Priszm Income Fund - which owns 400 KFC, Taco Bell and Pizza Hut franchises across Canada - filed for bankruptcy protection on March 31 under the Companies' Creditors Arrangement Act and is selling hundreds of its outlets to a European franchisor.
The income trust was granted court protection from creditors as part of a plan to assist in the sale of its fast-food restaurants. In January, the troubled company withheld a $2 million franchising payment as it continued to restructure.
Priszm plans to sell 231 of the fast-food eateries in Ontario and British Columbia to U.K.-based Soul Restaurants Canada Inc. Documents show Soul was offering $46.4 million for 232 Priszm outlets back in December. Some of the outlets include both KFC and Taco Bell franchises. The companies are working with their franchisor, YUM! Restaurants International, on the deal.
Earlier this month, Priszm received "a number of expressions of interest for its remaining restaurants," the company stated.
"The company is in the process of reviewing these offers and will be negotiating with the potential acquirers in order to maximize recovery for the company's stakeholders and provide for a going concern solution for the business," Priszm said in statement.
Last year Yum's 20,000 U.S. restaurants generated US$4.1 billion in sales and posted a $668 million profit. By contrast, the company's 4,000 restaurants in China had the same revenue and a $755 million profit.
Priszm's financial troubles escalated last summer when the company had to upgrade 75 restaurants under a franchise agreement. The upgrades, which cost about $100 million, were suspended last fall because of declining sales.
All this comes after exceptionally spectacular sales of the almost laughable Double Down burger. The fat-rich burger consists of bacon and two different kinds of melted cheese pinched between two pieces of KFC "original recipe" chicken fillets. The most successful new product ever for KFC was available in Canada for a limited time and sold over one million units from late October to mid-November 2010. "Perhaps KFC needs to think double and go double down again," one observer commented.
from Western Investor, May 2011
