There's a new concept cooking at Yum! Brands (NYSE:YUM). When Taco Bell Cantina opens in Chicago's Wicker Park neighborhood next week -- followed a few days later with an opening in San Francisco's SoMa district -- hungry patrons will be treated to more than just the quick-service chain's cheap Mexican staples.
Taco Bell Cantina is making waves because it's Yum! Brands' first foray into serving alcohol at one of its chains. Taco Bell Cantina will offer beer, wine, and sangria. Guests will also be able to add rum, vodka, or tequila to any fountain or frozen beverage, opening the door for a line of Twisted Freezes that include margaritas.
However, there's more to Taco Bell Cantina than just spiked drinks. The new urban locations feature updated decor, open kitchens, and no drive-thru windows. If that's starting to sound more and more like Chipotle Mexican Grill (NYSE:CMG) -- the market darling that has many of the same features including a move two years ago to add margaritas to its menu -- step up to claim your free Doritos Locos Taco.
Chipotle fans will argue that there's no way that someone craving a barbacoa bowl or carnitas burrito would settle for a Taco Bell Cantina. That may be true, but keep in mind that Taco Bell Cantina's going to offer an even wider menu than that nasty ground beef gordita that made you swear off the chain years ago. Taco Bell Cantina will offer tapas-style shareable apps including chili cheese nachos, rolled taco platters, mini quesadillas, and chicken tenders at compelling price points between $3 and $5 each.
Holding out for the last laugh
The late-night shows had a field day when it was revealed earlier this year that the Chicago location has applied for a liquor license.
"It was reported that a Taco Bell in Chicago may soon start selling alcohol, which is weird because usually it's alcohol that sells Taco Bell," Saturday Night Live's Michael Che said during the show's Weekend Update segment.
Nice shot, but the fact that Taco Bell has positioned itself for late-night "fourth meal" binges actually helps more than hurts here. It already appeals to the millennials that liquor-fueled concepts aim to attract.
This is also the kind of company that can ramp up a winning concept quickly. Whether we're talking about new locations or converting some of its 6,257 existing Taco Bell eateries, this is a company that can catch up to Chipotle in a hurry.
Taco Bell is already doing well. Comps posted a 6% year-over-year uptick in comps in its latest quarter, besting Chipotle's 4.3% spurt. Taco Bell's operating margins widened. It's doing better than you think, and if Taco Bell Cantina gives the fast food chain some fast casual sizzle it could mean even better things for Yum Brands and a potential challenge for Chipotle.