In the quick service restaurant industry, the winning formula is brand buzz, product news and great value, Yum says! The brand’s CEO, David Gibbs. And strings must provide all three components, not just one or two.
No brand has proven this more in the second quarter than Taco Bell.
The fast food giant brought back Mexican Pizza in May as an LTO. Loyalty members gained access two days before the full release, and in that two-day window, loyalty signups grew 15x. For the quarter, the number of rewarded members increased by 10%. Taco Bell sold over 20 million pizzas nationwide, 7 times previous levels. Some stores sold out within a week. Due to the overwhelming response, Mexican Pizza is returning again this fall, and it will be a permanent menu item. Taco Bell’s app was downloaded 1.4 million times in May, according to Apptopia, a leader in real-time competitive intelligence. It was right behind McDonald’s. Month-over-month downloads were up 82.1%, most among the top 36 fast-serving apps.
The item, starting at $4.49, was discontinued in 2020 in favor of simplification and new innovation. This was to the chagrin of the customers. A super fan, Kris Jagirdar, created a Change.org petition which received over 200,000 signatures.
Placer.ai data shows how Mexican Pizza accelerated foot traffic for Taco Bell:
Thanks in part to Mexican Pizza, Taco Bell’s U.S. same-store sales rose 8% in the second quarter despite inflation, war and Yum!’s best-ever quarter. This is a much better performance than sister concepts KFC, Pizza Hut and The Habit Burger Grill, which saw system-wide same-store sales decline 1%, 3% and 4% respectively. one year to the next.
Gibbs said Mexican Pizza’s return later this year should result in “a few selling points,” but he stressed that innovation like this has a bigger purpose.
“The benefit of things like Mexican pizza is the connection it has with consumers, the love they have for the product and the halo it gives the brand,” Gibbs said during the interview. call on the company’s second quarter results. “It’s as much about the buzz it creates and the relevance it creates for our brand as it is about the discrete amount of sales. …And I think that’s really our formula. We need to be the most relevant brands in the industry and connect with consumers like Taco Bell did in Q2. And you can see the results when that happens.
READ MORE: Taco Bell’s famous Mexican pizza returns to the menu
Equally important was the news of Taco Bell’s development. In partnership with longtime franchisee Border Foods, the brand debuted its two-story Taco Bell Defy prototype, equipped with four drive-thrus, an exclusive elevator system to transport orders and check-in screens digital for mobile customers. The store’s futuristic design includes many features that could be part of restaurants to come.
In the United States, Taco Bell saw unit growth of 2% year-over-year, bringing its total to 7,044 restaurants. The brand opened a network of 23 locations during the quarter.
Internationally, the brand’s same-store sales were up 9% year-on-year, with five of seven European markets posting double-digit increases. For the third consecutive quarter, international development surpassed the United States with 46 net new restaurants. Due to this momentum, full-year international expansion is expected to outpace that of the United States for the first time. Taco Bell ended the period with 856 IU, a 27% year-over-year increase.
“Taco Bell’s development machine is really running on all cylinders internationally,” Gibbs said. “And we’re proving that with focused effort, the right team against it…[Taco Bell president] Julie Masino and her team are doing an amazing job – the right franchise partners, that we can scale into these international Taco Bell markets, and they can be massive growth engines for Yum!. We should come to the end of the year with more than four markets with more than 100 units, which we know will be the tipping point for really accelerated growth going forward.
Yum! made nearly $6 billion in digital sales in the second quarter, and Taco Bell is looking to earn a bigger share of that in the future. The chain has fully deployed pick-up shelves in company-owned units and plans to launch the equipment in the rest of the system by early 2023.
And in the face of double-digit labor and raw material inflation, Taco Bell’s margins at company stores were 26%, flat year-over-year and 200 basis points. basis ahead of 2019.
“This is a testament to the brand’s pricing power and operational efficiencies the team continues to achieve, both contributing best in class,” said Chief Financial Officer Chris Turner.