Taco Bell's Value Meals Fuel Sales Growth for Yum Brands

Taco Bell, the popular fast food chain owned by Yum Brands, has been on a roll lately, with its U.S. same-store sales rising 5% in the second quarter of 2024. This impressive growth can be attributed to the chain's value-focused menu strategy, which has resonated with consumers amidst a challenging economic climate. In contrast, other Yum Brands franchises like KFC and Pizza Hut have struggled, with same-store sales declining by 4% and 4% respectively in the third quarter of 2024.

Taco Bell's value-focused menu strategy has been a significant driver of its sales growth. The chain's Cravings Value Menu, launched earlier this year, features unique, craveable items that are not simply junior-sized versions of core menu items. This menu has served as a strong driver of sales for Taco Bell, as it offers a moat around the brand's value perception. In particular, two limited-time offers (LTOs) and a new menu slate have been particularly successful at driving sales. The LTOs include the Big Cheez It items and Nacho Fries with Secret Aardvark Hot Sauce, which have resonated with customers and contributed to the chain's sales growth. Additionally, the Cantina Chicken menu, launched in March, has been a key driver of sales, with chicken menu mix increasing by 10 points and roughly a quarter of orders including a Chicken Cantina menu item.



Taco Bell's international expansion has also contributed to its overall sales performance. The chain has been accelerating its growth outside the U.S., opening 25% of its international footprint in just the last two years. As of 2024, Taco Bell has opened its 100th restaurant in Spain, and it is on track to open 1,000 international restaurants "within the very near future." This rapid growth in international markets has helped Taco Bell reach a broader customer base and drive sales outside of its U.S. market. The chain's focus on key markets such as Spain, the United Kingdom, India, and Australia and New Zealand has allowed it to establish a strong presence in these regions and tap into local consumer preferences. Additionally, Taco Bell's strategy of betting on digital orders and opening digital-only locations and restaurants with pick-up windows dedicated to delivery drivers has further enhanced its accessibility and convenience for international customers, contributing to its overall sales performance.

In conclusion, Taco Bell's value-focused menu strategy and international expansion have been key drivers of its sales growth, outpacing other Yum Brands franchises like KFC and Pizza Hut. By offering unique, craveable items at affordable prices and expanding its presence in international markets, Taco Bell has been able to maintain single-digit same-store sales growth over the past six quarters. As the fast food industry continues to evolve, Taco Bell's ability to adapt and innovate will be crucial in maintaining its competitive edge.