Latest Deadline Near, Taco Bell Still Waiting to Make Its Move : Corporations: Company’s hesitation keeps headquarters employees, along with O.C., state and Texas officials, on edge.
Executives at Taco Bell Corp. moved decisively in the first quarter to cut losses and record healthy financial gains, but they couldn’t make up their minds about where to put their corporate headquarters.
An executive search team, at work since last summer, has narrowed the choices to sites in Orange County and Texas. But the company has missed two self-imposed deadlines and is sliding through a third.
A month ago, the Mexican-style fast-food chain said it would announce “a final decision in the next few weeks.” But on Wednesday, a day after announcing a 22% increase in revenue for the first quarter and an 8% rise in operating profit, the company still would not say when it will announce whether it is staying or going.
The decision has drawn statewide attention because Taco Bell typifies the type of company California would like to attract and keep: a service corporation with hundreds of white-collar jobs.
Gov. Pete Wilson has asked the company to stay, and Assembly Speaker Willie Brown (D-San Francisco) has not only made a personal appeal but has said he will introduce an amendment to a pending bill that would give all large corporate offices--those with at least 200 employees--tax credits for building a new headquarters or expanding operations in the state.
Local government officials and business organizations have been involved too.
“Taco Bell’s is a pivotal decision,” Terry Hartman, president of the Irvine Chamber of Commerce, said recently. “If they leave, we’ve lost a major effort to retain somebody. If they stay, we’ve got a major win that we could use to anchor down others.”
In an interview with The Times last month, Taco Bell Chief Executive John E. Martin said the company was “this close” to moving to Texas when local and state officials “got religion” and began to offer incentives and inducements that could help to sway his decision.
Texas, with its less expensive land and lower-cost work force, is offering the company a package that includes $10 million in tax credits and other incentives to relocate there.
Meantime, the 1,000 employees and full-time contract workers at Taco Bell’s 12-story headquarters in Irvine are anxiously waiting for a decision on where the new corporate office will be when the lease on its current quarters expires in November, 1996.
“We just want the announcement so we can plan our lives,” one employee said Wednesday.
Only about half of the employees are likely to be moved should the company decide to leave for the Dallas-Fort Worth area, where it is looking at a site in the Dallas suburb of Plano. A sister company, Frito-Lay Inc., is based there.
While it has been weighing the decision, Taco Bell’s first-quarter earnings have added to its allure. Sales at stores open a year earlier--a key measurement of a retail chain’s financial health--grew for the 22nd consecutive quarter.
The company, part of the PepsiCo Inc. conglomerate, said its first-quarter operating profit rose to $33.7 million from $31.1 million for the same period last year. Revenue climbed to $673.7 million from $551 million.
Despite a drag on its earnings from its Hot ‘n Now hamburger affiliate, Taco Bell outperformed PepsiCo’s two other restaurant units, Pizza Hut and KFC, both of which reported significant declines in earnings.
Its earnings were hurt by higher costs from new efficiency efforts and additional hiring for anticipated growth. Earnings also suffered from a shift in product mix to items with lower profit margins and from losses at its low-priced Hot ‘n Now, primarily a small Michigan and Southeast operation that closed an undisclosed number of stores last year as major hamburger chains started lowering their prices. Taco Bell intends to reopen those Hot ‘n Now stores at a later date.
Taco Bell’s effort helped PepsiCo, based in Purchase, N.Y., post a 9% rise in first-quarter profit to $282.8 million, or 35 cents a share, and a 13% increase in revenue to $5.7 billion.
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Times staff writer Chris Woodyard contributed to this report.
