Anneta Konstantinides/Business Insider
Taco Bell has been going all in on value, and it's paying off.
The taco chain, which is owned by Yum! Brands, reported a 5% increase in same-store sales in the most recent quarter.
It outpaced its sister brands, KFC and Pizza Hut, and industry competitors such as McDonald's, which reported a drop in sales in the most recent quarter.
Taco Bell has been winning over customers with value meals as fast food prices have soared in recent years, putting some diners off.
Earlier this year, it overhauled its Cravings Value Menu, adding six new "meal-sized" items that cost under $3.
And, it's offering deals such as its $7 Luxe Craving Box, which includes a Chalupa Supreme, Beefy 5-Layer Burrito, Double Stacked Taco, chips with nacho cheese sauce, and a medium drink.
"Taco Bell is a clear standout in today's environment, not only achieving same-store sales growth well ahead of the QSR category, but delivering restaurant-level margins near a record high" Yum! Brands' CEO David Gibbs said on the company's earnings call Tuesday.
"We have a great way to play value that makes it hard for others to compete," he said.
Taco Bell uses relatively inexpensive ingredients and offers smaller serving sizes to enable it to keep costs down.
But the competition to offer cheaper fast food is hotting up as its rivals ramp up their own value menus to lure back diners.
McDonald's has extended its $5 value meal deal, and its CEO Chris Kempczinski recently said that the chain will launch a more permanent value menu.
The $5 deal is "a bridge value program," he told CNBC's Squawk Box. "I would consider the $5 menu sort of chapter one of a multi-chapter value playbook that we're going to be writing," he added.
Taco Bell's rise in sales was also attributed to new menu items such as the Cantina Chicken, which the company said performed above expectations.
Yum! Brands also announced plans to start using AI in hundreds of Taco Bell drive-thrus by the end of this year, joining the already 100 Taco Bell restaurants in the US using Voice AI technology.
