Must-know: Yum! Brands’ Taco Bell business

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Nov. 20 2020, Updated 4:51 p.m. ET

Overview

Taco Bell opened in 1962. It’s a fast food or quick service restaurant. About 15% of Yum! Brands’ (YUM) total restaurant units were in the Taco Bell division at the end of 2013. Of these, 5,700 were in the U.S. There were 270 restaurants internationally—this doesn’t include Taco Bell in India and China.

Yum 2014-10-07

The food

Like Kentucky Fried Chicken (or KFC), Taco Bell is also a fast food restaurant concept. It serves a variety of tacos—including the Doritos shell taco. It also serves burritos, gorditas, salads, nachos, chalupas, quesadillas, and tostadas. Taco Bell also has a variety of beverages, desserts, and sides.

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We recently discussed that Taco Bell has been trying to increase sales through different serving times. Taco Bell has a breakfast menu in the U.S. By offering a breakfast menu, Taco Bell hopes to attract customers during non-peak lunch and dinner hours. This is also a good way to increase operating leverage and improve instrumentality.

Broader appeal

Taco Bell has other strategies to attract more customers. The strategies include the Fourth Meal menu. This menu appeals to customers who want food late at night. The Catina Power menu includes items that have 20 grams or more of protein. The Fresco menu has items under 350 calories. The Dollar menu attracts price-sensitive customers.

Other restaurants—like McDonald’s (MCD), Burger King (BKW), and Wendy’s (WEN)—also offer a breakfast menu. These restaurants are part of the Consumer Discretionary Select Sector SPDR (XLY).

For all three restaurants—KFC, Pizza Hut, and Taco Bell—Yum! Brands has company-owned and franchise restaurants. By running a company-owned restaurant, Yum! Brands is exposed to cost pressures. We’ll discuss this in the next part of the series.

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