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Taco Bell Franchisees to Get Loans From Parent Firm

February 15, 2001|From Bloomberg News

Taco Bell Corp.'s parent company said Wednesday that it has set up a $15-million loan pool to help cash-strapped franchisees of the Irvine chain.

As many as 1,000 Taco Bell franchisees, squeezed by declining sales, may need some sort of assistance, said parent Tricon Global Restaurants Inc., adding that it might have to repurchase some restaurants.

Tricon has about 4,000 franchised Taco Bell restaurants and 6,700 Taco Bell restaurants total.

Taco Bell's sales have been hurt by consumer concern about a recall of taco shells that contained Starlink, a genetically engineered corn not approved for human consumption.

The taco-shell recall affected Taco Bell-branded shells sold in supermarkets and not used in Taco Bell restaurants. Still, the move kept some customers away, Tricon said.

"Taco Bell is suffering from the impact of Starlink and finding the right positioning for the brand," said Goldman, Sachs & Co. analyst Brandy Shin.

In the fourth quarter, sales of Taco Bell restaurants open at least a year fell 9%, helping push the parent company's earnings lower, said Tricon, which also owns Pizza Hut and KFC chains. Same-store sales at Pizza Hut rose 4%, but KFC's same-store sales fell 5%, the company said.

Tricon's profit from continuing operations fell to $120 million, from $122 million, spokesman Jonathan Blum said. Per-share earnings rose to 81 cents from 78 cents a year earlier, as a stock-buyback program reduced the number of shares outstanding.

Louisville, Ky.-based Tricon was expected to earn 79 cents, the average estimate of analysts surveyed by First Call/Thomson Financial.

Tricon's fell 5.6% to $2.18 billion, as the company sold more of its restaurants to franchisees. The company refranchised 757 restaurants last year.

Tricon's stock fell $1.06 to $34.96 a share on the New York Stock Exchange. The results were reported after the close of regular U.S. trading.

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