Collins Foods is pulling back from the Australian fast-food Mexican wave, announcing plans to offload or shutter its 27 Taco Bell restaurants across Queensland, Victoria and Western Australia within the next year.
The ASX-listed operator told shareholders on Tuesday it’s in talks with Taco Bell International and parent company Yum! Brands to transition the brand to a new operator.
According to The Australian Financial Review, if a buyer can’t be found, a full exit is on the table.
The decision follows a strategic review under CEO Xavier Simonet, who took the reins in November.
Simonet said Taco Bell had failed to achieve brand cut-through in an increasingly competitive landscape dominated by Guzman y Gomez.
The rival Mexican chain, now a $3.4 billion ASX-listed player, has significantly outpaced Taco Bell in growth, brand recognition, and market share.
Collins also pointed to structural challenges like the geographic spread of its Taco Bell stores, which limited efficiency and consumer awareness.
The brand posted a $1.1 million loss in the six months to October, with revenue down 2% on the previous year.
Brand refocus leans on KFC growth and global play
While Taco Bell is winding down, Collins Foods is sharpening its focus on KFC, its core revenue driver.
The company operates 285 of the 750 KFC outlets in Australia and plans to open up to 10 new stores annually. Globally, the business is ramping up activity in Germany, where it currently runs 16 KFCs and has inked a deal with Yum! Brands to open between 40 and 70 more stores over the next five years.
Collins will also take a $30 million write-down on its Netherlands business due to rising wage costs that have squeezed margins.
Taco Bell, which entered Australia in 1981 and relaunched under Collins in 2017, has had multiple attempts to find footing in the local market. The latest setback reflects a broader recalibration.
“Given the challenges for Taco Bell to date, we think this is a sensible redistribution of capital,” analysts at UBS noted.
Despite the looming exit, Taco Bell Corp says Australia remains a strategic market.
A spokesperson said the brand is “committed to Taco Bell’s long-term growth in the region” and is “actively exploring a transition to new ownership,” adding that they will continue to invest “alongside the right franchise partners.”