Yum Brands Bets on Taco Bell To Win Over Customers Overseas

Earlier this month, a Taco Bell opened at a massive Dubai shopping mall. Patrons waited as long as four hours to buy beef gorditas and chicken chalupas at the chain's first location in the Middle East.

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Dubai's Taco Bell, which opened this month, is across from a Burger King and a Pizza Hut at a shopping center. Yum Brands

That restaurant is part of a broader strategy for Taco Bell's parent company, Yum Brands Inc. As it has done with KFC and Pizza Hut, Yum wants to build Taco Bell into a global brand with locations across the world.

While Yum has struggled to increase sales in its nearly 20,000-location U.S. restaurant division, the company's international results have been far better. The Louisville, Ky., company built on Colonel Sanders's Kentucky Fried Chicken chain will generate 60% of its profit overseas this year.

In general, "we should do better outside the United States than we have in the U.S.," says David Novak, Yum's chairman and chief executive.

To expand Taco Bell, which has been the company's most profitable U.S. brand, Yum plans to put the chain in Spain by the beginning of next year and in India by April. Right now, there are about 240 Taco Bells in 10 countries outside the U.S., with the majority in Canada and Puerto Rico.

The challenge will be going to countries where Mexican food isn't popular and persuading customers to try the Americanized version sold at Taco Bell. Mr. Novak says the lack of authenticity in the chain's Mexican cuisine is an advantage. "It owns its own category," he says.

Other American food companies are trying to export Mexican food to other countries. General Mills Inc. sells its Old El Paso brand in about 20 countries.

Yum has tweaked the Taco Bell menu to adapt to local tastes but says it wants to keep it mostly the same as in the U.S. In Dubai, food is prepared so it is Halal, or ritually fit according to Islamic law. In India, Taco Bell won't serve beef, and the menu will use more potatoes and other vegetarian ingredients.

So far, Taco Bell has made some missteps overseas. In Costa Rica and Guatemala, the chain struggled because it priced its food too high, Mr. Novak says. Taco Bell has since lowered prices and moved toward a pricing structure that's more similar to its U.S. menu. In a seemingly audacious move, Taco Bell opened a location in Mexico last year. "The transactions in Mexico are not yet where we want them to be," Mr. Novak says.

But Mr. Novak points out that the company's track record winning over customers overseas and the lack of competition show that Taco Bell has global potential. For every million people in the U.S., Yum has 60 locations. Overseas, Yum has just two locations for every million people. Taco Bell's target market is consumers ages 16 to 24, a fast-growing segment.

"They're going to have to learn and probably not make much money from it for quite some time," UBS analyst David Palmer says of the expansion.

The Dubai Taco Bell is a small stand across from a Burger King and a Pizza Hut at a massive shopping center that has an ice rink and a shark tank.

Youseef Al Sharyani, an Emirati who recently went to that Taco Bell for tacos and quesadillas with his wife, nanny and four children, said it didn't taste as good as when he ate Taco Bell as a student in San Diego. But he thinks the chain will work there because the region has strong demand for fast food and a large international population. "People like having options," he said.

Write to Janet Adamy at janet.adamy@wsj.com