Taco Bell says that low-income customers are still flocking to its restaurants even as other fast-food chains say they're struggling to hold on to them

• The CEO of Taco Bell's parent company said the chain was doing a "great job" of retaining low-income diners.
• Demand for Taco Bell's revamped $3-and-under value menu is higher than expected, he said.
• Diners are complaining that fast food is no longer cheap in America.

Taco Bell says that it is still performing well among low-income customers even as other fast-food chains say they're struggling to keep hold of this demographic.

David Gibbs, CEO of Taco Bell's parent company Yum! Brands, said that the taco and burrito chain's restaurants in low-income trade areas in the US had outperformed the rest of the business.

"So with the low-income consumer, I know there's been a lot of talk about, 'are they dropping out?'" Gibbs said. "It looks like we're doing a great job of holding onto them."

Diners shouldn't expect Taco Bell to raise menu prices as much in 2024, he said. Yum! didn't say how much the brand put prices up by in 2023.

Taco Bell revamped its Cravings Value Menu in January by adding six new items, including a chicken enchilada burrito and loaded beef nachos, and taking other items off.

"The value menu that we've recently tweaked in the US to be $3 and under is actually over-indexing a little bit with consumers versus test and expectations, which isn't a bad thing because it's a real competitive advantage for us and it's designed to maintain franchisee profitability," Gibbs said. "We just are slowly returning to a more normal operating environment where value is always important in the category, as is convenience."

But the price of fast food across the US has soared in recent years and diners are complaining that it's no longer cheap. McDonald's said on Monday that it was seeing pressure among diners earning $45,000 and under.

"From an industry standpoint, we actually saw that cohort decrease in the most recent quarter, particularly I think as eating at home has become more affordable," McDonald's CEO Chris Kempczinski told investors.

But the burger giant is continuing to gain share among middle- and high-income diners. "The battleground is certainly with that low-income consumer," he said.

Record numbers of Taco Bell customers ordered digitally

Though Yum! also owns KFC, Pizza Hut, and Habitat Burger Grill, Gibbs said that Taco Bell made up the "vast majority" of the business' US sales and profits, contributing more than three-quarters of its US divisional operating profit.

Taco Bell had more than 8,500 restaurants globally by the end of 2023. It's dwarfed in size by sister brands KFC, with about 30,000 locations, and Pizza Hut, with around 20,000 locations.

Yum! said that Taco Bell's US systemwide sales grew 6% in the fourth quarter year-over-year and 9% for the full year.

Gibbs said that digital sales hit record levels, with 31% of all Taco Bell orders in the US placed digitally, including a big growth in the number of people ordering at its in-store kiosks.