The real reason why Taco Bell failed in Australia

A retail expert has shed light on why Mexican fast-food giant Taco Bell has struggled to gain a foothold in the Australian market.

On Tuesday, ASX-listed Collins Foods, which also operates KFC outlets across the country, announced it will exit its Taco Bell business.

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.

According to Professor Gary Mortimer from the Queensland University of Technologys Faculty of Business & Law, Taco Bells failure in Australia comes down to a combination of factors, with the cost of living crisis playing a major role.

Professor Mortimer explained that the chains locations were primarily in working-class suburbs, which typically favour big meals at a great value low price. 

However, he said those same communities have been hit hardest by rising living expenses, forcing families to tighten their budgets and eat at home instead of dining out.

If you are facing increasing rents or mortgage payments, youre 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 Technologys Faculty of Business & Law believes Taco Bells 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, facing stiff competition from well-established players like Guzman Y Gomez and Zambrero.

He 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.

The perception being driven by competitors like Guzman Y Gomez and Zambrero is more around fresh, authentic, real Mexican fare, he explained.

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 yesterdays announcement of its planned exit. 

Taco Bells 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 Bells 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. 

Even earlier, in 1981, an attempt to launch the brand in Sydney was halted after a local restaurant, Taco Bells 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.