Taco Bell Drops Kids' Meals: Is McDonald's Happy Meal Next?

Yum! Brands'  (NYSE: YUM  )  Taco Bell has officially nixed its kids' meals and toys from the chain's menu. This week the world's largest fast-food Mexican joint said it would stop selling kids' meals at all of its U.S. restaurants. CEO Greg Creed explained, "Pioneering this change on our menu is a bold move for our industry, and it makes sense for Taco Bell." As it's the first national fast-food restaurant to do this, will others in the industry soon follow Taco Bell's lead?

Mouth off
It's no secret that McDonald's (NYSE: MCD  ) is fighting critics who claim advertising fast food to children is wrong. In 2004, the Golden Arches started offering sliced apples as an alternative to fries in its iconic Happy Meals, in an attempt to offer healthier options for children eating at its restaurants. Unfortunately, that didn't do the trick.

In April, a Brazilian agency fined McDonald's $1.6 million for using toys included in Happy Meals to aggressively target children. While this is a slap on the wrist for the world's largest fast-food chain, it emphasizes the ongoing challenges McDonald's and other fast-food restaurants face when it comes to kids' meals.

Still, deciding to discontinue the Happy Meal would be a much more difficult feat for McDonald's than it has been for Taco Bell's kids' meals. For one thing, McDonald's Happy Meals reportedly account for 10% of all sales, though the company won't disclose the exact number of kids' meals it sells. Taco Bell, on the other hand, said kids' meals account for less than 1% of its gross sales.

Toying around
Sure, the Happy Meal has its fair share of health-activist enemies, but it's also been winning over generations of customers since the first Happy Meal debuted in 1979. In fact, in some cases customers were even willing to pay extra for a Happy Meal toy. In 2011, the city of San Francisco passed the Healthy Food Incentives Ordinance, which banned McDonald's toys from its kids' meals. However, demanding parents helped McDonald's find a work-around. Soon the restaurant chain was charging customers an additional $0.10 for each Happy Meal toy requested, according to the Huffington Post.

While Taco Bell's recent decision to cut its kids' meals will likely put wind back in the sails of health activists, it shouldn't have a material impact on McDonald's or other fast-food chains that currently advertise to kids. Moreover, if these cases are any indication, it's going to take more than fines and municipal legislation to kill McDonald's Happy Meal. That's good news for McDonald's shareholders, too, considering families make up a large portion of the chain's sales.  

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