Many Taco Bells Hit By Money Crunch <b></b>
Irvine, California-Numerous Taco Bell franchisees,squeezed by a drop in sales, are delinquent on loans they took outto buy restaurants from the Irvine, California-based chain'sparent company, according to sources familiar with thetransaction.
The extent of the delinquency isn't clear, but as many as1,000 restaurants-one-quarter of the Taco Bell franchised outletsin the United States-could be "at risk unless something isdone," said analyst Damon Brundage at Raymond James &Associates.
He made the assessment after talking with officials of TacoBell's parent, Tricon Global Restaurants Inc., which also ownsthe Pizza Hut and KFC chains.
Taco Bell's sales have been hurt by consumer concern about arecall of taco shells that contained Starlink, a geneticallyengineered corn not approved for human consumption.
During Tricon's short life as an independent company,selling stores to franchisees has become almost as important to itswell-being as selling pizzas, burritos and buckets of chicken.
The strategy of refranchising some Taco Bells and otherrestaurants, as the practice of converting company-ownedrestaurants into franchised units is known, has given Tricon'searnings a healthy boost since it was spun off by PepsiCo Inc. in1997. But some of the refranchising effort is now coming back tohaunt the company. Indeed, bankruptcy filings by some distressedfranchisees are a real possibility. In recent months, two largeTaco Bell operators did just that.
"Delinquencies have been on the rise," said JeffryButcher, controller of Bay View Capital Corp., a San Mateo,California, concern negotiating with Tricon on a possiblesolution.
Tricon announced that it has set up a $15 million loan pool tohelp cash-strapped Taco Bell franchisees. The company added that itmight have to repurchase some restaurants. -Los AngelesTimes