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Alcohol may be game changer at Taco Bell, and McDonald’s could use a boost

Alcohol may be game changer at Taco Bell, and McDonald’s could use a boost


Source: USA Today

Rick Munarriz, The Motley Fool

September 22, 2015


It will finally be perfectly natural to have a frozen margarita or a craft brew at Taco Bell. Yum Brands’ (NYSE:YUM) first Taco Bell Cantina opens later today in Chicago’s Wicker Park neighborhood, and if the store is generating any kind of buzz it’s not just because it’s at the site of a former sex-toy shop.


Taco Bell Cantina will be the first Taco Bell-branded concept to serve alcohol. Guests can pair up their dirt cheap chicken chalupas and ground beef gorditas with beer, wine, or sangria. There’s also the option to add rum, vodka, or tequila to any of its frozen or fountain beverages, birthing new twists on margaritas and icy rum punch drinks.


It could be a game changer for Taco Bell, going along with many other Taco Bell Cantina upgrades over the flagship format that include exhibition kitchens, tapas-style additions to the menu, and free Wi-Fi and charging outlets that encourage diners to stick around for a change.


Adding alcohol is no longer taboo. If it’s good enough for the market darlings in fast casual and premium coffeehouse concepts to add alcohol to the menu, why not Taco Bell? If it’s good enough for Taco Bell, why not McDonald’s (NYSE:MCD)?


McDonald’s could use the boost. Quarterly comps have been negative in the U.S. since late 2013, and it seems as if simplifying or complicating its food offerings haven’t done the trick. We’re now just two weeks away from McDonald’s going national with serving breakfast all day, but what if the Egg McMuffin doesn’t save the day?


There are plenty of reasons why McDonald’s and alcohol wouldn’t work.


    Taco Bell Cantina isn’t hiring any minors. Can you imagine McDonald’s without the perpetually replenishing task force of angst-riddled teens?

    Serving alcohol requires extra attention to security.

    Families can stay away, seeking out a more wholesome environment.


However, it’s also apparent that serving alcohol hasn’t held back the gourmet burger chains including Shake Shack, BGR, and BurgerFi. If McDonald’s is aspiring to go upmarket – and it is, if you’ve seen the new ads where it’s trying to pass off its buttermilk chicken sandwiches as food-truck fare – it may need to complete the experience by letting burger eaters get their drink on.


There are additional costs to keeping McDonald’s safe in a post-alcohol future, but they should be more than offset by the incremental sales of high-margin adult beverages.


The fear that families will stay away is overblown. They’re doing that anyway, and unlike McDonald’s, many of the liquor-friendly outlets are actually experiencing upticks in comps.


More importantly, adding the right beverages could improve the brand’s standing. Lord knows that the brand’s perception in the eyes of consumers can’t get much worse. Adding “craft beer” to the menu by singling out local brews would score some serious points with more than just fry-pinching hipsters.


McDonald’s would probably want to start slow. Craft brews and spiked McCafe coffee beverages would set the right initial tone. If sales and traffic move higher then it could expand the offerings. The only thing that McDonald’s can’t do is stand still. Mr. Market’s sobered up and he now expects more out of the fast-food icon.