Taco Bell’s same-store sales rose 3% in the third quarter, thanks largely to the chain’s drive-thrus, which served 30 million additional cars over the three-month period than a year ago, and did so at a much quicker pace.
Yet the company’s breakfast daypart has been a particular problem. It now represents just 4% of sales, down from 6% historically, executives with parent company Yum Brands said on Thursday. More than half of the chain’s stores are serving breakfast.
The decline in the breakfast business therefore hurt Taco Bell’s same-store sales by two percentage points. “It’s nothing we can’t overcome,” Yum CEO David Gibbs said on the company’s third-quarter earnings call on Thursday.
Breakfast has been a major problem during the pandemic. With many commuters now working from home, fewer are stopping at fast-food drive-thrus in the morning to grab a Breakfast Crunchwrap.
The weak morning daypart has affected other fast-food chains, too, including Burger King.
At the same time, competition has intensified. Wendy’s started adding breakfast in March and quickly grew the daypart to 8% of total sales in the second quarter, a strong early performance for the brand. The company is now spending money pushing the daypart.
And McDonald’s, the leader in the quick-service breakfast category, has pushed the daypart hard—it is debuting new bakery offerings, for instance. The company has stressed that its market share in the morning has grown through the pandemic even as sales fell, and in September breakfast same-store sales turned positive.
Taco Bell launched breakfast nationwide in 2014 and pushed it aggressively. The company began letting operators close in the mornings during the pandemic to help them cut costs and improve profitability.
Executives said they still have faith in the daypart for the chain. “Obviously we are committed to breakfast long term and expect to be back into that with all stores as time goes on,” Gibbs said.
It’s a completely different story in the chain’s drive-thrus, which have been driving much of the chain’s success in recent months.
The company served 30 million more cars in the period. “Drive-thru demand skyrocketed this quarter,” Gibbs said. But the company also sped its service: Average service times through the lane improved by 17 seconds year over year.
That has led the company to develop a redesign, Go Mobile, that envisions double drive-thru lanes and more integrated technology—Gibbs promised the prototype would have a “better experience for customers and better economics for franchisees.”
Gibbs said Taco Bell’s focus on family size meals has helped sales as consumers get larger orders during the pandemic. He also said the company’s focus on delivery and its loyalty program have also helped. Its menu cuts, meanwhile, have helped the chain’s margins and its speed through the drive-thru, while also giving the brand room to innovate, such as with its new Grilled Cheese Burrito.
“I think Taco Bell always has their finger on the pulse of the consumer,” Gibbs said. “That’s what makes the brand great.”
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