Taco Bell Corp. is on track to top $10 billion in systemwide sales this year, and unlike Bogie and Bacall, it doesn’t even have Paris—yet.
The Irvine-based fast food chain, a quarterly all-star of publicly traded owner Yum Brands Inc. in Louisville, Ky., has said it seeks $15 billion systemwide by 2022, much of the new money in foreign currency.
Domestic operations will dominate—at the end of last year it had 5,550 U.S. franchises and 350 overseas, with 650 company-owned sites, all but six domestic.
It wants to grow by a third to 9,000 units by 2022, 1,000 overseas.
U.S. locations will grow by about 1,650, but overseas totals will triple.
Master Plans
International President Liz Williams said Bangkok is next, and to get an idea what foreign expansion might look like, sightsee in Brisbane, Brazil or Bengal.
Brisbane is Taco Bell’s only Australia site, but more are coming. Brazil had 20 locations at year-end, and 10 times that are coming. India had 16 in December and will be “in the 20s” by year-end, Williams said.
Master franchising will drive much of the growth.
Sforza Holding Group in São Paulo signed in June as one of Taco Bell’s first two master franchisees; the other was Casual Brands Group in Madrid. Both are current operators—Spain had 38 locations at the end of last year—and each has committed to add 200 in the next decade.
Master franchisees can directly sell franchises to others and collect fees, Taco Bell taking a cut. Less revenue flows upward per-unit, but chains can grow faster globally.
The franchise fee for a Taco Bell is $45,000, royalty on gross sales 5.5%, average sales $1.5 million.
Big Plots
Operators in Australia and India aren’t master franchisees, and India might not need to be.
Taco Bell expanded there in 2010, and news reports talked up 100 sites by 2015. But it only opened six, all company-owned.
Then it signed Burman Hospitality Pvt. Ltd.—whose interests are in insurance, financial services, consumer goods and private equity firm Elephant Capital—and three years later it’s on the way to 30 locations.
Australia’s site is also a reboot, the chain’s third attempt to gain traction in the country. It opened in November, and Williams told a trade magazine that it’s her highest-volume restaurant overseas.
Operator Collins Foods Ltd. plans to next open in Brisbane suburb Keperra after a local city council OK, and has several more on the drawing board.
Local news reports gave the company rights to all of Australia, though a Taco Bell spokesperson said that wasn’t the case; Williams demurred.
World’s Edge
One common theme among new deals so far is the operator’s size.
Master franchises in Brazil and Spain have several dozen Taco Bells apiece and had shown they can open them fast—20 in two years in Brazil, 40 in 10 years in Spain.
India revved up as Taco Bell stopped wasting time on deals that didn’t bring burritos to market.
Collins is publicly traded at a $450 million (U.S.) market cap and also franchises Yum Brands’ KFC.
“Collins is a terrific partner,” Williams said. “We’re talking with them about the next phase of growth.”
Across the Tasman Sea, publicly traded Restaurant Brands New Zealand Ltd. has a $715 million market cap; recently bought 82 Pizza Hut and Taco Bell locations in Hawaii; wants to buy a Taco Bell cluster “with 70 to 100 stores” on the U.S. mainland; and seeks to also bring the brand to its home island.
“Restaurant Brands is one of the companies we’re talking to,” Williams said. “We know them well.”
Road Curves
Ten years ago, Taco Bell had 1,300 corporate locations, 4,300 U.S. franchises and 250 overseas operators. Five years ago, it dropped to 1,050 corporate due mostly to refranchises; and rose to 4,650 in the U.S. and 280 overseas: a total of 8% franchise growth here and 10% overseas.
By year-end, or five years on, it will have an estimated 600 corporate, and will have about 6,000 in the U.S. and 500 overseas—25% growth here and 75% growth overseas.
Taco Bell’s current five-year plan suggests growth in franchises of 33% here and 100% overseas by 2022.
Small Farms
The chain’s five-year plans tend to be the rolling kind; every two or three years there’s a new one, so no one ever quite knows or remembers whether marks are hit—or cares, as long as there’s growth.
Life in the big city: perpetual motion, continual reassessment, and putting the past in the rearview mirror.
Williams said “pizza and fried chicken were stronger concepts” internationally for Yum five to 10 years ago, when Taco Bell’s domestic franchises outnumbered overseas ones 17 to 1.
Protein and who-doesn’t-love-pizza sold big overseas for Yum, as for other chains with easily-grasped Americana—see Johnny Rockets.
Taco Bell grew in Latin America, where its theme was knowable and its supply chain could reach.
The 2022 goal, when passed, will cut the domestic-overseas franchise ratio to 7-to-1.
Home Turf
There are 13 Taco Bells within 7 miles of company headquarters at 1 Glen Bell Way.
There are 12 in Finland, Romania, the Netherlands, and Cyprus.
Apart from Spain and the U.K., the rest of Europe has none, as do nine of 13 countries in South America. There are four in Japan, three in China, and none in the Middle East.
Can-do American mode sees this as a challenge, not a problem, and as an issue of numbers, analysis and execution.
Williams’ background is in finance, with doses of tech and analysis from stints at Boston Consulting Group and computer and software maker Dell. She joined Yum in 2010 and has worked on franchise strategy and IT, among other areas.
International growth is happening. In 2016 there were no Taco Bells in Finland, Romania or the Netherlands, none in Peru or China—and no master franchisees.
