Yum! Brands CFO Chris Turner views all of his company’s restaurants as crown jewels. But he also recognizes that Taco Bell is the lone undisputed leader of its respective fast-food category.
Turner isn’t the only one who believes this. Taco Bell was named one of TIME Magazine’s 100 Most Influential Companies of 2022. The only other restaurant on the list was Chipotle. Additionally, for the past three years, Entrepreneur Magazine has placed Taco Bell as the No. 1 franchisor on its Franchise 500 Ranking.
Franchisees are clamoring for the brand. Judd Wishnow, who operates 115 Taco Bell restaurants through his company Southpaw, told QSR, “I can’t imagine a brand right now operating more effectively than Taco Bell.” Southpaw recently acquired 40 units in the Greater Atlanta market. Flynn Restaurant Group—now the largest franchisee company in the world—began with Applebee’s units, but its first foray into fast food was Taco Bell in 2012. Now it oversees 288 locations and is the brand’s third-largest operator.
Because of this passion for the brand, Turner said Taco Bell could open “thousands more in the U.S.” He compared the chain to McDonald’s, which ended Q1 with 13,446 locations in the U.S. Comparatively, Taco Bell has 7,216 units.
“There’s no reason we can’t have the same number of restaurants in the U.S.,” Turner said at the NYSE European Investor Conference. “The economics are so strong, our unit development pace has been really good.”
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Taco Bell’s U.S. same-store sales grew 9 percent in the first quarter, and its global operating profit lifted 10 percent to $204 million. Year-over-year digital sales were up 60 percent, leading to an eight-point rise in mix, and the brand is hoping to push that further by adding delivery-as-a-service to its mobile app. Traditionally speaking, drive-thru times remain under four minutes. In terms of development, The chain’s U.S. segment opened a net of 196 restaurants in 2022, by far the most among Yum!’s other brands. In 2021, it was a net of 203 openings.
Turner added that Taco Bell creates a level of brand buzz and cultural relevance that keeps it on the leading edge of conversation. For instance, the chain recently celebrated the return of its Volcano Menu with social icon Paris Hilton. The brand also received much press after waging a legal battle over freeing the “Taco Tuesday” trademark from Taco John’s. Taco Bell even enlisted the help of NBA superstar LeBron James to back up its point. Last year, Mexican Pizza was the big moment. When the menu innovation came back in May 2022, the company’s app downloads skyrocketed 82.1 percent month-over-month, according to Apptopia. Some recent innovation includes Steak Chile Verde Fries, Beyond Carne Asada Steak, Grilled Cheese Burrito, and a Big Cheez-It Tostada.
There’s room to grow business, too. Turner noted that Taco Bell has strong late-night and dinner dayparts and that the brand is working on better penetration during breakfast and lunch. He called it a “million dollar per store” opportunity. In April, the chain partnered with comedian Pete Davison to promote its morning daypart, including the national debut of the California Breakfast Crunchwrap.
“They’re so creative,” Turner said. “Customers don’t have in their mind what’s the reference point on pricing. I think [CEO David Gibbs] used the saying the other day, ‘No one knows the price of what a Chalupa should be.’ Burgers, people have a reference point, and some other places, people have a reference point. That gives [Taco Bell] the freedom from a pricing standpoint as they bring new innovation to the menu.”
The momentum is spilling over internationally. Taco Bell now has four global markets with more than 100 restaurants, including the U.K. The company recently surpassed 1,000 international stores after opening a net of 231 locations last year. In Q1 alone, a net of 40 restaurants debuted. Turner foresees tens of thousands of Taco Bell units outside the U.S., placing it on the level of KFC and Pizza Hut, which have 24,090 and 12,502 across the world, respectively.
The challenge for Taco Bell is learning how to bring the brand to life with the same level of customer passion as the U.S. Turner said it’s different from KFC and Pizza Hut, which are translatable because fried chicken and pizza are such popular dishes. With Taco Bell, there needs to be more trial. That’s why Yum! did away with its strategy of opening only a handful of units in one market; the lack of scale prevented the Mexican chain from properly telling its story. With hundreds of locations, Taco Bell can better leverage marketing, supply chain, and a 40 percent digital business.
“If you look globally, there’s really only a handful of companies that have figured out how to take brands globally at scale,” Turner said. “Franchising is the core competency that enables brands to do that. A handful of companies have figured that out, but a lot of companies have tried and have not figured it out. We are the global franchisor of choice and that gives us a tremendous advantage outside of the U.S.”
Yum! finished Q1 with 55,683 restaurants globally, but it projects 100,000 more units worldwide. It’s opened roughly 8,600 stores in the past two years, which averages out to one restaurant opening every two hours. The long-term growth goals are 5 percent net unit growth, 7 percent system sales growth, and 8 percent core operating growth. He used India as an example of the white space. The country is supposed to reach north of 250 million in the next five years, yet Yum! has roughly 2,000 locations. In the U.S., where there’s 330 million people, there’s around 17,000 units.
“Well you might say, ‘Gosh, 55,000 restaurants, aren’t you about tapped out?’ We’re just getting started,” Turner said.
