Taco Bell Corp.

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Taco Bell Corp.

founded: 1962 by glen bell

Contact Information:

headquarters: 17901 von karman
irvine, ca 92714 fax: (949)863-2246 phone: (949)863-4500 url: http://www.tacobell.com/

OVERVIEW

Taco Bell is the largest Mexican-style quick-service restaurant chain in the United States, dominating more than two-thirds of the market. The United States has more than 7,000 Taco Bell locations and other countries have more than 170. Approximately 32 percent of the U.S. units and 42 percent of the international units are company-operated, while the rest are independent franchises. Taco Bell serves more than 55 million people each week, selling over 4.5 million tacos every day. Lunchtime sales account for 50 percent of the company's business.

COMPANY FINANCES

In 1997 Taco Bell's worldwide sales exceeded $4.9 billion. Average U.S. sales per traditional restaurant location were $972,000. Same-store sales increased by 2 percent, after drops of 2 and 4 percent in 1996 and 1995, respectively.

ANALYSTS' OPINIONS

In March 1998, analysts were issuing "buy" recommendations for the stock of Taco Bell's parent corporation, Tricon. This was based on the concerted effort being made to franchise existing company-operated stores and on a major initiative to establish Taco Bell in Australia.

HISTORY

In 1962 Glen Bell built a small restaurant stand in Downey, California, called Bell's Drive-In. Bell learned the business as he ran it. His second unit was only large enough for one person to operate, but he instituted changes to help boost profits and simplify operations. In 1952 Bell sold his first stand and built another restaurant, which sold hamburgers and hotdogs. McDonald's restaurants opened around the same time, and the two operations nurtured the public's new fast-food habit.

Bell sold his first franchise in 1964. By the time the company, now known as Taco Bell, went public in 1969, there were 325 restaurants. PepsiCo acquired Taco Bell in 1978; there were 868 locations. In 1997 Taco Bell—along with the other PepsiCo-owned chains, KFC and Pizza Hut—was spun off to create TriCon Global Restaurants, Inc.

STRATEGY

Taco Bell implemented its "Value Strategy" in 1989; it was a three-tier pricing system that allowed customers to easily choose a meal within their budget. However, within a few years Taco Bell executives realized the company could not depend exclusively on the "value" end of the fast-food market, and it needed to boost its higher-priced offerings as well. One such attempt was the "Border Lights" line in 1995, but it made a disappointing showing, as even a $75-million marketing push failed to convince customers to pay more for lower fat items.

In 1995 Taco Bell also opened up new markets by increasing its number of non-traditional units. These units included mobile carts, kiosks, school lunch programs, and express units located in sports arenas, universities, airports, and movie theaters. In 1997 Taco Bell initiated a marketing and product development effort called "Project Gold," a plan to raise consumer quality expectations and create demand for a broader range of menu offerings.

Television commercials are a very important element of the company's marketing strategy. Several popular campaigns in the late 1990s featured celebrities such as basketball star Shaquille O'Neal. Promotional campaigns built around the Star Wars and Batman movies also helped to bring families into the restaurants.

FAST FACTS: About Taco Bell Corp.

Ownership: Taco Bell is one of the three divisions of Tricon Global Restaurants, Inc., a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: YUM

Officers: Peter C. Waller, Pres., 43, $834,433; Thomas E. Davin, COO, 40

Employees: 100,000

Principal Subsidiary Companies: Taco Bell, Pizza Hut, and KFC were subsidiaries of PepsiCo until 1997 when the restaurants were spun off to form Tricon Global Restaurants.

Chief Competitors: Taco Bell competes with other fast-food and pizza restaurant chains, including: Burger King; McDonald's; Wendy's; Subway; Domino's; and Little Caesar's.

CHRONOLOGY: Key Dates for Taco Bell Corp.

1962:: Glen Bell builds a small restaurant stand called Bell's Drive-In
1964:: Bell's becomes Taco Bell; the first Taco Bell franchise opens
1969:: Taco Bell goes public
1978:: PepsiCo purchases Taco Bell
1986:: Taco Bell opens its first international franchise in London, England
1997:: All PepsiCo restaurants are spun off to form Tricon Global Restaurants

In mid-1998 Taco Bell launched a television campaign featuring its now famous Chihauhua dog; the ads took shots at competitor Burger King and also tied into the promotion of Godzilla and Taco Bell's new product Gorditas. A nationwide taste test showed that men preferred Taco Bell's new Gordita Supreme Taco 58 to 42 percent over Burger King's Whopper. While some people found the commercials clever and funny, some Latino groups protested that the commercials unfairly stereotype members of the Hispanic community.

