New Chief Aims to Revive Taco Bell
Peter Waller gave Taco Bell gorditas, Godzilla, Chalupas, fresh fried tortilla chips and a talking Chihuahua that rose to national fame. But it wasn’t enough to win the ousted president immunity from the proverbial fast-food wars.
At Waller’s recent tearful sendoff, a mariachi band escorted him into a room of cheering employees,all dressed like Waller in red shirts and jeans. Waller told the group he wasn’t “a quitter” and that they should “follow their dreams.”
Taco Bell parent Tricon Global Restaurants Inc. sent Waller and his little “Yo Quiero Taco Bell” dog packing in July. In Waller’s place, Tricon has tapped Wendy’s International Inc. executive Emil Brolick, who oversaw product development and strategy for the Ohio-based hamburger Brolick’s challenge: to revive Taco Bell’s slumping sales and fend off competition from a host of rivals.
Like Waller, Brolick comes from the marketing side of the business. During his 12 years at Wendy’s, 52-year-old Brolick most recently was senior vice president of new product marketing, research and strategic planning. He was one of the architects of Wendy’s 1988 turnaround, according to John Barker, vice president of investor relations for the burger chain.
“He was the nucleus of a team that got Wendy’s on the right track in the late 1980s and built the best sales volumes,” Barker said. “His focus at Wendy’s was on building the brand, protecting and defending the Wendy’s brand. He was an important part of that.”
In July, Brolick met with employees at Taco Bell’s Irvine headquarters. He’s bought a house in Orange County but still is commuting from his home in Columbus, Ohio, until he can relocate his family here.
Brolick is heading up one of Orange County’s largest businesses. Taco Bell employs 600 people in Irvine and 100,000 in all, with annual sales of $5.2 billion.
Big Challenge
Brolick’s charge is to turn around Taco Bell through new products and advertising, according to Andrew M. Barish, an analyst with BancBoston Robertson Stephens.
Taco Bell is the first top-executive stint for Brolick. At Wendy’s, he was one of nine senior vice presidents. Insiders say he’ll be working closely with Tricon Chief Executive David Novak, who headed up Tricon’s KFC in the mid-1990s under former parent PepsiCo.
Last week, Novak named Aylwin Lewis as his new chief operating officer. His charge is to work with Brolick and the heads of Tricon’s other units to improve operational improvements.
Novak has seen his company’s largest chain lose ground in an industry rife with burger discounting and flush with Mexican fast-food rivals such as Laguna Hills-based Del Taco and Santa Barbara Restaurant Group Inc.’s Green Burrito, which is dual branded with Anaheim-based CKE Restaurants Inc.’s Carl’s Jr. chain. Even McDonald’s Corp. has begun testing sales of Mexican-flavored items at its Southern California restaurants.
The segment also is feeling pressure from more upscale regional chains that tout healthful ingredients, such as Santa Ana-based Wahoo’s Fish Tacos, Santa Barbara Restaurant Group’s La Salsa, Thousand Oaks-based Baja Fresh and Carlsbad-based Rubio’s Restaurants Inc.
For the fiscal second quarter ended June 10, Tricon reported a 6% decline in same-store sales at Taco Bell, marking the unit’s fourth straight quarter of declining or flat sales at units open at least a year.
Entertaining New Ideas
Mary Wagner, Taco Bell’s chief technology and quality officer, said she is working with Brolick to familiarize him with the Taco Bell menu as well as its competitors in the Mexican fast-food segment.
Wagner said she is working on new menu items as well as better packaging. There’s even talk about expanding the menu to include items such as french fries.
“The franchiseees keep bringing up good ideas,” Wagner said.
A 1972 graduate of the University of Detroit, Brolick earned his master’s degree in economics and holds a bachelor’s degree in business administration and economics. He’s held management positions at steakhouse operator Ponderosa Inc., Chrysler Corp. and Copeland Corp., an air conditioning and refrigeration manufacturer in Ohio.
