In 2013, Taco Bell was looking into adding to their business’ growth by introducing the breakfast line. However, the company is torn between expanding its Doritos Locos Taco line or to introduce the breakfast line. The company sees that one of the concerns of launching the breakfast line would be the increased expenses and costs and other operational issues. The management and key executives of the company must come up with the right decision for the overall growth of Taco Bell.
Tim Calkins; Blair Darrell
Harvard Business Review (KEL917-PDF-ENG)
October 07, 2015
Case questions answered:
Case study questions answered in the first solution:
- Why is Taco Bell interested in the breakfast opportunity?
- Do you think the brand should proceed with the launch?
- Do you anticipate it will be successful?
Case study question answered in the second solution:
- The key question on Bonnar’s mind was whether Taco Bell should launch a line of breakfast items in 2014 or expand the successful Doritos Locos Taco line.
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Case answers for Taco Bell: The Breakfast Opportunity
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Problem Statement – Taco Bell: The Breakfast Opportunity
Taco Bell is navigating how to expand their business. Specifically, they are wondering whether they should launch a line of breakfast items in 2014 or expand the successful Doritos Locos Taco line.
Why is Taco Bell interested in the breakfast opportunity?
Taco Bell wants to expand their business’ growth, and believe that introducing the breakfast opportunity could contribute to the growth significantly. The company is torn between two decisions: expand the Doritos Locos Taco or introduce the breakfast line.
According to Calkins, “ The primary driver of 2012’s improved results was the launch of the Doritos Locos Taco.” The advantage of going with this option is that it is the safest option that could enable growth.
Based on past the launch in 2012, we can attest that this decision will be considered as a low risk to the company and franchises. It also improved sales, but its potential to increase the business’ growth was insignificant compared to the potential of introducing the breakfast line. Keeping in mind that even if the company chose this option and introduced different flavors, the steady growth that Taco Bell is looking for won’t be guaranteed.
On the other hand, if Taco Bell introduces the breakfast line it has the potential of becoming successful. According to Taco Bell’s marketing team, they predicted that the breakfast menu would be profitable for a franchise which would lead to profiting the company as a whole.
They state that “For a franchise with about $70,000 in annual breakfast sales, or $192 per day. This calculation factored in the cost of additional wages, inventory levels, and utility costs. The average store at the time had daily revenue of about $3,560.” Breakfast is becoming more of a common phenomenon considering that it increased 3% compared to the decline of lunch and dinner.
Do you think the brand should proceed with the launch?
Taco Bell should proceed with the launch of the breakfast line. Breakfast has become a common meal that consumers purchase more and more. Therefore, this allows Taco Bell to take the opportunity of the open window to enter the breakfast market.
If the company doesn’t go forth with the launch, they will lose a big market segment. This will lead to not catering for the portion of their consumers’ needs and wants, leaving them forced to choose their competitors for breakfast items. If they do proceed with the launch, then the company will be using its resources much more efficiently.
Taking into consideration that Taco Bell doesn’t currently have a breakfast menu which means that the facility is not used before 10 am when they open. Thus, they are not using their resources to their maximized potential.
According to CEO Novak, he stated that a typical McDonald’s gets about $1 million in sales before the company opens its doors. Comparing Taco Bell and McDonald’s hours of operation and menu offering, McDonald’s has a head start ahead of Taco Bell due to its breakfast menu. The company can benefit from opportunities and sales increase if they do go forth with the breakfast line.
Do you anticipate it will be successful?
I anticipate that the breakfast line launch will be…