In its expansion bid, Yum! Brands will open five new stores this year and about 10 more next year
New Delhi: Taco Bell, the world’s largest Mexican style fast-food chain owned by NYSE-listed Yum! Brands, plans to open 100 outlets in India over the next five years, said Gaurav Burman, director, Burman Hospitality Pvt. Ltd, Yum! Brands’ franchise partner for Taco Bell in India.
Yum! has opened only nine Taco Bell outlets in India since it started selling tacos and burritos in India in 2010. Of these six are owned and operated by Yum! itself, while the remaining are owned and managed by the Burmans, the family that also owns packaged consumer goods company Dabur Ltd.
The company will open five new stores this year and about 10 more next year, said Burman, adding that it will look at markets like Chandigarh, Hyderabad and parts of southern India. Taco Bell’s expansion will be through its franchise partner Burman Hospitality. Burmans will invest in expansion and Yum! will spend in marketing and brand building.
“We worked on perfecting the model and finding the right partner before we decided to scale up," said Ankush Tuli, managing director, Taco Bell India.
After Yum! entered India in 1990s, the company focused on two other brands—Pizza Hut and KFC, and now operates about 800 stores in India.
For Taco Bell, said Tuli, India is one of the “key markets" as Yum! aims to more than treble the number of Taco Bell outlets to 1,000 outside its home and the largest market—the US. Up until 31 September, Yum! had 6,511 Taco Bell outlets, of which just about 300 are located outside the US.
Yum! has announced plans to open 1,550 Taco Bell restaurants from 280 by 2023 in markets outside the US, Bloomberg reported in December 2015.
“We don’t want to be a regular quick service restaurant (QSR) chain. What we are going to replicate is the QSR plus model to make Taco Bell a lifestyle brand in India," added Tuli. The company has started order table service and is serving beer-on-tap and other alcoholic beverages at Taco Bell restaurants—a service not very common at Taco Bell outlets outside the US market.
The company has also decided to reduce the size of restaurants to average 1,500 square feet from more than 2,000 sq ft earlier as part of its plan to maximize profitability at store level. Over a period, the company will replicate the new model across all its stores in India.
While Taco Bell is sourcing all ingredients from Indian suppliers like other QSR chains, its menu includes only one Indian food item. “Indianization of menu will be limited. It’s a Mexican style restaurant that would offer customized food for Indian consumers, essentially the millennials," said Tuli.
In the past few years, Mexican as a category has started picking up, primarily in cities like New Delhi and Bengaluru, with chains such as California Burrito and Chili’s Grill & Bar entering the market. American packaged food and beverages company PepsiCo Inc. also launched Doritos in India last year.
Like most of the QSR companies, Yum! Brands has been under stress for the past few years. After 11 consecutive quarters of decline in store-level growth, Yum! on 6 October, reported a 13% rise in sales at KFC outlets in India during July-September quarter. Sales at Pizza Hut India stores also grew 6% during the quarter.
Yum! Brands’ global revenue, however, declined 3% to $3.32 billion for the quarter under review. The company has blamed protests in South China Sea as main reason for its poor quarterly performance. The company is in the process to spin off its China unit later this year. Yum!’s Taco Bell division reported a 5% growth in system sales (excluding foreign currency translation) during the quarter, according to its result statement.
The QSR market in India is projected to grow to ₹ 4.98 trillion by 2021, expanding at an annual growth rate of 10%, from ₹ 3.09 trillion in 2016, according to India Food Services report 2016 by industry lobby National Restaurants Association of India (NRAI) and consulting firm Technopak Advisors Pvt. Ltd.