Taco Bell could hold the secret formula for bringing customers back to fast food

By CNN Newsource

Published August 6, 2024 9:11 AM

By Ramishah Maruf, CNN

New York (CNN) — Fast food giant Yum Brands is going all in on value — but only Taco Bell is performing well enough to immediately bring back inflation-weary customers.

Temporary store closings in the Middle East, Malaysia and Indonesia due to the Israel-Hamas war, “in addition to a more cost-conscious consumer, have presented headwinds to same-store sales,” CEO David Gibbs said in a second-quarter earnings call Tuesday.

But Gibbs said Taco Bell is outperforming its rivals in the fast food industry. “I think we’re really seeing Taco Bell stand out from the crowd,” he said to investors.

Customers are looking for ways to stretch their dollars, something McDonald’s and Chipotle learned the hard way. Gibbs lauded Taco Bell’s 10-item value menu as a prime example of a way to bring in those price-weary customers in a challenging environment.

“They’re unique items that nobody else in the industry has. And they’re not like junior-sized versions of a core item. They’re unique,” Gibbs said.

YUM has launched or reintroduced value deals at all of the biggest names in its portfolio. There’s KFC’s Taste of KFC deals and Pizza Hut’s $7 Deal Lovers. Taco Bell, known for its cheap eats, has an extensive Cravings Value Menu.

Of the three, only Taco Bell’s US same-store sales grew in the second quarter of 2024, at 5%. Both KFC and Pizza Hut’s same-store sales declined 3%.

Chief Financial Officer Chris Turner said on the earnings call that there are approximately 210 restaurants temporarily closed across the Middle East, Malaysia and Indonesia due to the Israel-Hamas war, affecting sales in the region.

The earnings call highlighted how fast food and fast casual chains are struggling to retain customers who believe it is cheaper to just eat at home. McDonald’s, Starbucks, Burger King and Wendy’s have all reported less foot traffic and lower overall sales and have jumped into value meals.

Meanwhile, Taco Bell’s Cantina Chicken lineup, launched in March, sold above the company’s expectations and led to a 7% increase in system sales alone.

“Since the platform launch, Taco Bell’s chicken sales mix has increased 10 points with nearly one in four orders including a Chicken Cantina item,” Gibbs said.

The company also reported increases in digital sales and a positive deployment of new technologies. Taco Bell is set to expand the use of artificial intelligence voice technology in its drive-thrus to hundreds of US locations by the end of this year, going all-in on a space where its rivals have failed. Lawrence Kim, chief innovation officer at Yum! Brands, previously told CNN he’s confident in his company’s technology.

Yum reported a revenue of $1.76 billion, below expectations of $1.8 billion in the second quarter.

CNN’s Clare Duffy contributed to this report.