Saying Taco Bell Corp. has let quality slip in recent years, new company President Emil Brolick said the fast-food chain plans to stress ingredients and service in order to win back customers and reverse an ongoing decline in same-store sales.
Brolick laid out his broad outline for a comeback earlier this month at a generally festive gathering in the cafeteria of Taco Bell’s Irvine headquarters to mark the company’s third anniversary under Tricon Global Restaurants Inc. The event brought together employees and executives via satellite from Tricon’s three brands as well as its international division.
Tricon executives said that Taco Bell is expected to report further same-store sales declines of 5% to 7% in the fourth quarter, on top of the 2% decline for the third quarter reported last week.
Tricon’s system-wide same-store sales, which include results from Pizza Hut and KFC, were flat for the third quarter, while overall revenue was down 2% year-over-year, to $5.2 billion. (Same-store sales at Pizza Hut rose 3% for the third quarter while KFC was down 3%.) The forecast for Tricon is a 1% to 2% decline in same-store sales for the full year.
The goal for Taco Bell and the other brands, officials said at the employee meeting, is to achieve 2% to 3% same-store growth.
Brolick, a former Wendy’s International Inc. executive, acknowledged that it’s going to take a lot of work to put the company back on track.
“It’s not as simple as a food issue,” he said. “It’s not as simple as just an advertising issue. It’s not as simple as an operations issue. Nor is it as simple as it’s the competition’s fault.”
Customer perception of Taco Bell’s food, taste, quality and value has declined considerably over the years, Brolick said.
But the observation was cast in an upbeat light, with recognition of top employees and motivational statements from Brolick and others that were punctuated with cheers and clapping. The cafeteria was decorated with banners and red, white and blue balloons.
Shaking off the company’s recent disappointing tie-ins with the latest “Star Wars” movie, Kip Knight, Taco Bell’s marketing director, told employees that the chain is in talks with film producers for another promotion scheduled for the third quarter of 2001.
Taco Bell is preparing to launch new products in the first three quarters of next year, including a Chicken Fiesta Melt, Hot Stuft Burrito, Border Tacos, a pasta dish and a new line of quesadillas.
Brolick talked about how he wanted to return to the combination of quality and value that Taco Bell established in the late 1980s. Product ingredients suffered during a series of changes through 1994, he said. To make his point, Brolick drew laughs from the audience when he asked if anyone remembered the Yugo automobile and what their perception was of the car.
“Price alone has never worked,” he said.
The meeting was kicked off with Tricon Chief Executive David Novak and Chairman Andrall E. Pearson beaming in from Louisville, Ky., to announce that the theme of the day was to motivate employees to “get maniacal about satisfying customers.”
Novak, who took over the CEO ranks from Pearson in January, told employees he also will take over the title of chairman in January when Pearson, 74, retires.
They said Tricon’s goals are to add international stores and grow its multi-branded units. They showed a slide of a new dual-branded store featuring the KFC and A & W; Restaurants Inc.
Over the past year the company said it has added 741 new units outside the U.S. including 22 Taco Bell stores.
One area in which Brolick is bringing his Wendy’s ways to Taco Bell is in the drive-through lanes.
Bob Nilsen, Taco Bell’s COO, talked to employees about reducing the time it takes to move a customer through lines at the drive-through. Nilson compared Taco Bell’s approach of asking customers multiple questions to Wendy’s style of letting the customer speak and asking a single question: “Would you like to up-size it?” Roughly 60% of Taco Bell’s sales are derived from its drive-through and take-out business and half is during lunchtime.
Also, company officials said they want to improve its 206% turnover rate among Taco Bell employees, roughly double that of competitors, based on a chart they showed employees. One method they mentioned to address the problem was offering incentives to employees.
Knight gave kudos to the company’s new advertising agency, FCB Southern California, saying it has done a “magnificent job” in the first 90 days with Taco Bell. He aired a tape of the agency’s first four commercials, including one set to break in early 2001 for the new Chicken Fiesta Melt. The spot features a Taco Bell employee racing across the restaurant screaming as he slides into a customer’s table to save the taco from being drowned in taco sauce. The actor pleads with the customer to try the Chicken Fiesta first before adding anything to it.
Since replacing the team behind the creation of the talking Chihuahua in July, FCB has been rolling out a series of new spots without the dog that focus on products. One spot shows a woman eating a taco with her boyfriend, who is transformed into a handsome stud.
The agency, which also handles Taco Bell’s field marketing business, recently launched its third spot to the theme of The Knack’s “My Sharona.” Four average-looking guys each point out “That’s my Chalupa” and break into the song singing “My Chalupa.”
Despite the upbeat atmosphere at the meeting, company officials detailed the setbacks of the past year.
Tricon’s principal U.S. distributor, AmeriServe Food Distribution Inc., filed for Chapter 11 bankruptcy in January. Tricon has been advancing funds to keep the company afloat as it awaits the proposed acquisition of AmeriServe by McLane Company Inc., a deal expected to close in the fourth quarter. Tricon took an $87 million charge in the third quarter related to AmeriServe.
“On Super Bowl Sunday of this year we didn’t know if we were going to have our restaurants open,” Novak told employees at the meeting.
Also discussed were the steps taken in the past few weeks by Taco Bell to recall taco shells at 7,000 stores worldwide after it was discovered that the supermarket version distributed by Kraft Foods Inc. contained genetically altered corn that has not been approved for human consumption. The public relations staff was applauded for its efforts to defuse a potential PR nightmare. n
