Taco Bell's taco bill includes energy fee

To cover rising costs, chain charges an extra 15 cents per customer.

June 8, 2001

By ANNE C. MULKERN and ANDREW BLUTH

In the latest sign the state's electricity crisis is eating into the economy, some Taco Bell restaurants this week added a 15-cent energy surcharge to all purchases.

Irvine-based Taco Bell, part of the nation's second-largest fast-food chain, Tricon Global Restaurants in Louisville, Ky., said escalating electricity costs forced the move.

The company would not say how many of its 360 Southern California restaurants are charging the fee.

The surcharge comes as many restaurants, hotels and other businesses grapple with surging electricity and natural-gas prices. Numerous restaurants have raised prices to pass along those costs, said John Dunlap, president of the California Restaurant Association, a trade association of 15,000 restaurants.

Many hotels now charge energy surcharges of $2 to $3 per night, but few restaurants have adopted that strategy.

Taco Bell likely chose the surcharge over raising prices because consumers understand energy costs are rising, restaurant analyst Bob Sandelman of Villa Park said.

The surcharge also implies that the fee will be temporary, he said.

But at least one consumer found the surcharge sneaky. Sherri Horner of Aliso Viejo encountered it Thursday after buying a chalupa, cinnamon twist and beverage from a Tustin Taco Bell.

"If the energy costs go up and they have to raise the price of food, that's fine," Horner said. "If they call it a surcharge, it makes it sound like a government fee.''

Several Orange County- based fast-food chains, including In-N-Out, El Pollo Loco and Carl's Jr. parent CKE Restaurants, said they have no plans to raise prices but are carefully monitoring energy costs.

Taco Bell's move may spark a similar response from other chains, said In-N-Out's vice president of operations, Carl Van Fleet.

"Any time one of the bigger chains makes any kind of strategic move on pricing, the rest of the industry always sits up and takes notice,'' he said. "I think you'll see other people considering (a surcharge).''

San Diego-based Jack In The Box raised prices 1.8 percent this year to help offset energy costs and is planning another hike but not a surcharge.

Taco Bell's parent company, which also owns Pizza Hut and Kentucky Fried Chicken, said last month in an earnings report that energy costs rose significantly in the first three months of the year.

The higher energy costs come as Taco Bell struggles to improve its bottom line. Tricon has tried mightily in the past year to boost Taco Bell's sales, which have been shrinking at sites open at least a year.

Most restaurants operate with narrow profit margins and can't readily absorb increased costs, said Dennis Lombardi, executive vice president of Technomic Inc., a Chicago food-service consulting firm.

A restaurant's energy costs typically equal 3 percent to 5 percent of its sales dollars, he said.

Many restaurants have seen their energy costs double in the past year, said Dunlap of the restaurant association. In addition, higher gas prices have driven up food costs because food must be delivered.

Taco Bell restaurants with the surcharge post a telephone number consumers can call for information, (800) Taco Bell. A worker answering that line Thursday incorrectly said the state is mandating the surcharge.

Taco Bell spokeswoman Laurie Gannon said that the employee was misinformed.

http://www.ocregister.com/news/surcharge00608cci.shtml

-- Martin Thompson (mthom1927@aol.com), June 08, 2001