The REAL reason why Taco Bell failed in Australia - and a household name store is to blame
- Expert explains why Mexican fast food chain flopped
- Cost of living crisis and strong competition to blame
- READ MORE: Major fast food chain on the verge of collapse in Australia
A retail expert has explained why Mexican fast-food giant Taco Bell struggled to gain a foothold in the Australian market - as it faces going under.
On Tuesday, ASX-listed Collins Foods, which also operates KFC outlets across the country, announced it will exit its Taco Bell business, plunging the chain's local operations into jeopardy.
'If a new operator cannot be identified and/or an agreement cannot be reached, other exit options will be explored,' the company said in a statement.
'Collins Foods intends to complete the transition within the next 12 months, subject to formal terms being agreed.'
Retail expert Professor Gary Mortimer pinned Taco Bell's failure in Australia on the cost of living crisis and also intense competition from household name Mexican takeaway store Guzman y Gomez and homegrown giant Zambrero.
Prof. Mortimer, from Queensland University of Technology's Faculty of Business & Law, said Taco Bell stores were mainly located in less affluent suburbs, which favour 'big meals at a great value low price'.
However, he said those areas had been hit hardest by rising living expenses, forcing families to tighten their budgets and cook at home instead of dining out.
'If you are facing increasing rents or mortgage payments, you're less likely to go out and spend 50 or 60 dollars for takeaway for the family,' he said.
The cost of living crisis has been partially blamed for the demise of Taco Bell in Australia
Professor Gary Mortimer from the Queensland University of Technology's Faculty of Business & Law believes Taco Bell's failure in Australia comes down to a combination of factors
Many of the suburbs where Taco Bell has set up shop are also among the hardest hit by mortgage stress.
Data from S&P Global Ratings shows areas like Blacktown in New South Wales and Narre Warren in Victoria ranking among the worst in the country for mortgage arrears.
Both are suburbs with Taco Bell locations, with Blacktown having two stores.
Professor Mortimer also noted that Taco Bell entered the Australian market 'too little, too late,' given how well established local Mexican outlets are.
'The perception being driven by competitors like Guzman Y Gomez and Zambrero is more around fresh, authentic, real Mexican fare,' he explained, while Taco Bell was more 'Tex-Mex' - American-style Mexican.
Prof Mortimer said these rivals had already carved out strong brand identities, positioning themselves around food quality and authenticity, while also securing customer loyalty as go-to destinations for Mexican cuisine.
Guzman y Gomez, which joined the ASX in 2024, has a market capitalisation of around $3.4billion.
The company reported a $7.3million profit in the first half of last year and continued its rapid expansion, opening 19 new locations during that period.
Taco Bell faced setbacks over a number of decades while trying to break into Australia
In contrast, Taco Bell recorded a $1.1million loss in the six months leading up to October 13.
Despite launching in Australia in 2017 with ambitious plans to open 51 stores by 2021, the chain had only reached 27 locations before yesterday's announcement of its planned exit.
Taco Bell's Australian journey has been marked by a long-running legal feud over naming rights.
In 2019, Collins Foods revealed that Taco Bill, a Victorian-based Mexican chain, tried to block Taco Bell's expansion into Victoria and southern NSW.
The dispute followed a previous legal battle in the late 1990s, when Taco Bell registered its trademark but became entangled in a four-year standoff with Taco Bill over use of the similar names.
Even earlier, in 1981, an attempt to launch the brand in Sydney was halted after a local restaurant, Taco Bell's Casa, took legal action over the name.
Despite the setbacks, Taco Bell finally opened its first Australian store in Brisbane in November 2017, drawing crowds that queued for months.
First opening in 2017, Taco Bell stores saw lines out the door for the first few months
The Mexican-themed fast food chain is famous for its bargain burritos, quesadillas and nachos.
Collins Foods operates 27 Taco Bells and 285 of the 750 KFC stores across Australia. It also runs KFCs in the Netherlands and Germany.
Further details, including the cost of selling off the Mexican-themed chain will be released at a later date.
Taco Bell's local failure came less than a year after US burger chain Carl's Jr also went into administration in Australia.
In a statement to Daily Mail Australia, Taco Bell Corp. said 'Australia remains a priority market for our brand, and we are committed to Taco Bell’s long-term growth in the region.
We are actively exploring a transition to new ownership and will continue to invest in the market alongside the right franchise partners.
Building on the strong foundations already in place, we will continue to deliver the bold flavours and unique experiences that Taco Bell fans know and love across Australia.'
