The Brooklyn Paramount Theater is a 97-year-old music venue on the corner of Flatbush and Dekalb in downtown Brooklyn, New York, designed in the French Baroque style of architecture. It was initially created as a movie house, but is known more for introducing the region to jazz greats like Ella Fitzgerald, Duke Ellington, Miles Davis and Dizzy Gillespie.
At one point it was converted into a basketball court before a recent renovation brought it back to its lavishly designed, musical roots and now it hosts a steady stream of acts like Stereophonics, Ganja White Night and Japanese Breakfast.
Yet the half-block-long line outside the theater last week was not there for guitar riffs or vocal progressions but Crunchwraps and Baja Blasts.
Just because the 400 or so attendees were there to see Taco Bell and not Poppy didn’t make them any less enthusiastic. They wore Taco Bell t-shirts. One wore a giant foam taco hat. Another was dressed like a Taco Bell mild sauce packet.
Emily in Paris actress Ashley Park was the emcee. Influencers could film themselves in front of a Live Mas Live backdrop as they walked in. There was a bell on a brightly lit portico that attendees could ring, sending the sound of Taco Bell’s famous bell echoing across the hall.
A succession of executives revealed new items they were testing or handed out awards to influencers, all bathed in purple lights. Customers gasped and applauded as Taylor Montgomery, the chain’s chief marketing officer, announced the year’s coming menu items like the Midnight Baja Blast and the Crunchwrap Slider.
There was a DJ and plenty of dramatics, such as a “big reveal” of a pop-up version of Taco Bell’s beverage-focused in-restaurant concept Live Mas Café, and a grand finale announcing the Queso Crisp Taco, featuring a shell made entirely from crispy cheddar cheese. There was a confetti shower at the end and afterward everybody ate the new items to loud music.
“It shows to the people that matter most, our fans, that we put our money where our mouth is, and we’re walking the walk,” Montgomery said in an interview. “That’s what they ask from us. So doing this shows our fans that we’re listening to them.”
Only a handful of U.S. consumer companies could do this, and none of them are restaurant chains. McDonald’s can’t do it. Neither could Chick-fil-A or Subway.
Sure, Taco Bell has tapped into consumers’ social media-driven demand for more excitement from their everyday fast food. But it is also unique among domestic restaurant chains, certainly the biggest ones, in that it has permission to just keep throwing new stuff out there. In an era in which more chains thrive by selling just one thing, like chicken fingers, Taco Bell thrives by giving its customers, or fans, a steady stream of new items.
More importantly, the company has the franchisees, the unit economics and the business model to do all this new stuff without destroying service—which is important, because Taco Bell seems hell-bent on doing a lot more of it.
Attendees lined to get into the Brooklyn Paramount before Taco Bell's Live Mas Live. | Photo by Jonathan Maze.
Category of one
Glen Bell created a version of the Crunchy Taco in 1951 and started a drive-in taco shop three years later. The first Taco Bell restaurant opened in 1962. Its first franchisee opened a location two years later, and by 1967 the chain had 100 locations.
Today Taco Bell is the country’s largest Mexican brand and the nation’s fourth-largest restaurant chain. Executives with parent company Yum Brands like to call the chain a “category of one,” making that remark almost any chance they get.
They’re not wrong. None of Taco Bell’s quick-service Mexican competitors come close to the chain’s scope.
In 2023, Taco Bell was 8.5 times larger than the rest of the fast-food Mexican category combined. And it was 29% bigger than the category if we added the fast-casual Chipotle in there for good measure.
But that’s not the only way Taco Bell stands out. It remains the jewel in the Yum crown, particularly in the U.S., where sister chains KFC and Pizza Hut have been struggling. At one point all three of Yum’s chains were the biggest in their respective sectors. Pizza Hut has since ceded that title to Domino’s, KFC to Popeyes.
Taco Bell now accounts for 80% of Yum Brands’ U.S. profit.
Among the broader industry, Taco Bell has been a consistent performer. It has had just three negative quarters since the end of 2011. Only Texas Roadhouse—which has had just one negative quarter since 2009—can say the same thing.
Taco Bell also boasts strong store-level profitability of 24%. That, plus the fact that it really has no major competitors, has helped the brand lure some of the industry’s strongest large-scale franchisees, many of whom paid top-dollar to acquire their stores.
Taco Bell restaurants generate the highest valuations among franchisee stores in the restaurant industry, approaching 10 times EBITDA, or earnings before taxes, depreciation and amortization. “It’s expensive,” one operator told me. Ten of the 20 largest restaurant franchisees in the U.S., including the biggest, Flynn Restaurant Group, own at least some Taco Bell locations, according to the publication Franchise Times.
It’s an active group. One of those franchisees, Pacific Bells, has taken initiative to go into a CloudKitchens facility in Wisconsin. Another, Border Foods, was the driving force behind the creation of the two-story, four-lane drive-thru Defy prototype. Others eagerly build fancier Cantina units.
