Faster Sales of PepsiCo-Owned Eateries Urged

PepsiCo Inc., Taco Bell Corp.’s parent company, has directed the Irvine-based restaurant chain to speed up sales of company-owned restaurants to franchisees. And earlier this month, Taco Bell announced that it had sold 74 restaurants to Border Foods Inc. in a deal valued at more than $40 million.

The deal makes Minneapolis-based Border Foods the largest operator of Taco Bell restaurants in Minnesota, with 74 locations. Border Foods also acquired sole development rights for the Taco Bell brand in Minnesota.

Why is Taco Bell--along with sister companies KFC and Pizza Hut--selling company-owned restaurants? The answer can be found in PepsiCo’s bottom line.

Most fast-food companies own about 30% of their restaurants, with franchisees owning the rest. But at Taco Bell, the ratio is reversed. That mixture of company- and franchisee-operated eateries is stalling PepsiCo’s profits because, unlike franchise operations, company-owned stores are responsible for the cost of buying land, building restaurants and furnishing them.

PepsiCo executives believe that the sale of its company-owned Taco Bell, KFC and Pizza Hut restaurants could generate as much as $800 million a year in added cash. And, PepsiCo adds, fewer company-owned restaurants will free up Taco Bell executives to concentrate on product development and marketing.