On a recent evening, Taco Bell CEO Brian Niccol was hanging out at his Newport Beach, California, home when an idea popped into his head—a menu item designed to appeal to young, ravenously hungry customers on their way home after a night of partying. Niccol, 42, was thinking about his days as an engineering student at Miami University in Oxford, Ohio, where he had a favorite lunch spot with a simple gimmick. “We went to this place called Bagel & Deli that had all these great names for their sandwiches,” he says, sitting on a sofa in his large, comfortable corner office at Taco Bell’s Irvine, California, headquarters. “I was like, ‘Why haven’t we thought of having great names for our burritos?’ ” (Taco Bell’s current offerings tend to have monikers like “Shredded Chicken Burrito” or “Beefy 5-Layer Burrito.”) He fired off a text to Taco Bell’s chief food innovation officer, Liz Matthews, that included a name borrowed from Bagel & Deli: “the After Burner.” Niccol didn’t give many further instructions. Whatever those two words might conjure in the minds of Matthews and her crew of chefs and food scientists would be the starting point. “What’s in the burrito?” he says in his office a few days later. “I don’t know! Make it up.”

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From an outsider’s perspective, the After Burner seems like a less-than-ideal name; with Chipotle battling food-poisoning issues, you’d think a Mexican fast-food chain would avoid any suggestion that a burrito might cause burning in your, you know, after. And given how many ideas are constantly in play in the test kitchen, the odds of this particular flash of inspiration making it to your local Taco Bell are low. But whatever happens, there’s a strong chance that the process of thinking about it will have reaped real rewards. Because at Taco Bell, in a way that’s unique to its industry, wild ideas are the whole enchilada, and a large part of Niccol’s strategy is to create a structure that taps into as many as possible. “Sometimes people in my position get pleasure out of demonstrating they’re smarter than everybody,” says the CEO, who has a bit of a Don Draper–in-California vibe and is wearing a blue plaid sport coat, an open-collar shirt, dark-wash jeans, and expensive-looking loafers. “I don’t get any pleasure out of that. I get pleasure from coming across something that I hadn’t thought of, giving it a whirl, and seeing if it works.”

Read More At a time when “fast casual” brands like Shake Shack and Sweetgreen have people lining up around the block for all-natural burgers and signature grain bowls, a 54-year-old chain that specializes in dollar-menu items like Beefy Fritos Burritos might seem about as forward-looking as cafeteria meat loaf. But if you peel open the paper wrapper and really look inside, Taco Bell turns out to have become one of the restaurant world’s most aggressive innovators, in a way that has remade both its menu and its business. It often functions more like a tech company than a fast-food chain, relentlessly rethinking every aspect of its business in an effort to improve its products, its marketing, and the way customers experience the brand. That change can be traced back to 2012, when, after years of testing, the company launched Doritos Locos Tacos, which swap the regular shell for a nacho-cheesier one. In just the first year, Taco Bell sold more than $1 billion worth of the blockbuster mashup, helping drive five straight years of growth. Since then, the company has revitalized its menu with new items and a steady stream of limited-time treats. It has paid off. Pre–DLT (acronyms are big at Taco Bell), the chain had fewer than 6,000 U.S. outlets. Now there are more than 6,500, with plans to add 1,000 more. The company is also continuing an international expansion, launching in markets such as India, Japan, Korea, and Spain. Revenue increased from $8.2 billion in 2014 to $9 billion last year, and 220 stores opened in 2015. A big part of that growth has been due to breakfast, which Taco Bell started serving in 2014 and quickly grew to rival McDonald’s. Along the way, the company has rolled out attention-grabbing limited-time items such as Cap’n Crunch Delights (icing-filled doughnut holes encrusted with cereal) and last summer’s DareDevil Loaded Grillers (burritos spiked with a range of hot peppers and cleverly marketed as a “How spicy can you go?” $1 dare). “Every five weeks we introduce something new, which becomes about 5% of what people buy on our menu,” says the head of Taco Bell’s Insights Lab, Melissa Friebe, who does innovation research for every part of the company. “Even though that number isn’t huge, it drives the urgency to come to our stores. A segment of people are really attracted to those things.” Meanwhile, Taco Bell has transformed the way it communicates with customers, putting an intense focus on social media. The company has become famous for stunts like its annual Friendsgiving, where Internet influencers such as Chrissy Teigen are invited to feast on a special tasting menu and document the party on Instagram and Snapchat. It’s part of a broader campaign to transform Taco Bell into the most media-savvy, buzz-generating brand in the fast-food world. “If you have the belief that there’s still work to be done, then you’ll figure out how to break a little glass,” says Niccol, who arrived at Taco Bell in 2011 as the head of marketing and innovation, after a stint at Yum Brands’ corporate sibling Pizza Hut (the company also owns KFC). “That’s what gets me excited. I think we’ve got a culture here that’s excited about that as well.”

