Taco Bell Hbr Case

Executive Summary: 5 points (1 page)

In 1997 Yum! Brands Inc. purchased Taco Bell from Glen Bell. Taco Bell had grown steadily in the US market with some restaurant locations internationally. However, its biggest market was in the US with young single males. On the contrary Yum! was an international company with several restaurants located globally. Taco Bell had experienced positive growth, especially in 2012, which made leadership set high achieving goals for 2022 to increase to 4,000 locations and increase sales by$.5 billion. It was during this same time that a marketing research company had anticipated that lunch and dinner sales for restaurants would decline while breakfast sales would increase. To Taco Bell’s dismay it had failed previously with a breakfast menu and its core customer, single young males, were not viable customers during breakfast hours. The central question for Taco Bell was could it increase growth while participating in breakfast sales?

Unfortunately due to the positioning of the company and its current market, the answer was no. However, there were several other ways to increase growth. Taco Bell needed to target in on its core customer and find out what they needed. In addition to good, affordable food, Taco Bell could maximize by making it accessible to its customers. Knowing that its customers were not willing to travel far for food it should have increased locations to make it as accessible as other food chain restaurants in the US.

Increasing the restaurants would allow Taco Bell to maximize from its current customers and possibly attract new customers. Yet, increasing the number of restaurants would not alienate customers. Yum! would benefit financially as the majority of its restaurants were franchised. This would encourage business and employment opportunities while not increasing operating costs for franchises. Expanding internationally and not just domestically would truly live to Yum!’s vision.

Situation Analysis

In 1997 PepsiCo created the food industry Yum! Brands Inc., which owned many restaurants including Taco Bell, Pizza Hut, WingStreet and KFC. Yum! had continuously experienced growth; in 2012 it reached revenue of $13.6 billion with a net income of $1.6 billion. The CEO, David Novak, boasted about the company’s continuous growth of at least 10% in earnings per share annually. The company only owned 20% of restaurant locations; the other 80% were franchises (75%) and licenses (5%). Franchises were able to use a brand, but had to pay licensing fee that was based on its revenue. In turn Yum! was responsible for providing continual customer traffic. Yum! benefited from the majority of the stores being franchises because the capital burden was left to the franchise operators increasing the financial return for Yum! However, as a downside the franchises were not required to carry every item or participate in every program.