INFLUENCES

The fast-food market is extremely competitive. Even market leader McDonalds must constantly strive to keep customers coming, as new restaurants appear on the scene or new marketing efforts are launched by existing players. Therefore, Taco Bell has made continuing efforts to increase customer satisfaction by gathering feedback. Customers dining in or picking up food via the drive-through were given questionnaires focusing on several different aspects of the Taco Bell dining experience. By 1993 Taco Bell had collected feedback from 800,000 customers through the written questionnaires and a toll-free hotline.

After reviewing several marketing studies indicating that Taco Bell had a higher brand awareness among shoppers than other food companies, the company decided to move into the supermarket retail business. In 1993 it introduced 18 new items in 3,000 stores throughout Ohio, Georgia, Michigan, Chicago, and Indiana. These locations were chosen for diversity in consumer demographics, taste preferences, and Taco Bell brand-name awareness. Taco Bell made this move with virtually no advertising, with the exception of newspaper inserts and in-restaurant couponing. The new products became successful almost immediately, and soon Taco Bell became the number-one or number-two ethnic food brand in supermarket Mexican food sections. By 1994 Taco Bell had expanded into over 10,000 supermarkets nationwide.

CURRENT TRENDS

In May 1993 Taco Bell moved into the "fresh Mex" dining market. The company purchased Chevy's Mexican Restaurants, a full-service restaurant/bar chain. Research conducted by Taco Bell showed that as fast food diners grew older and had more disposable income, they moved toward a casual dining atmosphere, with table service and a broader menu. Acquiring Chevy's allowed Taco Bell to keep customers as they made this transition. However, both Chevy's and another Taco Bell subsidiary, Hot 'n Now, were sold in 1997 in connection with the TriCon spinoff since they were judged peripheral to the organization's core business.

PRODUCTS

Taco Bell serves Mexican-style foods such as tacos, burritos, and nachos. Expansion of the product line beyond its Mexican roots is expected as the restaurant chain seeks to establish a "hip" image. It is likely to capitalize on the popularity of a wide variety of food served in "wraps," a trend well suited to its taco and tortilla format.

CORPORATE CITIZENSHIP

Taco Bell is engaged in a five-year, $15-million partnership with the Boys and Girls Clubs of America called TeenSupreme. Its purpose is to enhance citizenship and leadership among young people, as well as to promote job preparation skills by "expanding and enhancing the educational, vocational, and service opportunities for teens in Boys & Girls Clubs across the country."

The program has three key components that serve and enhance the clubs: TeenSupreme(R) Centers, Teen-Supreme(R) Training Academy, and TeenSupreme(R) Keystone Club. The Centers will provide special hours and teen-oriented programs that emphasize career exploration, job preparation, and job placement for more than 80,000 teens nationwide. The Academy will train more than 2,000 Boys & Girls Club professionals to implement strategies and program models for "recruiting, engaging, mentoring, and retaining teenagers in the Clubs." The Keystone Clubs are for members 14 to 18 years old. They provide more than 9,000 teens with the skills to become productive citizens and community leaders, mainly through the creation and execution of community-service projects.

GLOBAL PRESENCE

In 1997 Taco Bell operated nearly 200 restaurants in Canada, Guam, Grand Cayman, Japan, the Dominican Republic, Chile, Egypt, Poland, Jamaica, Peru, and several other countries, and it was beginning to move into Australia.

EMPLOYMENT

Taco Bell employs more than 100,000 people in its restaurants and corporate offices. Many of the restaurant positions are part-time.

POOCH REIGNS AT FAST-FOOD FRANCHISE

Taco Bell's advertising campaign featuring a talking Chihuahua is one of the most popular advertising efforts in years. Although it came under some scrutiny early on, a recent study by USA Today found that 55 percent of Hispanic consumers liked the campaign. The loveable dog has become the focus of most Taco Bell commercials since his debut in 1997.

The Chihuahua is intended to represent an average 19-year-old guy, according to the ad's developers at TBWA/Chiat Day Advertising. As each commercial unfolds, Taco Bell is finding that its consumers are following the commercials as if they were a television show. Each time a new one airs, viewers anticipate what will happen next.

Taco Bell is trying to meet its consumers' demands for more Chihuahua commercials while the dog remains popular. In the meantime, the catch-phrase that can be heard everywhere is "Yo quiero Taco Bell," which means "I want Taco Bell."

When Tricon was formed in the spinoff of PepsiCo's restaurant businesses, the new company's president, David Nowak, was expected to institute many of the employee and franchisee-friendly policies he had been known for at KFC. These policies included restaurant visits by upper management to meet with franchisees and hear their concerns, as well as employee performance awards.