Last week, Taco Bell announced it hit the 100 million sales mark for its Doritos Locos Taco. Another announcement by the Yum Brands (YUM) restaurant chain was the introduction of its Cantina Bell menu. The new menu offering, along with the popularity of the Doritos Locos Taco have brought Taco Bell back from its recent problems and are helping the chain compete with Mexican food chains Chipotle Mexican Grill (CMG) and Qdoba (JACK).
The Doritos Locos Taco rolled out to all the Taco Bell stores back in March after a successful trial run. Taco Bell hit the 100 million mark after only ten weeks on the market. The taco features a Taco Bell classic crunchy taco wrapped inside a shell made of Doritos chips. The partnership with Pepsi's (PEP) Doritos brand has transformed a normal taco into the company's most successful product launch in the company's history. Taco Bell, recognizing the success of the Doritos Locos Taco, has already announced plans to roll out a version featuring popular Doritos Cool Ranch brand in the fall. Plans are also in the works for a Hot and Spicy version featuring the Doritos chip of the same name. With over 100 Doritos flavors, Taco Bell has found a winning combination that offers numerous possibilities. The tacos sell for $1.29, offering Taco Bell an easy $0.30 upgrade over a normal classic crunchy taco.
On July 5th, Taco Bell rolls out its new Cantina Bell menu. The new upgraded menu will help the company compete with popular offerings from Chipotle and Qdoba. Lorena Garcia, a contestant on "America's Next Great Restaurant", is the mind behind the company's new offerings. Eight new menu flavors were released by the New York Daily News.
· Whole black beans with Mexican spices
· Cilantro rice with onion, garlic, and parsley
· Citrus and herb-marinated chicken with tomatillo
· New guacamole made with Hass avocados, jalapenos, cilantro, and tomatoes
· Fire-roasted corn salsa with red and green peppers and spices
· Creamy cilantro dressing
· Pico de gallo, diced tomatoes and onions with cilantro, lemon juice and vinegar
· Vegetarian versions of salad bowls and burritos
The new menu offerings will be under $5 on Taco Bell's menu. Lorena Garcia has been a frequent guest on "The Today Show" and "The Biggest Loser". Her appearance on the upcoming "Top Chef Masters" on Bravo Channel may get the new menu offerings some free publicity as her name will forever be linked to the Cantina Bell menu. Test stores in California offering Cantina Bell menu offerings saw improved sales during lunch and dinner. The company reported an increase in female customers at stores during the test phase as well.
Another upgrade to Taco Bell stores is its introduction of breakfast at over 750 locations. Taco Bell rolled out its First Meal menu offering in January across 10 western states including Arizona, California, and Colorado. Taco Bell partnered with Johnsonville, Cinnabon, Tropicana, and Seattle's Best Coffee (SBUX) to offer unique breakfast offerings. Breakfast offerings range in price from $0.99 to $2.79, with combo meals costing $3.99. After a successful launch on the western part of the United States, Taco Bell will expand to Eastern states in 2013. The fast food giant will expand its breakfast offerings to stores nationwide by 2014. Another idea in the works is making breakfast options available during the late night hours to combine First Meal with Taco Bell's popular Fourth Meal offerings.
Yum Brands has been an investor favorite as it expands its number of stores in growing markets like China and India. The company is in fact the largest restaurant company in the world in number of stores. In February, the company acquired a controlling interest in Little Sheep, a Chinese chain of restaurants. The company also sold off two of its smaller restaurant brands in Long John Silver's and A&W. Yum Brands has also turned its focus to its three existing United States restaurant brands.
In the company's most recent first quarter, all three restaurant chains reported positive same store sales growth in the United States. Taco Bell led the way with same store sales growth of 6%, versus Pizza Hut (5%) and KFC (2%). Yum Brands owns 22% of its chains, while the rest remain franchised. Yum Brands goal is to own close to 16% of the fast food restaurants. The strong growth of Taco Bell's sales, along with new innovations for the menu, should lead to strong demand for franchisees to buy existing stores or open new ones.
With over 5600 locations across the United States, Taco Bell clearly has the lead in number of units amongst Mexican chain restaurants. Chipotle has been beefing up its number of stores across the United States and has long appealed to health conscious consumers. Taco Bell's new Cantina Bell menu offerings could have a strong impact on Taco Bell's same store sales growth as it can take some customers away from Chipotle and Qdoba.
Yum Brands shares have been knocked down over fears of global sales. Perhaps now is the time to jump into a company that still remains strong in the United States. Yum Brands is still growing its market share, just at a slower global pace. If you are looking for a restaurant stock for the long run, Yum Brands is worth researching.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.