's technology initiatives, investments at the restaurant level, whether it's within or around the four walls drive through technology is a big area of opportunity, kind of back to auto convenience. So yes, putting some money towards restaurant operations that help drive throughput speed and experience overall. So hopefully that helps you kind of size that guideline.
Great, thank you.
[Operator Instructions] Our next question comes from Todd Brooks with C.L. King & Associates. Please proceed with your question.
Hey, good afternoon guys. And great news on the quarter-to-date trends that's exciting. A couple of questions for you, can we just dig in a little bit on attracting new franchisees to the brand? You've got a new prototype; you've got a history of strong results. What gives them across the threshold at this point? Is it a willingness to maybe seed markets with corporate stores? Is it just potential new franchisees wanting to have a little more certainty about how the end of the pandemic plays out here? What on sticks that and allows you to start to announce some new franchisee deals?
Well, hey, Todd, it's John. The main thing that we are talking about and really excited about with new franchise prospects and they're excited about as well is a Fresh Flex prototype. And the way that that then helps enable our menu of venues strategy, because we've talked very openly that we believe taking that portfolio approach to growth is absolutely the right way to think about growing in this environment, right where QSR drive-through demand is still going to be high. And we need options through our prototype to be able to access real estate. And maybe traditionally we just have an access. So if you think about a smaller footprint with a smaller parcel of land like our drive-through only building or a conversion and a smaller restaurant prototype within dining room. We've got the full array of options if you will, through that menu of venues approach.
And then, the way that you think about returns for that right now is theoretically is that, the consumer shift in regards to leveraging technology to access brands that I talked about a little bit earlier, that integration into the prototype enables a really nice array of on and off premise opportunities that. Hopefully what you're able to do is net down your total cost of investment in developing at Del Taco, because of your portfolio approach with menu of venues, but maintain a similar AUV, because of that consumer demand dynamic related to technology and technology integration to the prototype. So we think that that is a key piece and it really gets us to the table if you will with folks being really interested in that. I think the other piece that we've been talking about that is really important to recognize. I mean outside of California, we ran 9% of same-store sales growth in Q4; we've had eight consecutive years of positive same-store sales growth out of our franchise business. We've clearly put the infrastructure in place to be able to support franchise growth at Del Taco, we're in 15 states Coast to Coast. So we feel really good about that as do some of these prospects that are coming to the table. And we expect this to be a good year in regards to franchise prospecting at Del Taco, because of those facts.
That's great. And then just a second question, if I may. And I know your ability to do this will be stronger when you roll out the new the CRM this fall and the loyalty program. But if you look at new to brand customers during the pandemic and their behaviors, just anything you can share on kind of frequency in the sense of incremental customer that the brand drew and your ability to turn them into a repeat or a more frequent customer.
Yes. I mean our key consumer has typically been a QSR user that is participating in the category on a very regular basis and using many brands. So one of the things we've always said from the time that we launched our combined solution strategy is our goal is always to try to be best on block. So the operations delivering frequency and sales is critical combined with elevating the brand promise through things like menu innovation, the barbell, technology integration now is a big part of that strategy. Those are things that are going to draw folks in more often. So from a standpoint of a new consumer, I wouldn't say that that is necessarily our aim. I think it's very challenging in the QSR drive through space to go attract a brand new consumer. Likely these consumers are already in limited service restaurants and are coming into Del Taco at some point, albeit they may be very light users.
So, I think the play thought is we need to increase frequency across the segment. So if you think about light, medium users where you have a high volume of consumers not giving you their fair share of sales, that's where we want to really play, because that's a very fertile territory for the brand, because those consumers are in the category. They're already bought into QSR lifestyle and QSR drive-through and things like the CRM platform will help them to come back more often. So that's how we're thinking about it.
Okay, great. Thanks for the comments, John. Appreciate it.
There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.
Okay, well, thank you for taking the time with us today, and thank you for your interest in Del Taco. We do appreciate it and we look forward to sharing our progress on future calls. Have a great day.
This concludes today's conference. You may disconnect your lines at this time. Thank for your participation. Have a wonderful evening.