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The second floor of Taco Bell’s headquarters—located at One Glen Bell Way, a nod to the man who in 1962 opened the first Taco Bell restaurant—houses a complex of test kitchens that hum with activity. One of Matthews’s cooks is stirring an industrial-size pot of sauce in the Innovation Kitchen, while down the hall, in a room that resembles a small lecture hall built around a perfect copy of a Taco Bell restaurant kitchen, 15 people have gathered for a recurring event known as Creationeers, where outside consultants are invited to cook up their visions for Taco Bell’s future. For today’s installment, chefs from Taco Bell’s major suppliers have been tasked with creating new food experiences designed to appeal to Taco Bell’s youngest customers, the postmillennials usually referred to as generation Z. A cross-section of team members, including representatives from marketing, insights, and food innovation, are surrounded by tools of the trade: oversize cups of palate-cleansing soda, stacks of napkins, and, crucially, large garbage cans that serve approximately the same function as spittoons at wine tastings. (It’s a marathon event.) Their mission is to try out the chefs’ creations and run with any idea that seems promising. “From an innovation perspective, I’d love it if we had one person who just comes up with great ideas,” Matthews says with a laugh. “But it doesn’t work that way. The strategy is getting different people together, having food around, and having conversations.” “It used to just be about how cool the food is. now it’s almost like how you get the food needs to be as cool as the food itself.” It’s not that young people like totally different things. “We study gen Z not just because we want to target them, but because we want to get ahead in culture and we want to predict what’s going to happen,” says Friebe, who is overseeing the proceedings. “And also because youth is what our brand DNA is about.” According to some research that the chefs at the event have been given to work with, young people’s favorite foods are rotisserie chicken, burgers, steaks, and (promisingly!) tacos. But they do gravitate toward certain preferences, especially natural, healthy food. To that end, one chef offers up roasted veggie quinoa tacos, while another serves a salad based on elote, or Mexican-style corn on the cob. A chef named David brings out what he describes as an “umami bomb”: a vegetarian, gluten-free concoction called a mushroom raja taco. It’s a big hit, and the rajas—strips of peppers roasted until they become crispy—are specifically noted for future study. Gen Z also tends to be more excited about spicy food than their parents or older siblings, an insight that has inspired one chef to create a legit-delicious concoction called the Yellowbird Queso Quesalupa with Kimchi Fried Rice. (Yellowbird, a sriracha-ish hot sauce from Austin, has been a source of considerable interest at Taco Bell recently.) “Americans are starting to love the challenge of spicier stuff,” says chief product marketing officer Stephanie Perdue, who arrived at Taco Bell after a stint in movie marketing at 20th Century Fox. “At least with fast food, I don’t think that there are a lot of options out there.”

