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Taco Bell Aims Here, There and Higher for $14B Benchmark

It will take a lot of tacos—even with the newfangled breakfast Waffle Taco—to add billions in sales under Taco Bell Corp.’s “Bold Goal” of doubling revenue to upward of $14 billion over the next decade.

That explains two of the main thrusts in the strategy behind the goal: rounding out the fast-food chain’s presence throughout the U.S. and staking new claims around the world.

The nearly untapped potential of Taco Bell in international markets got official confirmation late last year, when Chief Executive Greg Creed promoted Melissa Lora from chief financial advisor to president of a newly established international division in Irvine.

Lora’s appointment resulted from a larger restructuring by Taco Bell parent Yum! Brands Inc. of Louisville, Ky., that made each of its three brands—Taco Bell, KFC and Pizza Hut—responsible for both U.S. and international operations. International and domestic operations were formerly separate, with international for the three brands previously yielded to Yum!’s Texas-based Yum! Restaurants International division.

KFC and Pizza Hut have long had significant sales overseas, which has been largely unexplored by Taco Bell.

Enter Lora, who heads up Taco Bell International and also serves as global chief financial and development officer for the overall chain.

The company declined to provide additional details on the international strategy, which are expected later this year, spokesperson Deborah Bell said.

She said Creed and Lora were unavailable for this story, but Yum! Chief Executive David Novak weighed in specifically on Taco Bell during an earnings call last week.

“We now have a dedicated international leadership team and have made additional investments in G&A to unlock the enormous development opportunities in front of us,” Novak said. “Given the power of the brand in the U.S. and its success in several other markets, we believe Taco Bell will eventually become our third global brand.”

Lora has a long runway of potential, with Taco Bell’s international presence spotty at best.

The chain has 279 restaurants in 20 countries outside the U.S., including Canada, Guatemala and Costa Rica, among others.

KFC, meanwhile, has more than 18,000 restaurants in 118 countries around the globe.

(Taco Bell’s totals do not include five restaurants in India, which are part of a separate division within Yum! There’s also another unit of Yum! just for its China business).

Taco Bell also sees room to grow in the U.S., which accounted for 97% of its global profits and ended the year with 5,769 restaurants.

Lora’s counterpart on the U.S. side is Brian Niccol, the chain’s former chief marketing and innovation officer, who was promoted last May and also reports to Creed.

Bad weather, rising food costs, and a 6% comparable sales gain in 2013 led Taco Bell to start the current fiscal year off slow. Yum! reported last week that Taco Bell had an operating profit of $84 million for the quarter ended March 22, down about 16% from a year earlier. Division revenue slipped about 11% to $391 million, and quarterly same-store sales dipped about 1% for the period.

Niccol’s long-term view includes what is being billed as a significant transformation of the chain’s operations as it adds about 2,000 restaurants domestically over the next seven to 10 years, with a focus on rural and urban communities.

Approximately 200 openings are planned this year, about two-thirds of which will be franchised, Niccol said.

“We’re picking up speed, the development pipeline is getting better, and the enthusiasm is very high on this; but the proof is still in the pudding,” Novak said.

Executives first began talking about doubling Taco Bell revenue in 2012, the same year the chain launched several new menu items. Sales so far indicate the plan is working.

“The thing that’s really exciting is that we’ve already made progress to the tune of $1 billion,” Niccol said. “The driver behind the growth has been a refocus on our customer and our team members in listening to how we can be a better, more relevant and successful Taco Bell. The best expression of that experience is our transition to a lifestyle brand around ‘Live Más.’ ”

Niccol referred to the ad campaign that began in 2012, when the company launched the original Doritos Locos Tacos—a taco with a Doritos-flavored shell that has since spawned Cool Ranch and Fiery versions. A fourth flavor, Spicy Chicken Cool Ranch Doritos Locos Tacos, is scheduled to roll out in May. The company said it has sold about 800 million of the Doritos Locos Tacos to date.

The next Doritos Locos launch will follow Taco Bell’s March 27 national launch of its breakfast menu, new business for the chain that includes menu items such as the waffle taco and A.M. Crunchwrap.

Novak called out the potential in the new business as a “$100,000-plus concept layer” to be added to each restaurant.

But Taco Bell will need to assert itself in the breakfast wars and educate customers on the new fare to succeed.

“[We’ve] got to break major habits,” Novak said. “I mean people have a tendency to do the same thing every day … it’s hard even to get our current users to give this a try.”

That could be where U.S. Taco Co., a fast-casual concept the company plans to launch in the summer with a single Huntington Beach location, comes into play. U.S. Taco will eventually serve alcohol at future locations, unlocking the potential in nabbing new customers. Taco Bell executives aren’t saying how large a piece of its overall business U.S. Taco could be.

The key piece in changing how the company speaks to its customers has already been made, providing the groundwork for everything else moving forward, Niccol said.

“We’ve become more relevant,” he said. “We’ve shifted from food as fuel to food as an experience, and what we really want to have happen is have people think about Taco Bell in a different way.”

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