Another, the Alabama-based Tacala, operates 350 locations. “We have a year-end celebration where we take the top, top, top, best-of-the-best GMs,” said Jason Kidd, Taco Bell’s chief operating officer. “For 10 years in a row, they send the most GMs to that.”
Many of these franchisees have pushed in recent years for more innovation, and they’ve had a receptive management team. Taco Bell in recent years has had a succession of marketing and sales-driven chief executives, three of whom have been named the Restaurant Business Restaurant Leader of the Year: Greg Creed, Brian Niccol and Mark King.
The current CEO, Sean Tresvant—one of the restaurant industry’s only Black CEOs—spent 15 years with Nike, where he had been chief marketing officer of the Jordan Brand, and golfed with the basketball great himself, before he jumped to Taco Bell to be the chief brand officer in 2021. He was promoted to CEO at the start of last year.
Those CEOs have taken an established playbook and run with it effectively enough to keep up that string of success. But they also understood one of Taco Bell’s fundamental advantages: Mexican food is generally easy to play with.
What’s more, the brand has never portrayed itself as truly authentic. It doesn’t take itself too seriously, either. As such, its customers give the company permission to take the menu in a lot of different directions. So it can serve decidedly not-all-that-Mexican items like chicken nuggets and fries, or an Ube-Strawberry Cookie.
“We humbly believe we’re the most innovative brand in the world,” Montgomery told Wall Street analysts on Tuesday morning of what Taco Bell called its “Consumer Day.” “When we are on our game and have a cadence of new products, we can beat the category by 5-6-8 points.”
David Gibbs, Yum’s CEO, stood before a photo showing Taco Bell’s menu variety and compared it with photos of burgers and fries that dominate the menus of some other top chains. “Everybody’s price-chopping it,” he said. “Everybody’s playing the same game. And then there’s Taco Bell, playing a category-of-one game.”
Not everything Taco Bell does works. During Live Mas Live, the company played an “In Memoriam” segment of its failed chicken products, such as 2015’s Chicken Biscuit Taco, the Naked Chicken Chalupa, the Chickstar from 2018 (“Why did we name it that? I don’t know,” Montgomery said) and chicken wings (“We actually brought it back twice, you said, ‘you shouldn’t have done it the first time,’” Montgomery said.)
Then there’s breakfast. Taco Bell introduced breakfast in 2014. The company allowed operators to stop serving the daypart during the pandemic, then reintroduced a more focused breakfast in 2022 featuring ads starring the comedian Pete Davidson—only to allow operators to pull out of the daypart again last year.
Breakfast is the most habitual of dayparts and it’s difficult for restaurant chains to break into the market even under the best of circumstances. Moving in and out of the morning only makes it that much more challenging. But Tresvant believes it can come back.
“Breakfast is still very important,” Tresvant said. “You will see it come back. You will see it come back in a big, bold, and most importantly, consumer-right way.”
Taco Bell's new menu features interesting ingredients, such as the Short Rib Chili Releno Burrito. | Photo courtesy of Taco Bell.
Big plans
Taco Bell nevertheless plans to keep new products coming. It wants to get its average unit volumes, now $2.2 million, to $3 million by 2030, or 36% growth in five years. It’s only a moderately aggressive goal. Between 2018 and 2023 the chain grew those volumes by 29%.
This year will be a test of its ability to keep pumping out new products that keep those fans interested. After a particularly productive year on the marketing front in 2024, Taco Bell plans to double the number of new products it introduces in 2025.
“We’re at our best when we’re pushing the limits and the boundaries of what’s possible for consumers and for us as a rebel brand,” Montgomery said. “That’s our role in the world.”
Few brands could introduce this many new products, and certainly it would be difficult to do so without stressing restaurant teams and franchisees. Most big brands right now, like McDonald’s and Chipotle, keep their new products to a relative minimum. Chick-fil-A doesn’t introduce a new product without removing it from the menu first. Others, like the sandwich giant Subway, encounter resistance from franchisees who think the new products drive up complexity without a comparable boost in sales.
Adding that many new products isn’t easy, even for a brand like Taco Bell. But the company and its franchisees have made it work, at least thus far. Kidd noted that it already has the fastest drive-thru in the industry.
But the company does plan to bolster service levels, through what Kidd called “meaningful moments” between employees and customers. Improving service levels at the restaurant level translates into meaningful sales growth.
Improved service generates sales, too. Taco Bell has a comprehensive, five-star rating system for its restaurants. For every half-point improvement on that system, a restaurant generates another two points in same-store sales, Kidd said.
Digital also can help. The company plans to add technology throughout its restaurants, using parent Yum’s Byte by Yum platform. That could help with operations, as its AI capabilities improve service.
