The Taco Bell franchise board isn't happy, and it's pressing for Taco Bell to launch an agency review.
On April 21 Taco Bell Franchise Management Advisory Council (Franmac) President Tom Cook sent a letter to franchisees airing a list of 14 grievances Franmac has with Taco Bell, encouraging franchisees to participate in a Taco Bell Town Hall call. It included the desire to launch an agency review, a complaint about the handling of the infamous Taco Bell beef lawsuit and a point expressing discontent over the fast feeder's "value messaging."
A follow-up email by Franmac was sent to Taco Bell restaurant owners detailing the 14 points of contention. The email popped up Monday on franchisee-community website Blue Maumau.
"A core responsibility of our advertising agency is to produce creative that effectively promotes our menu" the email said. "Ads in the past 12 to 18 months have been largely ineffective, and we believe that an agency review should take place. Taco Bell Corporate, in conjunction with Franmac should immediately undertake an agency review. Without a doubt, we will learn new things, obtain fresh ideas, and be further ahead, even if we decide to stay with the incumbent agency."
Mr. Cook's letter specifically called for the review of the DraftFCB account. DraftFCB and Franmac referred calls to Taco Bell. Taco Bell Chief Marketing Officer David Ovens said in a statement to Ad Age : "We are very pleased with our longstanding agency partnership and have no plans to make any changes as we're completely focused on building the business."
Another gripe the email points out: "Until such time that sales return to 2010 levels plus an additional amount to adjust for 2011 commodities, allowable impact should be reduced to 5%, and all mandates should be delayed."
During the company's first-quarter earnings call on April 21, Yum Brands CEO-President David Novak said: "In the United States we had a challenging quarter, no doubt about it. Same store sales fell 1%, and our restaurant margins declining 1.6 percentage points. Taco Bell, our most profitable U.S. brand, began the year with strong momentum and grew same store sales 4% in the first period. Unexpectedly, our positive sales momentum was reversed when we were thrown a curve ball with the false claim around our food quality. This impact has lingered longer than we anticipated, given it was an imagined story vs. reality."
Based on the email, Franmac isn't happy with the PR push by Taco Bell regarding food-quality claim. "There has been a lack of PR efforts in light of the recent beef lawsuit," the letter said, referring to the in January lawsuit filed against Taco Bell that accuses Taco Bell of false advertising for claiming to use "seasoned beef" or "seasoned ground beef" in its fare. Taco Bell responded to the suit quickly, launching an aggressive national print and web campaign countering the charges that its ground beef was mostly not, um, beef.
The lawsuit was withdrawn in April -- with no money exchanged -- and Taco Bell launched another campaign aimed at the law firm, Beasley Allen, that filed the lawsuit.
The email also said that "the value proposition as currently being executed is not driving transactions, and squeezing margins beyond a reasonable tolerance." Many fast feeders have been heavily promoting their dollar and value menus during the recession, increasingly to the detriment of franchisees' bottom lines, given the rising cost of commodities -- especially beef.
This is not the first time a Yum brand has had a run-in with franchisees. The KFC National Council and Advertising Cooperative in January 2010 filed a suit against KFC that claimed KFC management ignored franchisee pleas to focus on fried chicken, and instead devoted the advertising budget to promoting the new grilled chicken. Through the suit the council sought to gain more control over national advertising. A Delaware judge in February ordered KFC and the franchisees to cooperate to determine the direction of the chicken chain's marketing, as the judge ruled that both share control of KFC's advertising.