Brolick joined Wendy’s in 1988 as part of a team that founder and Senior Chairman Dave Thomas brought together. It also included the late Gordon F. Teter, who was Wendy’s chairman, CEO and president through last December. Teter had worked with Brolick at Ponderosa, which operated a casual-dining Mexican chain called Casa Lupita.
Brolick also was on the board of the former Worthington Foods Inc., which was bought by Kellogg Co. last year.
At Wendy’s, Brolick was instrumental in boosting sales with the use of promotional sandwiches such as the French Onion Chicken Grill. That’s one reason Novak took interest in Brolick, according to Tricon analysts.
The aim is to build sales at Taco Bell stores. The unit’s average is $918,000 per restaurant.
Rival Del Taco, for one, won’t open a store unless it can get annual sales of $1 million or more, according to Chief Executive Kevin Moriarty. Wendy’s average is roughly $1.3 million for company stores and $1.1 million for franchise units.
Brolick, like Waller before him, inherits a company striving to win back its core customer.
When Waller took over the top position at Taco Bell in June 1997, the chain had rolled out its low-calorie Border Lights menu. While the lighter fare helped sales, it took longer to make in an industry where speed is king and the drive-through window accounts for two-thirds of sales.
Under Waller, Taco Bell invested more money to improve its ingredients and food quality.
“Peter Waller reinvented the taco, improved quality and made significant contributions to Taco Bell’s food and the front of the house in his 10-year tenure,” the company’s Wagner said. “But we have a new guy with new ideas.”
Waller, who had joined PepsiCo in 1990 and was marketing director for Taco Bell through Tricon’s October 1997 spin-off, spent the past three years as Taco Bell’s chief. Waller moved the sales needle at Taco Bell from $4.8 billion to $5.2 billion, gave the brand pop-culture status and oversaw its growth to nearly 7,000 stores.
Mexican Food Tougher Sell
But selling Mexican food is a lot tougher than selling hamburgers, said John Martin, former chief executive of Taco Bell, who held the reins during the chain’s discounting heyday when it sold tacos for 49 cents and other items for not much more.
“It’s still not mainstream,” Martin said.
Waller and former marketing director Vada Hill hired advertising agency TBWA/Chiat/Day, which created the now-famous talking Chihuahua. The first dog commercials aired regionally in June 1997, but Waller took them national in December 1997.
Pooch Perked Sales
The dog began gaining notoriety with a $60 million campaign for Taco Bell’s new gordita product in April 1998. By May, the pint-sized pooch with a Mexican accent was promoting the gordita under a tie-in with the film “Godzilla.”
Taco Bell’s 1998 sales were up 3%, reversing a two-year decline. The promotions helped boost sales 2% in the third quarter followed by a 9% boost in the fourth quarter of that year. Sales of some 23 million talking Chihuahua plush toys for $2.99 to $5.99 in 1998 didn’t hurt, either.
In April 1999, Waller began to focus on working mothers and families with Grande Meals dinner packages. Same-store sales inched up just 1% during the second quarter of 1999.
In spring 1999, Taco Bell joined Tricon’s KFC and Pizza Hut in a movie promotion supporting the May 19 opening of “Star Wars: Episode I: The Phantom Menace.” PepsiCo struck this movie deal prior to its spin off of Tricon.
Customers were urged to visit all three stores representing the three planets in the movie. But instead of growing Taco Bell’s sales,and capping the first quarter’s 4% sales gain and a 1% rise in the second,third quarter sales declined 3%. By the fourth quarter of 1999, they’d leveled to zero.
Along with Waller, TBWA/Chiat/Day also was ousted in favor of FCB Southern California in Costa Mesa.
The talking Chihuahua isn’t being done away with entirely. But it was noticeably absent from a recent spot introducing a new menu item called the Cheesy Gordita Crunch. Taco Bell aired the 30-second spot before an estimated 40 million viewers during last month’s “Survivor” finale. n
