Taco Bell

Case Study

Contents • • • •

Aims Company Profile Problem Definition Underlying Assumptions • Reengineered Solution • Conclusion • Appendix

Aims

This brief presentation will attempt to shed light on the following aspects •Review performance of Taco Bell •Examine reasons for reduced productivity •Review overall effects after reengineering

Company Profile The franchise, Taco Bell, is an eatery that needs no introduction. It specializes in Mexican style food, including various types of tacos, salads, burritos etc. •The first Taco Bell restaurant was opened in 1962 in Downey, California •It had grown to 1000 units by the time it was taken over by PepsiCo in 1978 •By year-end 1996, there were more than 6,800 Taco Bell units in 17 countries and territories, with system-wide sales of $4.7 billion

Company Profile…cont’d

Taco Bell in itself, is a subsidiary of Yum Brands, a Fortune 500 company, which boasts other renowned franchises like Pizza Hut, KFC etc. Yum! Brands' global system sales totaled more than $22 billion in the year 2001.

Problem Definition In 1983, analysis showed that the Taco Bell’s total cumulative growth since 1978 was a shocking negative 16% compared to a positive 6% of the total industry. This prompted the management to pinpoint immediately what was going wrong and where. This led them to identify the following factors; •Lack of business vision for the company •Reliance on obsolete management and operational practices, which focused more upon the processes themselves instead of customers •Top-down structure, with multiple levels of management •Following traditional approaches, which assumed what customers wanted without even asking them All the above factors were resulting in slower and costlier service.

Problem Definition…cont’d

Having identified some of the key areas that needed improvement, Taco Bell started reengineering itself out of troubled waters. It started to concentrate more upon its customers and what they wanted.

The more they listened, the more they found out that what the customers wanted was really very simple…good food, served fast and hot, in a clean environment and at a price they could afford!!!!!

Underlying Assumptions The older system of operations at Taco Bell was based upon traditional operational practices, which were grossly insufficient for the economic and business climate of the 21st century. The entire setup was based upon certain assumptions, which include the following; •Assuming that the restaurant knew what the customers wanted without even asking them. This led them to falsely believe that customers wanted fancier décor, broader menus, outdoor playgrounds etc, instead of quality food at an affordable price •Investing in large kitchen areas, which in some instances, covered 70% of the total area in the mistaken belief that it would improve customer satisfaction. •Operating the restaurant along the lines of a manufacturing company instead of a retail outlet. Doing away with this concept led to the development of novel ideas like K-Minus and TACO.

Underlying Assumptions…cont’d

•Believing that the only segment they could target was the one within the restaurant’s premises. This translated into $78 million, whereas outside the restaurant, the total market came to about $600 billion in USA alone. •Limiting themselves to the goal of becoming the value leader in the quickservice restaurant industry instead of value leader for all foods for all meal occasions.

Reengineered Solution Reengineering the setup at Taco Bell involved several steps, including; •Complete reorganization of human resources •Dramatic redesign of operational systems •Doing away with entire levels of management •Creation of jobs like “market manager” •Replacing area supervisors with market managers and reduce their numbers. • Eliminating district managers and promoting restaurant managers. Taco Bell followed only one rule during re-engineering… “Enhance those things that bring value to the customer and change or eliminate those that don’t”

Reengineered Solution…cont’d They also changed their restaurant structure by: •Limiting the kitchen area by from 70% to 30% •Increasing the customer area from 30% to 70% •Doubling the seating capacity in the area available Additionally, re-engineering led Taco Bell to introduced two new methodologies, namely K-Minus and TACO (Total Automation of Company Operation) Reengineering Process

K-Minus

TACO

Reengineered Solution…cont’d K-Minus:K-Minus means kitchen less restaurant, based on nature of the company. All of their food was cooked outside the restaurant at central locations. This stemmed from the concept that food should be retailed instead of being manufactured. TACO (Total Automation of Company Operations):It provides each restaurant with an MIS facility and empowered the employees with computer know-how. It eliminated paper work and allowed more time to be spent on the customers. Such programs serve as agents of change for more innovative ideas like new and varied points of distribution (like street corners, concession stands etc)

Conclusion This case study brings forth the following conclusions: •Reengineering businesses is very much a reality and is not limited to the confines of textbooks. If done properly, it can virtually turn around any business; be it consumer goods (Kodak), restaurants (Taco Bell) or financial institutions (IBM Credit) •Customer must be the starting point for everything in reengineering •Resistance to change should be anticipated and appropriate steps should be taken to deal with it. •Every company that seeks to be reengineered should seek a phrase that makes its corporate vision clear like “we want to be number one in the share of stomach” (Taco Bell)

Appendix

The following web sites were referred to while making this presentation: •www.yum.com •www.tacobell.com Apart from online resources, the following text was consulted as well: •Reengineering the corporation - Hammer & Champy