Web Exclusive | September 2015 | By Bruce Horovitz

Taco Bell Gets Hip with Cantina

Brand is opening urban units in San Francisco and Chicago, targeting younger customers.
QSR Mexican leader Taco Bell opens Millennial friendly new restaurants in urban markets.
A rendering of Taco Bell Cantina. image used with permission.

This isn’t your father’s Taco Bell. Maybe not even your older brother’s.

No drive thru. No parking lot. Heck, not even a hidden kitchen. And yes, beer and wine are served along with the burritos.

This is the Taco Bell Cantina. Taco Bell’s ultra-savvy, Millennial-snaring strategy finally comes to life this month in Chicago and San Francisco—two new restaurants that are super digitally friendly and local in design, where the food is served in open baskets instead of concealed inside plastic bags. The Taco Bell Cantina in the Wicker Park neighborhood of Chicago is scheduled to open September 22, while the San Francisco unit—with patio and mobile pick-up window—will open shortly after that.

Eager to compete with fast-casual success stories like Panera Bread and Chipotle, which have plucked away young, trend-setting customers from larger quick-service brands, Taco Bell is revving up an evolving Millennial strategy that kisses suburbs goodbye in favor of urban hubs.

No, the nation’s largest Mexican fast-food chain isn’t abandoning its thousands of suburban locations. But a sizable chunk of the 2,000 additional domestic stores it expects to add over the next seven years will be urban locations that cater to a new generation of users.

“Today’s consumers are living in more urban settings,” says Brian Niccol, Taco Bell’s CEO. As a result, he says, with Taco Bell Cantinas, the chain is “adapting our traditional restaurant concept to fit their modern needs.”

In other words, it’s trying to be hip. That’s hip as in alcoholic beverages offered with meals. Hip as in original artwork inside painted by local artists. Hip as in exterior and interior designs that are wide open. Hip as in shareable menu items—tapas-style appetizers like nachos and rolled tacos—that scream authenticity. And hip as in ditching the drive thrus, since most customers will arrive on foot.

“This is on trend,” says Christopher Muller, hospitality professor at Boston University. “Taco Bell has a big head start [over major fast-food chains], but they need to move very quickly to capture market share before the target moves away.”

The move comes at a time when the entire industry is tripping over itself to embrace free-spending Millennials. At the same time that it’s testing the urban locations, Taco Bell also is growing its delivery platform, expanding breakfast, and tweaking its menu by adding more unconventional mash-ups and items with natural ingredients.

“We’re trying to reshape the Taco Bell experience to reflect how people live today and what they want,” says Meredith Sandland, chief development officer at Taco Bell.

For Taco Bell, Sandland says, the new, urban stores are all about responding to five societal trends at once: digitization, localization, urbanization, transparency, and green-friendly. So compelling are these trends, she says, that Taco Bell expects to open at least 10 more of them in 2016 in urban markets. While she declined to name any of them, she conceded that New York City “meets” the requirements.

The two Taco Bells that open this month will do something that domestic Taco Bells have not done before: serve alcohol.

Why would a fast-food chain suddenly delve into alcohol?

“The consumer interest is there,” says Sandland, who notes it was one of the more common requests from customers. “It’s part of the experience of dining in an urban environment—customers expect to get alcohol with their meals.”

Particularly Millennials. Some 46 percent of Millennials say they prioritize adult beverages and look for variety in them when dining out, reports Technomic’s recent “Trends in Adult Beverage” report. And Millennials not only crave new foods, but new drinks, too. Compared with other age groups, Millennials are most likely to try a new drink, according to Technomic's research; while 8 percent of the general population tried a new drink on their most recent occasion, 18 percent of younger Millennials (21–24 years old) and 12 percent of older Millennials (25–34) did so.

The move is also about Taco Bell trying to lift its dinner business (and check average), since dinner is a time of day when folks more commonly order alcoholic beverages. But this continues to be a “test” for Taco Bell, Sandland says. The driver: While 70 percent of its suburban business is through the drive thru, roughly half of its urban business is dine-in.

The types of alcoholic beverages served will be up to the franchisees, she adds. The San Francisco location will serve beer and wine only, while the Chicago store will serve beer, wine, sangria, and so-called twisted Freezes made with alcohol. Each franchisee will determine the prices, too, Sandland says. The Chicago location will have someone at the door checking IDs during peak weekend and evening hours, she says.

Design of everything from the art on the walls to how the food is served is a key element at the new, urban locations. The Chicago store, for example, features a mural designed by a local artist that gives a nod to the neighborhood’s history and to the building’s 100-year-old past. Instead of serving tacos and burritos wrapped in paper—then stuffed inside paper bags—folks eating at the new stores will notice the open plating, with food served in baskets or on trays that actually display the food. And the kitchens are mostly open, too, so customers can watch the food being prepared. This is particularly important to Millennials.

“We want to make each restaurant experience unique and memorable,” Sandland says.

And, perhaps, cosmically different from the mainstream competition. After all, eating at Taco Bell Cantinas not only can fill your gut, but, after a brew or two, might also send you home with a light buzz. But that’s OK. You walked.

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