Hey, Yum! KFC Needs to Have Its Own 'Doritos Locos Taco' Moment

KFC, Kentucky Fried Chicken bucket and Drumsticks

Going over Yum Brands' (YUM) disappointing third quarter report from Tuesday night makes it clear that it's not just the chicken that's boneless at KFC.

The poultry fryer is struggling -- particularly abroad where something fowl has gone foul in China. Comparable-store sales (a measure that compares the year-over-year change at the average established store) plunged 13 percent in China during the quarter.

This is a pretty big deal. There are 4,463 KFC restaurants in the world's most populous nation, and until late last year, the Chinese couldn't get enough of the Colonel's 11 secret herbs and spices. However, with a food safety scare stemming from some of the chain's suppliers and a bird flu outbreak, KFC's sales have fallen and they can't get up.

Yum Brands figured that sales would turn positive in China by the end of this year, but now it's conceding that's not in the cards.

Flying Home

Things were only relatively better closer to home, where comps fell 4 percent at domestic KFC locations.

KFC is the worst performing chain for Yum Brands. Pizza Hut clocked in with a 1 percent slide, while Taco Bell actually posted a 2 percent gain. For all of the buzz that KFC has generated with its boneless chicken pieces -- included the clever "I ate the bones" marketing campaign that was introduced earlier this year -- the sad truth is that the average store isn't selling as much as it used to.

Something's wrong, and it's time for Yum Brands to take a page out of the playbook that helped it breathe new life into Taco Bell last year.

%VIRTUAL-article-sponsoredlinks%The leading Mexican fast food chain was meandering -- but then came the Doritos Locos Taco. Teaming up with PepsiCo's (PEP) Frito-Lay, Taco Bell took Doritos into the food lab to devise a taco shell impregnated with nacho cheese powder.

It was a huge hit. Comps soared 12 percent during the product line's first full quarter on the market. Taco Bell added Cool Ranch to its line earlier this year, and by the time that a third Fiery line of spicy shells was added, the fast food chain had served up an amazing 600 million Locos Tacos.

I Ate the Moans

Something as simple as offering a Doritos-flavored taco shell has been enough to turn Taco Bell around. The slightly upscale Cantina Bell line also helped, but clearly, Taco Bell wouldn't be doing as well as it is now if it wasn't for a single product that has evolved and expanded since being introduced 19 months ago.

So, where are KFC's Locos Tacos?

As ambitious as the boneless chicken offering has been, it hasn't helped improve sales. KFC's latest innovation are KFC Go Cups. Priced at $2.49, these essentially repackage the chain's existing seasoned wedges and fried chicken options into cups. But if offering food that conveniently fits in cup holders was the Holy Grail of drive-thru, we would all be eating doughnuts for dinner.

KFC needs something more to make the chicken chain trendy again, and there's certainly no shame in teaming up with Frito-Lay the way that Taco Bell did. After all, Frito-Lay parent PepsiCo once owned Pizza Hut, KFC, and Taco Bell. Why do you think these are three of only a handful of major chains that still serve Pepsi?

It's easy to spin the wheel and drum up combinations. Here are a few to get you started.

  • Cheetos Tenders: Ground-up Cheetos are incorporated in the breading of KFC's chicken tenders.

  • Fritos Famous Bowls: The classic mashed potatoes, chicken, and corn bowl can get spruced up with Fritos. If that doesn't move you, how about Fritos Bar-B-Q or Chili Cheese corn chips for a crunchy kick?

  • Tostitos Salsa Chicken: If KFC is looking for a Cantina Bell upgrade, serving its grilled chicken smothered in Tostitos salsa is a start.

See? I didn't even have to dig into the dozens of Lay's potato chip flavors and how they could add some zesty crunch to the Doublicious sandwich, or even work Funyuns into Chicken Littles or the classic chicken pot pie.

Taco Bell's success is something that Yum Brands should be porting over to Pizza Hut and especially KFC. It seems as if things can't get much worse, so why not take a bold bet?

KFC got rid of the bones, but now, it's time to grow a spine.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends PepsiCo. The Motley Fool owns shares of PepsiCo.