Should Taco Bell Stick To ‘Fourth Meal’?

In March, Taco Bell launched its line of breakfast options, taking aim at the McDonald’s classic McMuffin and other morning offerings. Yum Brands’ Taco Bell left no question unanswered when the restaurant used real-life Ronald McDonalds in their TV campaign for the breakfast menu launch — McDonald’s was their intended target.

So, how is that working out for Taco Bell? Perhaps, more importantly, what does it mean for McDonald’s?

AdAge reports that Yum Brands CEO David Novak said in an earnings call recently that the restaurant’s breakfast revenue accounted for about seven percent of total sales in the quarter. Food industry consulting firm, Technomic, says Taco Bell had nearly 5,500 restaurants at the end of 2013, and using the seven percent figure, the company could see as much as $641 million in breakfast earnings at year’s end.

Those figures sound pretty impressive until you realize that the McDonald’s U.S. breakfast sales revenue alone tops earnings from the entire worldwide Taco Bell chain; about $8.9 billion, according to Technomic.

So Taco Bell may not take out McDonald’s in the ‘good morning’ game, but that doesn’t mean that they should just throw in the towel. Novak said the breakfast initiative has already turned a profit for the company and expects each restaurant to see as much as $120,000 in increased annual sales. He also said that overall sales have increased from the year prior by two percent.

McDonald’s may still have plenty of people lovin’ the McGriddle, but there’s a pretty decent market for Taco Bell’s A.M. Crunch Wrap, Waffle Taco and Cinnabon® Delights™. (I, uh, know someone that does Taco Bell breakfast a lot.)

Regardless of your breakfast preference, both brands have their own challenges. The release this week of McDonald’s second-quarter sales shows a 1.5 percent drop. Meanwhile, Taco Bell, which saw significant sales boosts in the past two years with the release of the Doritos Locos Taco and the Cool Ranch Doritos Locos Taco, are seeing those numbers level off, and the recent introduction of new Dorito-flavored shells has been more of a sputter than a bang.

Novak said on the earnings call that the Spicy Chicken Cool Ranch Doritos Locos Taco “under-performed” versus expectations. “We believe it ended up being too much of a niche product to overlap the 15 percent growth we’ve had over the past two years with the introductions of Doritos Locos Tacos and then Cool Ranch.”

Fortunately for fast food fans that enjoy variety, Taco Bell’s business model includes the release of numerous new products each year. In May, the chain was reportedly testing new items in select markets, including the Breakfast Quesarito and the Rolled Chicken Taco (aka Taquito).

[image: Taco Bell]