Does Taco Bell hate kids?

Taco Bell recently announced it plans to stop selling kids meals and toys in its restaurants at the beginning of 2014, making it the first national U.S. fast-food restaurant to kill kids meals (although west coast based Jack-in-the Box did eliminate kids meals back in 2011).


Why would Taco Bell risk alienating moms and kids?

The short answer is Taco Bell is doing a smart job of tightly targeting their consumer (the edgy millennial) and positioning its marketing and product offering to best serve that consumer. "The future of Taco Bell is not about kids meals . . . This is about positioning the brand for millennials" according to Taco Bell CEO Greg Creed.

The longer answer also includes the fact there is likely a sizable benefit to cost payout by removing the kids meals:

• Benefit:
• Remove operational complexity and inventory costs
• Trade-up to a higher ticket. A kids meal with a Crunchy Taco, Cinnamon Twists and a small beverage currently costs ~$2.84 vs. $3.17 when purchased a la carte from the full menu
• The menu space and signage can be better utilized for higher margin items
• Marketing can be better focused on core target
• Removes risk of lawsuits or negative PR around child obesity

• Cost:
• Limited as kids meals only account for half of 1% of Taco Bell's overall sales (Unlike McDonald’s where Happy Meals likely account for ~10% of sales)

So, no, Taco Bell doesn't hate kids it just loves 'edgy' millennials more and is willing to sacrifice a few consumers to do a better job targeting its core consumer.

Who let the Red Lobsters into the Olive Garden?

Darden Restaurant Inc, the operator of Red Lobster and Olive Garden, has opened three Red Lobster - Olive Garden combined store locations in smaller cities that they believe cannot economically support standalone locations.

As the picture below shows, the locations have two separate entrances entrances and dinning rooms, but reportedly share a bar area, kitchen, and bathrooms. Customers in one dinning room cannot order from the menu of the adjoining restaurant.

On the surface the strategy appears to make strategic sense, reach new customers by creating economies of scale to control costs and deliver incremental revenue.  Nevertheless, I question the overall strategy.  I would argue both restaurant chains have lost they way from their historic brand compasses and now currently suffer from a lack of authenticity.  For example I would venture to guess that many middle class Americans question how fresh the seafood at Red Lobster really is, while Olive Garden is hardly seen as real italian.  The fact that consumer sentiment has drifted from these initial positions is due to business decisions putting profit in front of brand equity.  The two in one concept further plays up the chain aspects of both brands and helps continue diluting their authenticity.  Then there is the old marketing rule that if do two things well enough it means you don't do anything great.

While Yum brands has executed this strategy on many of their fast food and QSR brands (KFC, Taco Bell, Long John Silvers, and Pizza Hut) with a major difference versus Darden's full-service restaurants being that they usually have joint dinning rooms, which enable families to all order different foods and then sit together delivering a benefit for the customer.