It looks like Taco Bell is off to a flying start in India. According to The Wall Street Journal, business is booming at India's first Taco Bell, located in Bangalore. The restaurant is averaging crowds of more than 2,000 customers a day, based in part on the novelty of Mexican food. That's great news for Yum! Brands (NYSE: YUM ) , which also operates Pizza Hut and KFC.
As I wrote here, Yum! has big plans for expansion in India, where it intends to open 1,000 new fast-food outlets by 2015. This total would quadruple its existing footprint, which includes about 70 KFC's and 160 Pizza Huts. Yum! currently has a somewhat larger presence in India than McDonald's (NYSE: MCD ) , but slightly smaller than Domino's (NYSE: DPZ ) . By 2015, Yum! expects to have between 50 and 100 outlets of its Mexican-themed eatery.
International expansion is a key focus for chain restaurants these days; saturation and a stagnant economy have caused a fast-food slow-down in the United States. Emerging markets offer the potential of decades of growth, which is why McDonald's recently announced it would double its presence in China by 2013. McDonald's move is an attempt to catch up to Yum!, which dominates Chinese fast-food with some 2,800 locations.
It's not easy to bring American restaurant chains to new countries. CKE Restaurants (NYSE: CKR ) opened its first Carl's Jr. in Shanghai late last year, but has yet to announce plans for India. Though Papa John's (Nasdaq: PZZA ) has a large Asian presence, it has just two dozen locations in India. Yum!'s quick start in India and fantastic success in China bode well for its efforts in the subcontinent.
As I saw in Shanghai, the company knows how to adapt to foreign markets. In fact, this ability is already evident in the first Indian Taco Bell. As the Journal notes, most Indians have never tried Mexican food, but Yum! has taken the time to create a "tacopedia" to guide customers through a totally new experience. And of course, the menu is vegetarian.
Yum's management compares India to the way China was 10 years ago. Considering that China now makes up about 34% of Yum!'s revenue, the company clearly sees a great opportunity.
Investors should recognize their opportunity as well. Yum! continues to position itself to take advantage of emerging middle class, and should enjoy steady growth through the coming decades as a result.
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Motley Fool Options has recommended a bull call spread position on Yum! Brands. Try any of our Foolish newsletters today, free for 30 days. Fool contributor Tom Winner does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.
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