Ever since quick-service chains such as Burger King and KFC have tried introducing alcohol to the mix, they’ve struggled to build sales. Taco Bell has joined the fray with a drink menu of beer, wine, sangria and alcoholic slushies at its new Cantina concept in Chicago and wine and beer at its second Cantina in San Francisco—both of which opened in September. The question is, six months in, is Taco Bell’s model succeeding where others have stumbled?
Cantina was designed as part of a growth plan geared toward capturing millennial consumers. It was important for Taco Bell to win back this audience in order to offset a decline in profits and total sales since 2012, as reported in parent company Yum Brands’ 2014 annual report. With a strategy that includes open kitchens, free WiFi, late-night hours and alcoholic Twisted Freezes, Taco Bell Cantina is aiming to look more like a hip nightspot, a move that Darren Tristano, president of market research firm Technomic, says “is shifting Taco Bell more toward a strength of theirs: that fourth meal.”
Straying from the traditional model appealed to Chicago franchisee Neil Borkan. “I think that Cantina has a purpose in the QSR arena, filling a void for people who want to enjoy our food in a comfortable place, to relax and have a drink, without rushing, and without the expense,” he says. It follows in the footsteps of KFC Eleven and BK’s Whopper Bar, but the former (now closed) had fast-casual prices and the latter serves beer only; Taco Bell keeps the food priced at quick-service levels and has a more extensive bar menu.
As a result, young customers are considering the restaurant not only as a pop-in spot for the preparty and after-party, but as a place where the actual party takes place, Borkan says. He adds, groups of millennials are choosing Cantina for birthday celebrations, just like they would a trendy urban bar, while Tristano points out that “it gives [the Cantina] broader occasions to serve.” What that means for Taco Bell: “Profitability in adding traffic, both to the additional food-sales potential as well as the alcohol, which tends to see high margins,” says Borkan.
The question lingers whether QSRs are equipped to deal with the challenges that booze brings to the model. A White Castle location tried it but dumped the idea, claiming it didn’t work out. Baja Fresh also experimented with alcohol but no longer serves it. When Cantina opened, Eater.com made much of Taco Bell hiring a bouncer—an indicator of the problem that intoxicated customers can pose. Then there is the laborious process and cost of licensing, strained neighborhood relations, time and money associated with training staff to serve alcohol, impact on speed of service and distribution issues.
“We trained everyone, no matter how old they are,” says Borkan. “In a regular Taco Bell, older people usually work the line and the kids work the registers. In Cantina, it is the reverse, because the kids can’t ring up the alcohol.” He adds that they also hired a private service to frequently check that “everyone is doing what they are supposed to be doing—carding every customer, for example.”
Borkan says that though serving alcohol is a big responsibility, the extra training and cost have been worth it. The average check at Cantina now is 50 cents higher, he says. And the drinks are bringing repeat business from the neighborhood, as well as what he calls the “late-night, third-shift crowd.” Though traffic is strong, they are making some adjustments, rotating and refreshing the frozen- drink list and re-evaluating the wine on offer. “We are looking at the wine that we sell, because it hasn’t been a big mover for us,” he says of the individually wrapped plastic glasses of wine on offer.
Borkan is pleased enough with the results to be scouting more locations for Cantina in Chicago, while Taco Bell spokesperson Rob Poetsch says that due to the concept’s early success, more Cantinas will roll out nationwide over the next several years.
“It’s still too early to tell if Cantina will be successful,” though it does seem to be on the right track, says Tristano. “Taco Bell’s consumer base is still starting to get used to this change in the way the brand is being seen. They are continuing to appeal to their existing client base, but they’re broadening a bit more now that they’ve expanded their menu [with alcohol],” Tristano says.
Taco Bell’s previous foray into booze—the failed U.S. Taco launched in 2014 in Huntington Beach, Calif. —followed a different strategy. “U.S. Taco was really designed to go after a customer that we weren’t getting, the fast-casual-type customer, who was looking for a little more adventurous food, and was willing to pay more for it. That was the main difference between the two,” says Poetsch.
In addition, U.S. Taco was never even able to secure a permanent alcohol license and didn’t get enough foot traffic, reports contend.
The main problem, according to Tristano, was that the audience wasn’t willing to pay more, and the concept was too different from the standard Taco Bell model. “U.S. Taco’s price point was three to four times that of Taco Bell. It lost the value proposition as it upscaled,” he says.
Being able to offer a Taco Bell menu at Cantina at the same price point, with adult beverages, is a nice transitional step. “It’s similar to what McDonald’s is doing with the McCafé,” says Tristano. He concludes that Cantina can be poised for the same type of success, by following a similar plan. “Test it, roll it out,” he says, and then get it right.”