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This idea-generation process isn’t just limited to food: Every aspect of the chain’s operations is constantly up for reinvention, from packaging to restaurant design to marketing. Meredith Sandland, Taco Bell’s chief development officer, is leading a team that’s dreaming up new ways of configuring the restaurants, including an open-kitchen taco-making setup that lets customers see the ingredients and preparation. (She tells me this idea comes from Taco Bell’s Asian outlets, although it’s also not so different from the way Chipotle works.) She is also leading Taco Bell’s ongoing effort to refocus on urban centers, which began with the recent debut of upscale, liquor license–equipped Taco Bell outlets in San Francisco and Chicago that include the open-kitchen concept. Meanwhile, chief marketing officer Marisa Thalberg (an Estée Lauder veteran) and her group are constantly rolling out attention-generating social media campaigns. The supply chain is also in flux, with new corporate-responsibility initiatives under way, including the elimination of high-fructose corn syrup and artificial ingredients, as well as a pledge to move to cage-free eggs by the end of the year. One of the new food innovations the company is most excited about—a concept that everyone seems to believe will become another Doritos Locos–level blockbuster—came out of this same sort of brainstorming process. In 2012, Taco Bell started working on an idea that combines two of its core products, the chalupa and the quesadilla, into one mega-cheesy item: the Quesalupa. Picture an amped-up taco that replaces the regular shell with a special chalupa stuffed full of cheese—a sort of south-of-the-border take on stuffed-crust pizza. The filling is just regular ingredients: ground beef, lettuce, tomatoes, more cheese, sauce. But somehow the Quesalupa offers a texture-flavor synthesis that achieves an almost otherworldly ideal of the cheesy, the beefy, the crunchy, and the craveable—all adjectives you hear a lot if you spend any time at One Glen Bell Way. The thing, in Taco Bell–speak, has epic cheese pull: Bite into one and fat ribbons of perfectly elastic pepper jack form a weirdly satisfying bridge between your hand and your mouth. The Quesalupa underwent three years of testing and The Quesalupa underwent three years of testing and iteration until finally, in 2014, it appeared as a three-month pilot menu item in outlets around Toledo, Ohio, complete with a local ad campaign to hype it. Despite a blizzard that threatened to spoil the test, drive-through lines wrapped around the restaurants. Now the Quesalupa is going nationwide, with maximum fanfare: a Super Bowl ad. For the moment, it’s being considered a temporary menu item, in large part because Tyson, which is making the shells, still hasn’t found a way to automate the process. It turns out that getting cheese inside that shell is fiendishly difficult, and workers are making each one by hand. “It looks like that Lucille Ball skit,” Niccol jokes. “I flew to Arkansas to meet with Tyson because I wanted them to know, ‘Look, it’s hugely important that we figure this out. I need you guys to feel committed to getting to scale.’ ” Back at Taco Bell’s offices, I get a taste of why Niccol is so eager to ramp up his latest creation. After the Creationeers event ends, a tray of Quesalupas is placed in front of me, and I immediately tear one in half to investigate the much-discussed stuffed casing. As the cheese creates gooey strands between my hands, I nod with recognition. Major cheese pull. The thing is off-the-charts cheesy, beefy, crunchy, and, if you’re into that kind of thing, extremely craveable. “The Quesalupa is a fastball,” Niccol says. “It’s like everything that you love about Taco Bell—amplified.” A 10-minute drive from One Glen Bell Way is a place Taco Bell’s tech team calls the Sandbox, one of two nearby restaurants that they use to test new ideas. The Sandbox looks like any other Taco Bell—it’s across a parking lot from a Walmart—except for one major difference. At the counter where you would usually place your order with a name tag–sporting employee, you’ll instead find a neat row of touch screen–equipped kiosks. There’s just one customer-facing worker, who simultaneously handles drive-through customers and answers any questions about the unusual electronic system that lets customers punch in their own orders.