That could also help profitability: Stores that do 50% or more through digital sales generate higher profit margins and those that do less digital sales. The company is giving customers some bells and whistles to encourage more of those sales, such as a tool in its mobile app enabling customers to name their own burrito.
Still, getting to that $3 million figure will require the brand to keep up with new products that both play to consumers’ demand for value and push it into new occasions, exposing it to new customers.
Confetti fell after the conclusion of the Live Mas Live presentation. | Photo courtesy of Taco Bell.
Chicken, beverages and value
Last October, Taylor Frankie Paul, the social media influencer and star of the Hulu series The Secret Lives of Mormon Wives, went to Taco Bell for a TikTok post and then filmed herself pouring creamer into her Baja Blast. “It just makes it that much better,” she said.
The result of this post was the “Dirty Baja Blast” made its debut at Taco Bell’s beverage-focused, concept Live Mas Café. “I’m not sure why we didn’t think of it earlier,” Montgomery said. They probably didn’t because “dirty sodas” are a relatively new invention out of Paul’s home state of Utah that are only now gaining in popularity.
Beverages are a big and growing business right now and Taco Bell wants a part of it. The company wants to sell $5 billion worth of beverages per year by 2030, a substantial goal given that Taco Bell now generates about $16 billion in sales worldwide.
Live Mas Café features a menu of about 30 beverages, the bulk of them caffeinated, such as Rockstar Energy Refrescas or specialty coffee drinks as well as canned versions of both. It’s designed to be an in-restaurant café, which alone could drive sales.
Yum executives seem bullish on the concept, and Gibbs said beverages is a business where Taco Bell is “welcome to play.” But it would have company on that particular playground: McDonald’s is also making a beverage push, and drive-thru beverage concepts like Dutch Bros, Scooters and 7 Brew represent the biggest growth area of the restaurant industry right now.
If Taco Bell can succeed on beverages, it will give the company an entirely new canvas on which to push new products onto those fans. But Montgomery said the company has to stay true to who it is, and indeed the beverages it offered also included items like Churro Chillers with flavors like Mexican Chocolate. “We’ve got to do things our way,” Montgomery said.
Beverages could give Taco Bell the additional occasions it craves. People drink more often during the day than they eat, which is why this is such a growth area for restaurants. And that could also provide the boost that the chain needs to get that wayward breakfast business back on track. “Live Mas Café could be a way to bring back breakfast,” Tresvant said.
That’s not the only way the company believes it can get occasions. Fries are one such boost. Taco Bell recently made Nacho Fries permanent, which can drive more occasions.
So could chicken. In December the company introduced Crispy Chicken, the chain’s chicken nugget product. It sold out in two weeks. But it also boosted Nacho Fries sales by 20%. Taco Bell plans to bring that product back for 21 weeks this year.
That also could help fuel another of the chain’s major efforts, building chicken sales. Like beverages, Taco Bell wants to build chicken into a $5 billion business by 2030. Taco Bell plans to bolster the Cantina Chicken menu that helped the company generate such strong sales last year.
That also pushes the chain into higher-end territory where it hopes to compete more directly with fast-casual competitors. And indeed, many of the items the company tested featured ingredients like poblano peppers and short rib, ingredients one doesn’t normally think of when it comes to Taco Bell.
“We need to elevate the brand in order for us to compete with some of the other fast-casual competitors,” Montgomery said. “We have to get the consumer to think of us in a different way.”
But it’s worth noting that the company isn’t abandoning the value customer, which is a big reason the brand has remained strong through an otherwise difficult period for restaurants. The U.S. consumer simply views Taco Bell as a value option, and the company’s innovation push makes them think they’re getting something worth the price they’re paying.
Eighteen percent of Taco Bell sales come from its value offerings, but customers who order that value tend to spend more. Yet the company is also doing things such as adding a price tool to its mobile app. Customers can give the app the amount of money they can spend and the software gives them meal recommendations.
The combination gives Taco Bell a true barbell menu strategy. Its customers think it’s cheap, even if they’re ordering the bigger stuff. And the company has given customers plenty of innovative new items on its value menus, such as the $5 $7 $9 Luxe Boxes the chain introduced in January.
Montgomery said that the strategy is to give customers what they want, whether they come in needing to spend less than $10 or more than $15. “For us, it’s how do we be relevant for customers every day?” he said. “How do we actually create solutions to develop those two things? Which is why you can come in, you can get something off the traditional value menu for $3 or less, or you can go get an extremely expensive product.”
Time will tell whether Taco Bell is able to keep up this level of innovation enough to get to 2030 with those higher unit volumes. Keeping up with an ever-changing consumer fed by an almost constant craving for new products has to be tough. But the company appears unfazed by any pressure. There are just too many menu possibilities with the Taco Bell menu.
“The limits are endless,” Montgomery said. “If we’re doing our job right, we’re always pushing down more innovation, better value, more occasions. That’s where we’re at our best. And if we’re on our game, nobody can touch us.”