Taco Bell: The Breakfast Opportunity Hungry for Expansion. Hungry for Success Mehak Gupta - 139324180 Rosanna Lobo - 138979190 Agenda Current Situation Challenges Change & Main Question Addressing the Challenges Evaluation of Alternatives Recommendation Implementation 03 05 06 07 09 10 12 Current Situation Yum Brands sees enormous potential growth for its most successful subsidiary Taco Bell which contributed to two-thirds of Yum’s total US profits. Recent Success • Awarded “2012 Marketer of the Year” by Advertising Age. • Ranked among Top 10 quick-serve restaurants in USA. • Even though smallest by store count, Taco bell was most profitable, with operating margin at 11% compared to 7% for Pizza Hut and just 5% for KFC. Key Drivers • 20% company owned restaurants of 40,000 locations. • 75% franchisees accounted for fixed income via licensing. • Capital burden on local owners. Goals • Generate repeat customers to boost same store sales. • Increase declining customer satisfaction through loyalty. • Create profits with higher margins. Top Priority Grow Taco Bell Core Customers • Price-sensitive customers • Single young men Brand Focus • Affordable rates • Easy to Eat; Easy to prepare Presence • 21 Countries; 6053 stores worldwide • Social and digital media platforms Current Situation In spite of rising profits, Mexican-inspired restaurant chain Taco Bell is eager to grow and expand business but unsure of the right approach. Even with massive marketing budget, Taco Bell cannot do both Launch a New Breakfast Line 2011 Sales fall by 1.4% due to class-action lawsuit. Taco Bell contributes to 2/3rd of YUM! Brands US profits Expand the successful Doritos Locos Taco line 2012 Increase in sales by 11.2%. Same-store sales up by 2013 While steady climb in sales, growth rate reduces to 7%. 8% owing to Doritos Locos Taco. https://www.statista.com/statistics/205803/taco-bell-sales-per-system-unit-since-2006/ Challenges Having failed thrice at launching a breakfast line, is the breakfast opportunity too risky an investment for Taco bell versus making mediocre profits via expansion of Doritos Locos Taco Line? Expand Doritos Locos Taco Line Launch New Breakfast Line A Successful but would not generate significant profits. A Can Mexican food be seen as Breakfast food? Will people be open to change their routines? B Safer approach. Less Risk. No Long-Term benefits. B New initiative will not work without support of franchisees. C Not new enough to create excitement and curiosity. C Long-term continued support by Advertising department. Change and Main Question Taco Bell must examine each approach to find the most suitable strategy that aligns its goals to respective benefits provided by these approaches outweighing the drawbacks. Change Taco Bell must add a new business strategy to gain considerable financial returns and untapped market share. Question How can Taco Bell expand its business and capture higher market share? Addressing the Challenge Mexican quick-serve restaurant, Taco Bell must choose between the below two approaches. Even with massive marketing budgets, it cannot implement both strategies for expansion. Increase Profits & Gain market share Launch new Breakfast Line Expand current Doritos Locos Taco Line Addressing the Challenge Evaluation of Alternatives A thorough analysis of both approaches is made below showing key benefits of each highlighted with green dot markers. Strategic Alternative/ Decision Criteria Capital Investment Return on Investment (ROI) Market Share Launching a Breakfast Menu Taco Bell will have to invest a large amount of capital. There is lot of opportunity in the breakfast industry, so ROI will be exponential. Expand Doritos Locos Tacos Product Line Expanding an existing product requires low investment The ROI will be incremental. Benefits Drawbacks Profitability Implementatio n Difficulty Consumer Satisfaction Rank 1 = Lowest 6 = Highest There is a huge untapped market within breakfast industry, so Taco bell stands to gain large market share. Better ROI and Market share will lead to better profitability. Launching an entirely new breakfast menu is a complicated procedure. Consumers will be more satisfied with more an expanded menu and variety of options. 4 Since it’s an existing product, the market share won’t have any additional growth. No additional profits will be gained. Expanding an existing product is comparatively easier. There will be no excitement as the product is not a new one. 2 Recommendation Our advise to Taco bell would be to invest in launching the new breakfast line. In order to gain high profits, the company must be ready to take high risks in a new market with new products. Acquiring New customers through: 1. 2. Marketing a. Traditional advertising through TV and Newspapers, b. Social media marketing and Taco Bell website and mobile app development, and c. Sales & Promotions like membership joining bonus and early morning breakfast order promotions. Increased number of stores a. New locations will bring in new customer base. Retaining existing customers via: Outcome: • Repeat customers for Taco Bell’s new Breakfast Menu. • Increased store traffic • Improved Brand Image • Larger Customer Base Lion’s share of market 1. New loyalty programs a. Customer referral program, b. Credits Promotion, c. Online Contests, and d. Free-delivery promotion. • 1. Through convincing franchisees with research a. Surveying the current customers about upcoming breakfast line, and b. Showcasing previous success story examples like McDonalds. Through preparing franchisees for operating breakfast menu a. Training staff for the breakfast menu and operating the new equipment, and b. Providing the new equipment to the franchisees. Outcome: • Support of franchisees to stay committed and prepared for the new breakfast menu. 2. Recommendation Taco Bell is missing out on major opportunity in Breakfast Arena, where competitors are earning more in breakfast sales than Taco Bell does total sales Globally. Breakfast accounted for 12.5 billion restaurant visits or 21% of all restaurant visits. Breakfast is an especially price-sensitive meal. Taco Bell’s affordable reputation provides an opportunity for the brand to move into the breakfast market. Higher margin Beverages. Plans to add Coffee and Orange Juice 51% consumers’ breakfast orders include both food and beverage. 57% consumers who eat breakfast at home claim to do so in order to save money. 36% consumers’ say it is too expensive to buy breakfast from a chain. 3% consumers’ breakfast occasion growing, Lunch and dinner are seeing a decline. Unused facility from 7am to 10am. Introducing breakfast line will add additional hours to generate profits. Breakfast accounted for 25% of McDonald's sales. 31% of consumers are purchasing breakfast outside of morning hours more often. All day breakfast can be implement at later stage. Source : Technomic’s Breakfast Consumer Trend report Implementation Plan The action plan will be implemented over a year focusing on improving profitability and gaining additional market share for the company.
