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New Taco Bell Owner to Turn Up the Heat

Restaurants: Fast-food chain's execs hope to reverse sluggish sales in post-PepsiCo era.

October 08, 1997|GREG JOHNSON | TIMES STAFF WRITER

Taco Bell Corp. executives on Tuesday pointed to revived quarterly sales and new dinner products under development as proof that the Mexican-style fast-food chain is poised to rebound under its new corporate ownership.

Taco Bell and sister companies Pizza Hut and KFC were spun off Tuesday by PepsiCo Inc., which is focusing on its core soft drink and snack businesses. The restaurant chains, with combined revenue of $10 billion, are now owned by Tricon Global Restaurants Inc., which fell 88 cents to $31.13 on its first day of trading on the New York Stock Exchange.

Although the drop suggests shareholders sensed a bittersweet taste to the Louisville, Ky.-based company that trades under the YUM stock symbol, restaurant company executives argue that life without PepsiCo should make it easier to drive sluggish fast-food sales and profits.

"We now have a company that's focused on the restaurant business," said Peter Waller, president and chief concept officer of Irvine-based Taco Bell. "We have a company that really understands the restaurant business, that has plans to build upon holdings that shareholders now value at about $10 billion."

Restaurant industry analysts agree that the spinoff should allow Taco Bell, Pizza Hut and KFC to pay closer attention to their core businesses.

"Key people at packaged-goods and bottling companies like PepsiCo don't come into contact with customers very often, but in the restaurant industry, you're always in contact with customers," said Pacific Palisades restaurant consultant Ray Coen. "And that difference has hurt PepsiCo's restaurants."

Taco Bell and its sister companies also have been subject to PepsiCo's practice of "moving executives around to help establish career tracks," said Randall Hiatt, a consultant with Irvine-based Fessel International.

Taco Bell stumbled badly during 1995 and 1996 as its emphasis on inexpensive food was eclipsed by rivals who were more successful in courting 18- to 24-year-old males who drive fast-food sales.

After six consecutive quarters of declining same-store sales, Taco Bell reported a sluggish 2% increase in the restaurant industry yardstick for the first half of 1997.

Waller said he expects "good news for the third-quarter results. . . . We have momentum at Taco Bell."

In June, Taco Bell unveiled a $200-million campaign that is designed to rebuild its image among young males.

Waller said that the ads, from TBWA Chiat/Day in Venice, featuring pink-clad wrestlers and Chihuahua dogs are working: "The ads are hitting a home run in terms of what Taco Bell is about. Things have been going well since they were introduced."

Waller said Taco Bell, best known for it lunch menu, will soon introduce new products aimed at building its slow dinner traffic.

A new emphasis on heftier, dinner-type products would "push check averages up, increase frequency and drive traffic," Hiatt said. "That's the story of the fast-food business, which is still very much a product-driven business."

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