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The restaurants, designed in partnership with Ideo and Mobiquity, aren’t just cool and interactive; they’re meant to encourage users to customize their orders in near-limitless combinations. It’s a similar experience to what’s now available through Taco Bell’s app and website, both of which are heavily oriented toward personalization. “If [a group] is going to make a late-night run,” says Niccol, “it’s a lot easier to put your order in and have one of you go pick it up, versus you having to remember that, hey, Rob doesn’t want onions.” The Sandbox’s ordering system is part of an ongoing experiment that could lead to a rethinking of Taco Bell’s whole dine-in experience. “This store is always in beta,” says Lawrence Kim, the company’s director of on-demand. “Tomorrow we’re actually installing three more kiosks, because one of the insights we’ve gotten is it’s taking longer for people to order. People are customizing more and experimenting more, so there’s going to be a longer line, eventually.” Taco Bell is also keen to explore delivery, which will become more important as it rolls out new outlets in the kinds of city locations that it previously de-emphasized in favor of suburban and rural settings. So far, testing has involved partnering with startups such as DoorDash, to handle the actual taco transport. “[The ordering process] needs to be as simple as Amazon Prime,” Niccol says. And the company is experimenting in smaller ways, too, such as possibly building a Slack integration that will let office workers order Gorditas while barely breaking from their workday. Niccol insists anything is possible. “Drone delivery! Or mood ordering, or weather ordering,” he says, referring to AI–enhanced apps that could predict what you want before you’re aware of it. “I don’t know how many of those things will be novelties versus every day, but for this gen Z group, it’s important for them to know that we’re the type of brand that could do it if we wanted to.” Or as the Insights Lab’s Friebe says, “It used to just be about how cool the food is. Now it’s almost like how you get the food needs to be as cool as the food itself.” And then there’s Taco Bell’s marketing initiatives. Taco Bell’s social media team is given broad autonomy in how they represent the brand online. They work out of a high-tech room called the Fishbowl that’s lined with wall-size mission control–ish screens providing real-time info about the always churning online conversation about the company. During my visit, much of the buzz is about the recent addition of a taco to the official emoji set, something Taco Bell pushed fans to lobby for. To celebrate this accomplishment, the company has created a bot that spits out one of 600 GIFs in response to tweets combining the taco icon with any other emoji. This week people are also tweeting about the “Numero Uno” campaign, which involved uprooting Glen Bell’s original restaurant—recently slated for destruction—and trucking it to One Glen Bell Way, while live-tweeting the entire journey. The company seems to get Internet culture better than many legacy businesses, which is how Taco Bell landed on AdWeek’s list of the 24 hottest digital brands of 2015, alongside Vice, Snapchat, and Spotify. “We’re this incredibly social, cultlike brand,” says Thalberg. “We’re just trying to blow wind in those sails.” Every Monday, Niccol gathers his executive team for a meeting that takes up a large portion of the day. Lunch is brought up from the Taco Bell outlet downstairs. In mid-November, in addition to the cage-free announcement and a status update on the Quesalupa rollout, among other topics, Niccol mentions that Wendy’s and McDonald’s have made some aggressive moves onto Taco Bell’s traditional value-menu turf. “It’s just going to get more crowded,” he warns. Then Niccol proposes something much less tangible, in the form of a koanlike question. “How,” he asks, “do we go beyond cheesier and crunchier?”

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He doesn’t mean it literally, of course. Cheesiness and crunchiness—not to mention beefiness and craveability and everything else that makes people keep coming back to these not-exactly-good-for-you products—are central to Taco Bell. But as Niccol looks ahead, one thing on his mind is how to turn the brand into more of a lifestyle. “I love looking outside the category,” he says. “The way H&M is democratizing couture fashion, or Uber is democratizing transportation? I think we have the ability to do the same thing.” What he’s aiming for is the kind of connection that Apple or Nike have with their customers. A connection that lets the company set dining trends, like Mexican for breakfast. One where there’s enough intrinsic interest that a blockbuster new product, like the Quesalupa, can be launched the same way Paramount would a tentpole movie, with an online teaser campaign building up to the Super Bowl. A connection that makes customers feel like they’re buying into a sensibility that’s current, youthful, and even a little foodie-ish—not just stopping in for a taco. Really, Niccol is creating a whole new story around Taco Bell as a place that’s not just that default cheap choice for suburbanites, but also one where urban office workers can custom order their lunches, then gather over margaritas after work. “People tell me Taco Bell feels different than it used to,” Niccol says. “And to me, that’s hugely important. Because if you really look at our menu, excluding the addition of breakfast, it hasn’t changed that much. I take that as a sign that I’m changing people’s emotional connection to the brand.” Read more about our Most Innovative Companies of 2016