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Yum! Brands Takes Taco Bell to England (YUM, MCD, BKC, DPZ)


Yum! Brands (YUM) has been getting a decidedly global flavor at its KFC, Taco Bell and Pizza Hut restaurants in recent years. And the next global market that is in its sights is the United Kingdom.

Yum! Brands will launch a Taco Bell chain in England next month according to reports, debuting at Lakeside Shopping Centre in Essex. The fare will be similar to what American diners are used to, with a menu that features cheap tacos and burritos and caters to value-conscious consumers.

This is just a small part of an ambitious growth strategy for Taco Bell and other YUM brands. The fast-food operator now has more than 3,500 locations in China, with ambitious plans to open about 500 new locations in the People’s Republic and about 900 internationally this year. This new growth plan has the potential to really supersize the profits for Yum in the months ahead.

Of course, those global profits are sorely needed. In its mid-May earnings report, YUM noted that first quarter international sales rose about +1%, which basically offset a -1% decline in the U.S. Yum plans to open about 200 new restaurants in the U.S. in 2010, but is also closing about the same amount. That means any growth has to come from overseas.

This mirrors a trend among fast-food giants like McDonald’s (MCD), Burger King Holdings (BKC) and Domino’s Pizza (DPS).

  • The biggest reason for strong McDonald’s earnings in April was a hefty increase in global same-store sales, which jumped 4.2%. Results included a gain of 5.2% in Europe, and a 5.7% gain in the Asia/Middle East/Africa region.
  • As for Domino’s Pizza sales, about 55% of Domino’s $5.6 billion in sales last year were in the United States, and international same-store sales have increased for 64 consecutive quarters (that’s 16 straight years).
  • Despite the fact that worldwide same-store sales at Burger King restaurants were down 3.7% percent in the first quarter, BKC stock saw a 6.1% decline in the United States and Canada. That means without strong global sales, Burger King sales and earnings would have been much worse.

Though Americanized Mexican food may not seem like the most likely export, Taco Bell is Yum! Brands’ best export in the global fast-food marketplace. A Taco Bell opened in Cyprus in December 2009, and Yum! opened additional restaurants in Spain in early 2009 as part of a test trial for the European market. YUM stock also opened its first Taco Bell in India last year, with considerable success thanks to its unique menu offerings such as a potato and paneer burrito tailored to the Indian consumer.

Taco Bell is set to debut in England at the end of June, but don’t expect this to be the last leap overseas for Yum! in 2010. Global growth seems to be the biggest driver for fast-food stocks like McDonald’s, Burger King, Taco Bell and the like right now.

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