Taco Bell’s strong third quarter can be attributed to the company’s new leadership earlier this year, new ideas, and fresh innovation on the menu, the brand explained during an October 31 conference call. Overall, the YUM! Brands chain was one of the key growth drivers for the company.
Taco Bell closed the quarter with an 8 percent increase of system-wide sales and same-store sales growth of 5 percent, year-over-year.
“I think Taco Bell is just doing everything really well. Obviously to report 5 percent system sales growth, the calendar was incredibly strong,” said Greg Creed, YUM! Brands chief executive officer. “I think the product innovation continues to be world class. I still believe that there's no better product innovation that comes out—that doesn't come out from Taco Bell.
The restaurants are being incredibly well-run. The value price points are spot on. The communication is distinctive and cut through.”
“And to the delivered system sales growth of 8 percent, that is really at the top end, definitely the top end of what happened in the Mexican category and I would argue at the top end of what's happened in quick-service restaurants,” he added.
The chain took the top spot as America’s No. 1 favorite Mexican restaurant in the Harris Poll in April and there’s no signal anyone will be knocking them from that position any time soon.
“Taco Bell's ability to innovate and elevate around both their marketing and products highlights the fact that the brand proudly stands in a Category of One. Internationally, this is only the beginning for Taco Bell and I'm excited to see the growth the brand grow and expand,” Creed said.
Between promotions and partnerships with everyone from Forever 21 to Cheetos, Taco Bell’s marketing strategy and menu innovation continued to draw customers into its restaurants. The brand was able to balance new menu ideas and bring back fan favorites, like Nacho Fries, on the menu.
The influence of new leadership during the first quarter of 2018 allowed the company to breathe new life into its promotional calendar. At the beginning of the first quarter, Creed said, the record-breaking launch of new products kept customers coming back. “I couldn't be more proud of the Taco Bell U.S. team for improving the way they constructed the calendar in order to generate a more consistent performance and extend momentum,” he said.
The movie trailer theme marketing campaign promoting Taco Bell’s Nacho Fries continued during this quarter as well. Taco Bell was also able to capitalize on the Comic-Con crowd by celebrating the 25th anniversary of the movie Demolition Man with Nacho Fries.
“In case you didn't know, in the movie Demolition Man, the only remaining restaurant is Taco Bell, which the brand celebrated with a truly unique activation at Comic-Con,” Creed said.
Taco Bell’s unit expansion progressed with the opening of 59 new units during the third quarter. Besides its classic storefront, Taco Bell has experimented with different dining experiences for its customers. These new Urban concepts are comprised of walk-up stands and Cantinas, which sell beer and alcohol and offer diners a look into the back of the house with an open kitchen concept.
Some of the recent markets to open one of these non-conventional concepts include New York; Raleigh, North Carolina; and Chicago. Franchisees are also excited about the potential growth Urban and Cantina concepts will offer to them and the brand, YUM! said.
“Lastly, as we know, unit-level economics are essential to stimulating development. I had the privilege of attending the Taco Bell Franchise Convention last month and there's a lot of excitement especially for our Urban and Cantina models where early returns have been encouraging and the development pipeline continues to build,” added David Gibbs, president and CFO.
Additionally, Taco Bell sees many opportunities when it comes to off-premises. At the beginning of the year, Taco Bell and KFC partnered with GrubHub to bring the option of delivery to customers. Since the announcement, which included YUM! taking a $200 million stake in the company, the integrated delivery solution was launched in 2,100 stores nationwide covering about 30 percent of the U.S. market.
“We are adding stores at a rapid rate and expect to make healthy headway through the end of the year,” Gibbs said. “We have seen positive early results along with valuable operations learnings. Franchisees are very excited about delivery as an opportunity to drive incremental sales and are all in on delivery as a major brand initiative.”