In the Yum Brands pantheon of concepts, Taco Bell stands out. The Mexican fast-food chain has provided the Louisville, Ky.-based company its only source of domestic growth over the past decade, as sister chains KFC and Pizza Hut shrunk. But unlike those other two brands, it had only a negligible presence outside the U.S.
That is changing. Last year, Taco Bell added 160 net new locations outside the U.S., which may not sound like a lot until you realize the company only operated 600 international restaurants at the beginning of last year. “That’s 26% growth,” Yum Brands CEO David Gibbs said. “That’s pretty impressive. And we see that accelerating.”
And it is getting some momentum in some notable countries. Taco Bell now operates 100 locations in Spain. “We know that when you get to that 100-unit tipping point, you see an acceleration” in unit growth, Gibbs said. “We have other markets poised to do the same.”
Brands have been pushing hard on international growth for years. A largely saturated and hotly competitive U.S. market has made domestic growth more difficult to come by. International markets are seen as ripe for chain expansion, and more brands have been devoting more of their energies on that end.
Yum has been arguably leading this charge, alongside companies like McDonald’s and Starbucks. International growth provided almost all the fuel behind the company’s record-breaking development of 4,200 global restaurants last year. Yum now has 53,000 global restaurants in its four brands, also including Habit Burger.
That international presence, in fact, has helped Yum overcome a number of challenges of late. The U.S. accounts for 40% of Yum’s business. When the domestic market is weak or facing problems, international markets can often pick up the slack.
CFO Chris Turner noted that labor challenges in recent weeks were largely a U.S. phenomenon—though he cited issues in the U.K. and Australia. “Our global footprint provides us a natural advantage in this type of environment,” he said.
Perhaps no brand illustrates the international strength more than KFC. The company has added more than 10,000 global restaurants since 2010 even though the number of U.S. units over that time has declined by abut 300. KFC now operates 27,000 restaurants around the world. Only 14% of the chain’s locations are domestic. China is a bigger market for the brand than KFC. “KFC is basically a Chinese brand,” consultant Joel Silverstein said in an interview last month.
Pizza Hut’s international presence isn’t that dramatic. But only about a third of its locations are in the U.S., compared to about 60% a decade ago.
In that sense. Taco Bell clearly stands out. The brand has enjoyed strong U.S. growth. The company has added about $5.4 billion in domestic system sales since 2010 and about 1,400 restaurants—including about 300 last year. “Taco Bell is back to developing at a really fast, like in the early days of Taco Bell, and we see that accelerate,” Gibbs said.
That said, its international presence was non-existent in 2010. So, while nine out of 10 of its restaurants are in the U.S., that is still strong growth.
The company has been focused intently on improving its standing internationally. That includes taking its aggressive marketing strategy to many of these international markets. That includes the brand’s “Taco Moon” campaign last April, its first global marketing campaign.
Accelerating international growth would therefore be a massive win, one that could provide the chain with a strong source of regular revenue and profits for decades.
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