- Taco Bell's sales felt the crunch of a tortilla shortage last month, leaving customers at some locations unable to order menu items like burritos and quesadillas for roughly nine days. Yum Brands CEO Greg Creed confirmed the event on the company's Thursday earnings call, saying "Did it have an impact on sales? Yes." In spite of this, the restaurant still saw sales growth for the quarter.
- "Was it clearly unacceptable to run out of the core menu item? Yes," Creed said. "Have we taken it up with our supplier? Yes," he added, clearly placing the blame on the supplier and not internal procurement.
- The goal is ensuring restaurants don't run out of core menu items, Creed said, adding they don't expect the issue to have a material impact going forward. It is unclear what impact the shortage had on customers who were unable to order their tortilla-wrapped treats.
Taco Bell has been pretty tight-lipped about what led to the failure in flour tortillas. The fast-food chain has blamed the situation on supplier shortages, telling media at the height of the drought it was "working diligently to replenish the supply," according to Nation's Restaurant News.
Yum Brands did not respond before press time when asked to expand on these supplier issues.
While the shortage may have affected sales in some locations, Taco Bell and Yum Brands more broadly didn't end up feeling much of an impact. Taco Bell saw sales growth of 10% and same-store sales growth of 7%. The drive-thru misfortune was enough to worry some analysts last month however, with Bank of America Merrill Lynch calling it a "near-term headwind," according to CNBC.
But this shortage still highlights how important suppliers are to companies' operations. Taco Bell's customers probably don't expect the tortillas to be made in-house, but they expect there to be tortillas all the same. This is why a supplier's risk factors are important metrics for companies to follow.
If the end-consumer is reliant on a product or, in the case of Taco Bell, just in need of a burrito, they could try and take action for being unable to access it — even if it was an outside supplier who slipped up. One passionate, Louisiana-based taco eater did call 911 on Taco Bell when it ran out of tortillas, but the Slidell Police Department simply responded saying, "While this is truly a travesty, the police can’t do anything about this. Hopefully, they are replenished in time for Taco Tuesday!"
With the shortage over and the suppliers on notice, Taco Tuesday should be a go.