Lawsuit still hurting Taco Bell, Yum says

Taco Bell has drawn praise inside and outside the restaurant business for the way it handled a lawsuit loudly proclaiming its ingredients to be crap. The measure sought to block the chain from calling describing the content of its tacos and burritos as ground beef, arguing that there was more filler than meat in the mix.

Taco Bell’s aggressive response, waged in ads and a publicity campaign, prompted the plaintiff quietly to drop the suit earlier this week. But the chain’s franchisor acknowledged yesterday that considerable damage has been done.

“Our positive sales momentum was reversed when we were thrown a curveball with the false claim around our food quality,” David Novak, the CEO of parent company Yum! Brands, told financial analysts.

He asserted that “heavy users” of Taco Bell continued to frequent the chain as the lawsuit (and Taco Bell’s response) generated headlines in the major media. But “light users” stopped visiting and have yet to resume their earlier levels of patronage, Novak said.

“We do not expect the second quarter in the U.S. to get better,” added CFO Rick Carucci. “We have not yet been able to reverse the negative sales trend at Taco Bell.”

Analysts seemed skeptical of the assessment.

“I'm a little surprised that Taco Bell has weakened as it's gotten away from the lawsuit,” said Jason West of Deutsche Bank. “Do you think there's any other issues going on out there with the [quick-service restaurant] consumer and that are new any way in terms of gas prices or whatever it may be?”

Gas prices haven’t helped, acknowledged Carucci. But the publicity stirred up by the lawsuit was the determining factor, he contended. Taco Bell’s same-store sales were running about 4% above the year-ago tally before the story broke. Bad weather tempered that in some areas, but the decline wasn’t early as severe as what happened after the lawsuit became widely known.
If anything, he added, the damage was probably mitigated by the promotion of a shrimp-filled taco for Lent.

“We just need a little bit of time to get further away from the event,” said Carucci, as quoted in a transcripted posted by SeekingAlpha.com.

“We just don’t know how long it’s going to take us,” added Novak.

He assured the analysts on the call that the situation would not affect Taco Bell’s plans to add breakfast and remodel its stores.
“Better not,” he stressed.

The call just about coincided with Taco Bell’s announcement that it wanted a public apology from the Alabama law firm that had handled the lawsuit.

The Yum executives indirectly explained why. The attorneys had stirred up as much publicity as they could when the suit was filed and was still alive. But they very quietly withdrew it, leaving ample chatter still underway.

Taco Bell apparently wants the firm to publicly renounce its actions and to make some publicity about it withdrawal of suit.

There was no mention during the call of Long John Silver's or A&W, the restaurant brands Yum is trying to sell.

Helping the legal profession's recovery

I’ll probably be served with court papers at any moment for using “restaurant” in the name of this space. One of the big chains is sure to claim it holds exclusive rights to the term, at least on this side of the sun.

As our sister publication reported this morning, Subway’s lawyers are squaring off with the Casey’s c-store chain over use of the term “footlong.” Casey’s wants to use it as a generic descriptor of its own sandwiches, but Subway says it holds exclusive rights to the term whenever it’s applied to heros, as per a trademark request currently before the government.

But that federal case is hardly the only dispute underway over the use of restaurant—sorry, counselors, I meant “foodservice”—names, slogans and terms.

Tavern on the Green, New York’s bankrupt landmark, isn’t in business any longer. But that hasn’t stopped the bankruptcy trustee from harrumphing at a Marriott in Indianapolis that wantes to call its lounge JW’s Tavern on the Plaza. Like Casey’s, the would-be operators of the Plaza are suing the trustees because they feel “Tavern on the [blank]” won’t be confused with a now-gone place in New York City. Global warming will no doubt get a considerable boost of hot lawyer breath before the matter is settled.

Then there’s the battle that drew page-one coverage yesterday from the New York Times, just under its reportage from Egypt and Tunisia, a few column inches away from a report on the inability of many states to pay pensioners’ health benefits. A chain that admittedly ripped off the Kentucky Fried Chicken name during the 1960s is battling with other operations that are using names too close to its moniker, Kennedy Fried Chicken.

Somewhere, a lawyer is weeping with delight.

There are also ongoing disputes over variations of El Pollo Loco, Jason’s Deli (specifically, Chef Jason’s Deli & Pastries), and the Batman logo, which DC Comics alleged was being used by a barbecue place that named itself BATS, after its owners (Beau and Travis).

But I have more pressing matters, like what to call my dogs after a certain transportation company learns that I identify them as greyhounds.