Yum! Brands (NYSE:YUM) is known as an international powerhouse -- and for good reason. In 2013, the fast food giant brought in over half of its $13 billion revenue from China and does substantial business in over 125 countries around the world, including India where it has over 700 restaurants.
Two of its major chains, KFC and Pizza Hut, have enjoyed warm welcomes abroad with over 14,000 KFC locations outside the U.S. and more than 7,000 Pizza Hut stores. However, Taco Bell, the third piece of Yum's core, has only seen limited action overseas as 95% of its nearly 6,000 locations are found in the U.S.
The company now aims to change that with a bold plan to add 1,300 international outlets by 2023, bringing in $2 billion in additional system sales.
Run for the border
Taco Bell isn't exactly a stranger to foreign markets -- the chain currently has about 250 restaurants in 26 countries, but results have been mixed over its history as Mexican-style fast food has never really caught on the way that burgers, pizza, and other American staples have.
The Gorditas-slinger has also had some missteps. In the 1980s, it opened four stores in the United Kingdom but closed them all just a few years later, only reentering the British market over a decade later in 2010. The chain also pulled the plug on expansion efforts into Japan and Korea during the same period, back when it was owned by Pepsi.
Now, management seems to feel more confident about its prospects overseas. The push also comes as the chain aims to open 2,000 more U.S locations by 2022, bringing total system-wide sales to $14 billion.
Taco Bell is first expanding in markets where it has already established operations, including the United Kingdom, South Korea, Chile, and India. Yum! is targeting countries with a growing middle class and some familiarity with Mexican food, before moving onto other areas.
Why this could be a big win for Chipotle
Taco Bell isn't the only Mexican-food brand with its sights set on international conquest. Chipotle Mexican Grill (NYSE:CMG) has also been slowly expanding abroad and now has 17 restaurants open in Canada, the United Kingdom, France, and Germany.
Like Taco Bell, Chipotle has encountered some headwinds as it tries to convert the uninitiated into burrito lovers. In London, its biggest international market, sales have been slower than at home, a gap management attributes to lack of awareness about the brand and Mexican food in general.
Though popular across the U.S., Mexican food is not well-known in many parts of the world the way Chinese or Italian cuisines are -- 98% of Mexicans living abroad are in the U.S. Still, there's some evidence that Mexican cuisine could be the next big global fast food as Darren Tristano of food research firm, Technomic, believes burritos and their ilk "are transitioning to a global cuisine."
Free guac with that
It's here that Taco Bell's marketing push could be a huge benefit for Chipotle. International consumers need to be educated and sold on burritos, tacos, and other unfamiliar foods in the Mexican family, and Taco Bell is an expert at this. With its 6,000 locations, the chain is still the dominant Mexican restaurant enterprise, a victory more for its marketing than its product.
Because of its size and marketing expertise, Taco Bell is the brand most likely to increase international awareness for Mexican food, simultaneously benefiting smaller players along the way. This phenomenon has played out before. The proliferation of Starbucks across the country created an opportunity for hundreds of independent coffee shops as interest in espresso drinks and gourmet coffee boomed, lifting demand for the product across the board. Similarly, the image of the hamburger as the quintessential American meal probably owes more to McDonald's than any other organization, but that notion has helped plenty of other companies turn a tidy profit.
Chipotle, with its sustainably raised "Food With Integrity," is loath to compare itself to Taco Bell, a chain perhaps best known for its orange-dusted Doritos Locos Taco, but the two are fighting the same battle for once. If these companies can finally unlock an appetite for Mexican food abroad, 1,300 new restaurants may just be the beginning.
Jeremy Bowman owns shares of Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill, McDonald's, PepsiCo, and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, PepsiCo, and Starbucks. 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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