Breakfast? Check. Here's What's Next for Yum! Brands, Inc.

Yum! Brands just finished rolling out breakfast nationwide, but it's not done yet.

Apr 1, 2014 at 6:15PM

Yum! Brands, (NYSE:YUM) may have just completed its nationwide rollout of Taco Bell breakfast last week, but don't for a second think the fast-food giant is resting on its laurels.

Don't get me wrong. I've held a special place in my arteries for Taco Bell's new "waffle taco" since it was introduced on a test basis last summer. So, believe me, I understand why investors are still buzzing with excitement for how breakfast at Taco Bell could change Yum! Brands' fortunes for the better.

And Yum! is pulling no punches, either, as it unabashedly attacks the fast food daypart historically ruled by McDonald's (NYSE:MCD). Heck, Yum! even went so far as to hire dozens of people named Ronald McDonald to promote its new breakfast lineup. Gimmicky? Sure. But it's no mystery McDonald's stands to lose more than any other chain if Yum! Brands succeeds.

At the same time, however, we need to remember there's much more to Yum! Brands' business than just breakfast at Taco Bell. Here are two big steps Yum! is planning to drive its growth over the long term:

1. Reboot KFC in China


Source: Yum! Brands.

Last Wednesday, Yum! Brands announced what it's calling an "aggressive and comprehensive plan to restage KFC in China."

This is an almost certain response to KFC's persistent struggles in the region over the past year, and already began with an "unprecedented" menu revamp involving the simultaneous introduction of 15 new products. The new menu was rolled out to all of Yum!'s 4,600 KFC China locations in more than 900 cities, and Yum! says it plans to implement a similar menu update "at least once a year." 

While it might seem risky, Yum! Brands insists it developed the new menu by "carefully listening" to customer feedback on social media and through "rigorous consumer research and market testing." 

In addition, Yum!'s restage includes redesigned product packaging, contemporary uniforms, a gradual rollout of a new store design, and digital initiatives including a new mobile app, electronic menu, and prepay takeout options.

Finally, Yum! outlined plans for a new national marketing campaign, which will include several Chinese celebrities across all communication mediums. The end goal, Yum! says, is to "further elevate the brand and enhance consumer engagement."

So what's to gain from the revamp? Remember, despite adding 740 new locations in China in 2013 -- 428 of which were KFC units -- Yum!'s operating profit there fell from $1.015 billion in 2012 to just $777 million last year. If Yum! can pull this off and return to business as usual in China, suffice to say there's plenty of room for both top- and bottom-line growth.

2. Permeate small towns in the U.S.


Source: Wikipedia.

Remember last year Yum! Brands management outlined its plan for doubling annual U.S. Taco Bell sales to $14 billion by 2021.

That plan includes initiatives like the now-complete nationwide breakfast rollout, improving restaurant ergonomics, offering higher-quality menu items like the Cantina Bell lineup, and, perhaps most notably, adding around 2,300 new stateside Taco Bell locations. And though many will reside in more traditional suburban locales, roughly half are targeted for smaller U.S. towns.

All told, this also means Yum! will have around 8,000 stateside Taco Bell locations just seven years from now. If this sounds too lofty a goal, remember McDonald's currently has more than 35,000 global locations, of which over 14,000 are located in the U.S. alone.

In the end, I'm convinced that leaves ample opportunity for Yum! Brands' franchises to grow and thrive for years to come.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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