Yum! Brands’ (YUM) most profitable chain in the U.S. isn’t Pizza Hut or KFC–for years, it’s been Taco Bell. With the success of Doritos Locos Tacos, the upscale Cantina Bell menu, and breakfast (available nationwide next year), the chain’s comparable sales have been up for seven consecutive quarters, including a 2 percent increase in the most recent period.
Taco Bell’s comeback is just one sign of the growing popularity of Mexican fast food in the U.S. Data from food researcher Technomic shows that sales at Mexican-style restaurants grew 9.3 percent in 2012, outpacing the 5.8 percent increase among all limited-service restaurants. In fact, tortillas now outsell burger and hot dog buns in the U.S. while tortilla chips likewise eclipsed potato and salsa tops ketchup, according to a recent Associated Press report.
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“We know that for the U.S. to have a successful year, it’s important for our most profitable U.S. brand to do well, and we certainly have a lot going in our favor at Taco Bell,” said Yum CEO David Novak during a recent earnings call. The late-night gordita joint now accounts for 60 percent of the Yum’s operating profits in the U.S. There are 5,704 Taco Bells in the U.S., about 32 percent of Yum’s total in the country.
The burger-and-fries business, meanwhile, have seen better days. McDonald’s (MCD) same-store sales grew only 0.7 percent last quarter, Wendy’s (WEN) was up 0.4 percent, andBurger King (BKW) fell 0.5 percent.
Mexican quick-service restaurants offer “high value and appeal with millennial consumers and affluent groups,” says Darren Tristano, an executive vice president at Technomic. Popular burrito purveyor Chipotle (CMG) has led the way, and the 1,525-store chain just reported a same store sales increase of 6.2 percent in the last quarter.
Even casual-dining giant Chili’s Grill & Bar (EAT), where comparable sales fell 1.9 percent last quarter, is looking for a rebound via its Mexican menu. “When you look at taco, quesadillas, fajitas, that category represents really the biggest category that we have at Chili’s. Bigger than burgers,” Brinker International CEO Wyman Roberts said during an earnings call on Wednesday. Chili’s Mexican food, he says, will give the chain an edge over casual-dining rivals.
The plan for Chili’s is to focus on that part of its menu. A Chili’s spokesperson wrote in an e-mail: “Mexican is a menu category our guests have given us all the permission in the world to expand, and with Southwestern ingredients already a part of our flavor profile, it is the natural next step in Chili’s menu innovation.”
So while burger and pizza chains remain the most popular in the U.S., diners and those trying to capture their attention are increasingly moving in a south-of-the-border direction.
