Taco Bell Considers Creating Chain of Sit-Down Restaurants

Taco Bell, continuing its diversification from its Mexican-style, fast-food restaurant niche, plans to build or buy as many as 300 sit-down restaurants by the end of the decade, company officials said Wednesday.

The Irvine-based company wants to establish itself as a “dominant” force in full-service restaurants by building a chain--or chains--that would generate an estimated $1 billion in revenue by 1998, said Taco Bell spokeswoman Janis Smith. Taco Bell’s existing company- and franchise-owned fast-food locations now generate $3.3 billion in annual revenue for Pepsico, its Purchase, N.Y.-based parent company.

The sit-down restaurants are part of Taco Bell’s ongoing expansion outside of its primary Mexican-style, fast-food restaurant operation.

Taco Bell in February unveiled plans to develop packaged Mexican-style food that would be sold through restaurants and grocery stores. It also has opened fast-food kiosks in supermarkets, shopping malls and other locations to sell Taco Bell products. And, in 1990, Taco Bell entered the fast-food hamburger restaurant business by acquiring Hot ‘n Now, a chain that now has 100 locations, clustered mainly around Fresno and Charleston, S.C.

Taco Bell hasn’t determined if it will build new restaurants or acquire existing locations, Smith said. And while Taco Bell’s initial focus would be on Mexican-cuisine sit-down restaurants, the company might later expand into other niches.

“This is all very preliminary, so we’re exploring a lot of different things,” Smith said.

Restaurant industry observers agreed that Taco Bell should proceed with caution.

“This isn’t the same customer they’re going after with fast food,” said Doug Christopher, an analyst with Crowell, Weedon & Co., a Los Angeles-based brokerage. “Their expertise is fast food . . . serving pre-prepared food. . . . I wish them well.”

Taco Bell will learn that “fast food and sit-down aren’t necessarily the same business,” said Sheree Zizzi, spokeswoman for San Diego-based Foodmaker, best known as the parent company of the Jack in the Box fast-food restaurant chain.

Foodmaker also owns Chi-Chi’s, the nation’s largest Mexican-style sit-down restaurant chain, with 232 restaurants in the Midwest and Southeast. The chain contributed $445 million of Foodmaker’s $1.5 billion in revenue for the year ended Sept. 30. Chi-Chi’s revenue fell from $446 million during the previous fiscal year.

Foodmaker purchased Chi-Chi’s in 1988, but kept the restaurant chain’s headquarters in Louisville, Ky.

Taco Bell’s full-service dining venture is directed by Tim Ryan, a senior vice president/marketing, who soon will become senior vice president in charge of full-service dining concepts. Pepsico already owns Pizza Hut, a sit-down restaurant chain, and KFC, which operates the Kentucky Fried Chicken chain.

There were 4,153 Taco Bell restaurants worldwide at the end of 1992, including 2,549 owned by the company.