Taco Bell was sitting solidly in the sweet spot for fast food in troubled times. <\/p>\n
The Irvine-based chain had developed a menu that was affordable enough for consumers worried about inflation and also fun enough for those looking for more than just hamburgers and pizza. Its sales and stock price were soaring. Then came cyclosporiasis. <\/p>\n
A massive parasitic outbreak<\/a> has taken Taco Bell down a peg, and now it has to rebuild its momentum. <\/p>\n \u201cThe brand has seen a meaningful near-term sales impact,\u201d said Chris Turner, chief executive of Taco Bell\u2019s owner Yum Brands, on an earnings call Thursday. \u201cOur teams are acting quickly and transparently while keeping the safety and well-being of our consumers as the top priority.\u201d<\/p>\n Unfortunately for Taco Bell, it has become one of the biggest names associated with the outbreak. <\/p>\n Last month, the Centers for Disease Control and Prevention announced that shredded lettuce served at Taco Bell in five states was the source of more than 1,600 cyclosporiasis infections. In comparison, an E. coli outbreak linked to McDonald\u2019s<\/a> in 2024 infected around 100 people. In 2010, a salmonella outbreak tied to Taco Bell sickened 155 people. <\/p>\n Still, on Thursday, the company reported<\/a> same-store sales increased 7% in the second quarter, marking the ninth consecutive quarter of same-store sales growth that outpaced industry averages. Yum Brands, which also owns KFC and Habit Burger and Grill, saw operating profits increase 5% to $655 million year over year. <\/p>\n Caused by the parasite cyclospora, cyclosporiasis<\/a> can cause diarrhea, fatigue, cramping and weight loss. More than 90 people have been hospitalized as a result of the outbreak in Indiana, Kentucky, Michigan, Ohio and West Virginia.<\/p>\n How Taco Bell and others in the food industry touched by the outbreak recover will depend on how long it lasts, said Aneurin Canham-Clyne, a reporter for the trade publication Restaurant Dive. <\/p>\n \u201cIt\u2019s a very large outbreak,\u201d he said. \u201cBut if you look at chains that have really suffered in the long term from reputation harm from outbreaks, it usually takes repeated outbreaks, and it usually takes outbreaks that kill people.\u201d<\/p>\n On July 17, the same day the CDC announced the link to Taco Bell, the chain issued a release<\/a> saying it had completed removal of affected Taylor Farms lettuce from its restaurants. Taylor Farms also issued a recall that day of all iceberg lettuce<\/a> sourced from Central Mexico from a certain time period. <\/p>\n According to Placer.ai, Taco Bell\u2019s foot traffic dropped 31% on July 17 and was down 30% the next day. <\/p>\n Yum\u2019s shares lost as much as 12% from their July peak. <\/p>\n \u201cConsumers would reasonably be wary about eating at Taco Bell for some time, even after the brand gives its all clear,\u201d Canham-Clyne said. \u201cThere\u2019s reason to be immediately suspicious of the idea that a problem like that could be rectified in one day.\u201d<\/p>\n Taco Bell was founded<\/a> by Glenn Bell in 1962 in Downey and opened its 100th restaurant in Anaheim by 1967. The company went public in 1970 and moved into its current headquarters<\/a> in Irvine in 2010. <\/p>\n Before founding Taco Bell, Bell drew inspiration from his friends and neighbors at Mitla Cafe in San Bernardino to create his own version of a crunchy taco.<\/p>\n Before the outbreak, Taco Bell had found its stride \u2014 and analysts say its operational advantages could carry it through the rough patch. <\/p>\n Experts say Taco Bell\u2019s secret sauce isn\u2019t just one flavor<\/a> \u2014 the brand has achieved cultural relevance, menu innovation and compelling value that keep customers coming back. <\/p>\n \u201cTaco Bell has long been known as a very strong brand and has managed to stay very relevant<\/a> to younger consumers and to the culture, despite being 60 years old,\u201d said Sara Senatore, a Bank of America senior analyst covering restaurants.<\/p>\n Senatore also credited past Taco Bell chief executive Brian Nichols for ramping up the restaurant\u2019s digital presence and bringing more customers to its app for ordering ahead and rewards programs. Nichols served as chief executive for Taco Bell for three years before leaving in 2018 to fill the same role at Chipotle. In 2024, he was hired as chief executive for Starbucks. <\/p>\n Fast food brands including Jack in the Box, Wendy\u2019s and Carl\u2019s Jr. have struggled<\/a> under the pressure of several forces this year, including a low-income consumer group that\u2019s squeezed by inflation, rising food and labor costs and increasing competition with fast casual and casual dining alternatives. <\/p>\n \u201cAnywhere you look, the below-average-income consumer has been pressured, and that\u2019s a function of broader inflation<\/a>,\u201d said Brian Harbour, an equity analyst at Morgan Stanley. \u201cMore recently, it\u2019s a function of gas prices.\u201d<\/p>\n But Taco Bell, led since 2023 by Chief Executive Sean Tresvant, has mastered its branding and digital appeal skillfully enough to overcome these obstacles. Tresvant previously worked for Nike as chief marketing officer of the Jordan brand, which is wildly popular among younger consumers \u2014 the same group that often frequents Taco Bell.<\/p>\n Yum Brands Chief Financial Officer Ranjith Roy said the brand has a long-term growth opportunity in the U.S. of more than 10,000 stores. <\/p>\n Some of Taco Bell\u2019s advantages come from its choice of cuisine. Mexican-inspired fast food can pack in more flavor than burgers and chicken sandwiches and offer more room for innovation. There\u2019s also less competition and more opportunity for filling meals without expensive ingredients<\/a>. <\/p>\n \u201cFrom a value perspective, Taco Bell just has always been known for very, very sharp value,\u201d Senatore said. \u201cTaco Bell can afford to offer price points of 99 cents or $1.99 because for something like a bean burrito, the cost is going to be much lower than a hamburger, and it can still be very satiating.\u201d<\/p>\n Taco Bell\u2019s Luxe Value Menu<\/a> offers 10 items for $3 or less, including a spicy potato soft taco for $1.69 and a cheesy bean and rice burrito for $1.89. It also has a customizable Luxe Cravings Box that comes with three items and a drink for $7.99.<\/p>\n In comparison, the Jack in the Box medium Classic Smashed Jack Combo comes with a quarter-pound cheeseburger, fries and a drink for $12.29. Chipotle\u2019s chicken burrito with rice, beans, cheese and salsa, plus a side of chips, totals $12.50.<\/p>\n Taco Bell wins customers over with creative menu options, experts said. They sell tacos with Dorito shells, nacho-seasoned fries and a Mexican pizza<\/a>. <\/p>\n While some fast food joints have over-innovated to the point where customers see it as tiring or gimmicky, Taco Bell appears to have found the right balance. <\/p>\n \u201cIn almost any other restaurant, Taco Bell\u2019s pace of innovation<\/a> would seem too fast-paced, but I think that the Taco Bell customer base welcomes that and responds to it,\u201d said Harbour from Morgan Stanley. <\/p>\n